Download Financial Operations - International Business (Our Global Economy).

International Business:
Our Global Economy
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 Scarcity

–
Refers to the limited resources available to
satisfy the unlimited needs of people
 Economics

–
The study of how people choose to use limited
resources to satisfy their unlimited needs and
wants
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6






Steps
Define the problem
Identify the alternatives
Evaluate the alternatives
Make a choice
Take action on the choice
Review the decision
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 Price
is one of the most economic factors you
encounter every day. The amount paid for
goods and services results from economic
decisions made by consumers, businesses,
and governments.
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 Supply
– the relationship between the
amount of a good or service that businesses
are willing and able to make available and
the price.
 Demand
– (the buyers side) the relationship
between the amount of a good or service
that consumers are willing and able to
purchase and the price.
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 Market
Price –
the point at
which supply
and demand
cross
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 Inflation
– an increase in the average prices
of goods and services in a country
 To
start a company that makes a product
requires several elements. These elements
are called factors of production
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 Natural
Resources (Land)
 Human Resources (Labor)
 Capital Resources (Capital - $)
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 Command
– government or central planning
committee regulates amount, distribution,
and price
 Market – individual companies and consumers
make decisions about what, how and for
whom items will be produced
 Mixed – where the economies are blended
between government involvement in business
and private ownership
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 Command

Government regulates

Government can even regulate what job you have
 Market

Economy
Companies and consumers make decisions

Private Property, Profit Motive, Free Marketplace
 Mixed

Economy
Economy
Some government involvement ex. France
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 Exists
when a country can produce a good or
service at a lower cost than another country
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 Exists
when a country specializes in the
production of a good or service at which it is
relatively more efficient

For example, if, using machinery, a worker in one country can
produce both shoes and shirts at 6 per hour, and a worker in a
country with less machinery can produce either 2 shoes or 4 shirts
in an hour, each country can gain from trade because their internal
trade-offs between shoes and shirts are different. The lessefficient country has a comparative advantage in shirts, so it finds
it more efficient to produce shirts and trade them to the moreefficient country for shoes.
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 GDP

Measures output of goods
produces within it’s borders
 GNP

(Gross Domestic Product)
that
a
country
(Gross National Product)
Measures the total value of all goods and services
produced by the resources of a country
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 Balance

Difference between a country’s exports and
imports
 Foreign

of Trade
Debt
Amount a country owes to other countries
 Consumer

Price Index (CPI)
Federal Government report that shows price
levels of products & services in different regions
of a country
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 Literacy
Level – countries with better
education systems usually provide more
goods and services that are of higher quality
for their citizens
 Technology
–
automated
production,
distribution, and communication systems
quickly allow companies to create and
deliver goods, services, and ideas quickly
 Agricultural dependency – an economy that is
involved in agriculture does not have
manufacturing base for high quality products
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Industrialized Country – strong business activity,
technology and educated population
Infrastructure – refers to nation’s transportation,
communications, and utilities
Less-Developed Country – little economic wealth and
focus on agriculture and mining
Developing Country – moving towards industrialization
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 Emerging
Markets – Places where consumer
incomes and buying power are increasing
because of economic expansion
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 Gross

Measures the output of goods that country
produces within its borders
 Gross

Domestic Product (GDP)
National Product (GNP)
Measures the total value of all goods and services
produced by resources of a country

*It’s like GDP except the goods could be made in other
countries but using resources from your country
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 Balance
of trade – difference between a
country’s exports and imports

Example – if a country imports more than it
exports, it is an unfavorable balance of trade
also known as a TRADE DEFICIT
 Foreign
Exchange Rate – value of country’s
money to another country
 Foreign Debt – amount a country owes to
other countries
 CPI – Consumer Price Index is a federal govt.
report published by Bureau of Labor
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