Explain four types of economic dependence. Are this types of economic dependence remain relevant to explain economic growth and development of developing countries.

Economic dependence is a situation in which the cost or the revenues associated with

a given project are dependent on the cost or revenues generated by another project. The

concept is found within companies, industries, and even the economies of different countries.

Shifts in any of the factors associated with the two related projects can lead to changes in the

profitability and the general stability of one or both of the projects.

An example of economic dependence within a business would be the relationship

between the cost of producing a specific good and the cost associated with marketing that

good to consumers. Production costs have a direct effect on determining the retail price for

the good, since the goal is to earn a return on every unit that is sold. Should the price for any

of the raw materials used in the production process increase, it will have a direct effect on the

amount of profit generated by each sale.

The same general idea of economic dependence can be applied to two businesses that

have a working relationship. If one company produces machine components that the other

company needs to manufacture goods, any change in the line of available components will

have a direct impact on the supplier’s customer. This may mean an increase in the cost of the

components. In a situation where the supplier discontinues production of a given component,

the result is a shift in costs and revenues for the client, at least until the component can be

secured from another supplier.

Along with this type of interdependence in business, the concept of economic

dependence is also found among nations. In situations where two countries establish an

equitable balance of trade, each enjoys the benefit of exporting goods at reasonable prices

while also importing goods at prices that are considered equitable. Should one country decide

to cut imports to the other, the situation could lead to an imbalance in trade that has a

negative effect on the general economy of one or both nations, possibly driving up the price

for available goods or by creating a series of job losses in related industries.

At its best, obtaining an economic dependence creates a situation where all parties

involved benefit from the arrangement. When an imbalance takes place, the potential for one

or both parties to experience a loss of revenue or an unfavorable change in associated costs is

greatly increased. For this reason, taking the time to assess the impact that any change will

have on other departments within the business, suppliers and customers, and even the trade

balance between nations is extremely important. Once lost, restoring an economic balance

may take a great deal of time and effort.

There are four types of economic dependence which is direct economic dependence,

trade dependence, financial dependence and technology dependence. Four of that dependence

have many own explanation in terms of economic growth and development of developing

countries.