Globalisation and the price level

Globalisation can definitely reshape prices in markets that globalisation can re-determine the supply and demand in markets across the world. Globalisation emerges many markets across countries into several world markets then the overall demand and supply may not change significantly, but the individual demands and supplies in separated countries do change and tend to narrow the price differences across regions and countries. Under such circumstance, the price levels in the developing world increase as the previous prices were lower than the average world price levels, the price levels in the developed world decreased as the previous prices were higher than the average world price levels.

However, globalisation may have impacts on the world overall price levels. Globalisation can help to enlarge the production scale, leading to a possible improvement of productivity. The costs of production reduce under globalisation so the supply curve can shift upwards, the prices can drop. On the other hands, globalisation can increase the overall demand. New products are introduced to new markets and the people can find out their new demands when they see new products in their markets. When both the supply and the demand increase, the price change is determined by the extends of changes in supply and demand. However, as I expect the supply increases more significantly than the demand changes, therefore a decrease in the price level appears under globalisation and we can see that our world economy experienced a period of low inflation and high economic growth from late last century to early this century.

Such price level change is near its end, as the further price level change will be led by the change in trade barriers across countries that when the barriers are high, the prices will increase and when the barriers are disappearing, the prices will drop.