british design

british design - why british is best

product / price = international competitiveness

domestic goods are substitutes for imports

exports are substitiutes for foreign produced goods

expenditure switching focuses on changing incentives to increase X and reduce M

X = demand for £
M = supply of £

current account deficit = M > X = S >D = depreciation = change in relative prices and automatic adjustment

but demand inelastic in short run thus price and total revenue flows move in opposite directions to make matters worse. Elastic demand in the long run brings about an improvement in the deficit position (J-curve) given the combined elasticies of X and M are greater than 1 (Marshall Learner Condition exists)