BRIC SUMMIT 2023:

IT’S IMPACT ON WORLD ECONOMY

MICROECONOMICS ASSIGNMENT

BY
ANANYA MOHANTY
Roll No - 23PGP030
TERM 1 | SEC A
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 The BRICS Summit this year occurs amidst significant geopolitical shifts, with Russia
and China at the forefront. Russia faces Western sanctions affecting its economy, while China
confronts economic challenges amid a trade dispute with the United States. Given these
uncertainties, the summit may emphasize greater economic cooperation to address the Ukraine
War fallout and global economic slowdown. This could help dispel perceptions of BRICS'
irrelevance.

One key question is whether the BRICS grouping will expand to include 40 more
countries, such as Argentina, Iran, and Saudi Arabia. This expansion could counterbalance the
influence of the US-led Group of Seven (G7) in the global economy and provide an alternative
source of financing for developing nations. However, it might also reflect China's ambition to
lead the developing world, potentially straining its relationship with rival India.

China's push for de-dollarization in global trade, aimed at reducing reliance on the US
dollar, plays a role in BRICS' expansion plans. China seeks to promote the Yuan as an
alternative reserve currency. Yet, India, aspiring to elevate the Rupee's global status, may resist
Yuan dominance due to geopolitical tensions.

Despite these aspirations, the idea of a common 'BRICS currency' seems unlikely to be
discussed at the upcoming summit. Instead, the focus may shift towards deepening trade ties
with African countries, particularly through the African Continental Free Trade Area. China,
in particular, is already Africa's largest trading partner.

In terms of economic potential, BRICS represents over 40% of the world's population
and a significant portion of global GDP. Foreign investments in BRICS have quadrupled from
2001 to 2021, fostering economic growth. The group accounts for 18% of global exports, with
room for increased intra-member trade. Expanding BRICS could substantially boost global
trade and economic relevance, possibly contributing more than 50% of global GDP by 2030.

From a microeconomic perspective, the potential expansion of BRICS and increased

economic cooperation can lead to various outcomes. It could create new opportunities for firms
in member countries, fostering competition and innovation. Reduced reliance on the US dollar
might reduce exchange rate risks for businesses involved in international trade. However,
concerns may arise regarding the distribution of benefits among member nations, as some
countries may benefit more from expanded trade than others. Additionally, economic ties with

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African countries could open up new markets for BRICS firms, potentially driving economic
growth.

In the context of BRICS expansion, there's an opportunity cost associated with adding
new member countries. By expanding, BRICS nations might gain access to new markets and
resources, but they also commit resources (financial and diplomatic) to integrating these new
members. Economists might analyse whether the benefits of expansion, such as increased trade
opportunities, outweigh the opportunity cost of diverting resources from other potential
investments or policy initiatives

BRICS countries, with their vast populations, can represent both elastic and inelastic
demand for various goods. For example, if BRICS nations collectively reduce their reliance on
the US dollar for trade, it could affect the demand for the dollar. Economists might study the
elasticity of demand for the dollar in BRICS countries to predict how changes in its value might
impact their trade and currency exchange.

In the case of BRICS expanding trade ties with African countries, we might examine
how this affects the supply and demand for goods and services in both regions. Increased trade
could lead to changes in the prices of commodities, which would impact producers and
consumers in BRICS and African countries differently based on their relative supply and
demand elasticities.

We could explore how various market structures within BRICS countries influence the
outcomes of economic cooperation. For instance, analysing whether certain industries are
monopolistic, oligopolistic, or perfectly competitive can provide insights into how firms within
those sectors benefit from expanded trade and investment opportunities.

In conclusion, the BRICS Summit's focus on economic cooperation, expansion, and de-
dollarization reflects the complex dynamics of a group seeking to assert itself in the changing
global order. From a microeconomic perspective, these developments hold both opportunities
and challenges for businesses, with potential implications for economic growth and income
distribution among member countries.