Exporting Goods.

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Exporting Goods

Although Fit - for - Life will be selling to domestic customers it will in the future rely on sales to foreign customers.  Goods (sometimes called visibles) and services (sometimes called invisibles), which are sold to foreign customers, are known as EXPORTS.  

Fit - for - Life will sell products to foreigners this could be trainers and other sportswear.

Fit - for - Life (a British company) receives the money from the sale of the trainers.  So the trainer is an exported good as it is a good sold to foreigners.

Exchange Rates

A British customer is likely to pay for a Fit - for - Life product in pounds sterling.  However a French customer is likely to pay in Euros.  

The price of euros for pounds, the EXCHANGE RATE, is frequently changing.  The changes can have a vital effect on Fit - for - Life.  

        The exchange rate at present is €1.50 = £1.  This means that €1.50 can be exhanged for £1.  A £40.00 pair of Nike Cortez trainers from Fit - for - Life will therefore cost a French customer €60.00 (£40.00 x €1.50).

        If the exchange rate fell, the value of the pound may also fall, so that €1= £1.  Fit - for - Life will now have to decidewhether to change its prices.  If it chooses to keep the price at £40.00 the price in Euros will fall.  The price of the same trainer in Euros will be €40.00 (£40.00 x €1).  This new lower price should encourage more French consumers to buy more Fit - for - Life goods.  In theory a fall in the value of the pound means that foreigners can but British goods more cheaply and should buy more.  

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However if the value of the pound rises, so that € 2= £1, then the trainers would be more expensive in France.  They would cost €80.00 (£40.00 x € 2) this would disencourage French customers to buy the trainers, less products will be brought, thus allowing more competiton to arise from other businesses in France.

The Government

The UK like other countries has to pay its way in the world.  Exports have to equal import over time.  If imports were greater than exports, the difference would have to be borrowed by foreigners.  To repay it, the exports would ...

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