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The product life cycle

The product life cycle usually consists of four major steps or phases: Product introduction, Product growth, Product maturity and Product decline. The product life cycle refers to the period from the product’s first launch into the market until its withdrawal finally. (Komninos, 2002). And all products have their certain life cycles.

Robert (1994) used the character of David Ricardo’s theory of comparative advantage to illustrate that international free trade would be beneficial to trade parties since free trade could help eliminate those products that enter into the final phase of the product life cycle and allocate resources to potential industries effectively. He said that it is inefficient to make televisions in the United States because labors could work on something else more efficient, such as drug industry.

For instance, the book described that televisions imported from Japan hurt television industry in U.S. and domestic companies’ profits grew down. On the one hand, representatives of companies lobbied the government to protect domestic industry by increasing tariffs to against cheap imports. Nevertheless, this behavior would have costs as consumers had to spend a higher price to get a television. Although domestic industry would make profits, it harmed consumers’ interests. Obviously, people would oppose this policy and total social welfare would decline.

On the other hand, he believed that the domestic television industry had entered into the final phase of the product life cycle, so the government should not take redundant measures to protect domestic industry. Aa a result, some companies may go bankrupt and many workers would lose their jobs. But overall, American got wealthier. Both America and Japan prospered. Moreover, these spare resources would be allocated to industries and companies could use the resources to produce and develop new products, which are competitive and potential. The unemployed workers...