Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
CHAPTER 2 Our Global Economy 2-1 2-2 2-3 2-4 2-5 Economics and Decision Making Basics of Economics Economic Systems Achieving Economic Development Resources Satisfy Needs © 2011 South-Western | Cengage Learning CHAPTER INTERNATIONAL BUSINESS, 4e 2 LESSON 2-1 Economics and Decision Making GOALS Describe the basic economic problem. List the steps of the decisionmaking process. © 2011 South-Western | Cengage Learning SLIDE 2 CHAPTER INTERNATIONAL BUSINESS, 4e 2 The Basic Economic Problem Scarcity refers to the limited resources available to satisfy the unlimited needs and wants of people. Ex. A country must decided whether to grow its own food or to import agricultural products so its workers can produce other items Studying how people, countries or a company chooses to use its limited resources to satisfy their unlimited wants and needs is called economics. © 2011 South-Western | Cengage Learning SLIDE 3 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Making Economic Decisions Coping with scarcity Making choices © 2011 South-Western | Cengage Learning SLIDE 4 CHAPTER INTERNATIONAL BUSINESS, 4e 2 The Decision-Making Process © 2011 South-Western | Cengage Learning SLIDE 5 CHAPTER INTERNATIONAL BUSINESS, 4e 2 The Decision Making Process Step 1-Define the Problem-What do I need or want? Step 2-Identify the Alternatives-What are the different ways my problem can be solved? Step 3-Evaluate the Alternatives-What are the advantages and disadvantages of each of the choices available? Step 4-Make a choice-Based on the advantages and disadvantages, which would be the best choice? Step 5- Take action on the choice-What needs to be done to put the decision into action? Step 6-Review the decision-Did your decision solve the problem? As time goes by, what different actions might be necessary? Were there consequences you did not predict when you evaluated the alternatives? © 2011 South-Western | Cengage Learning SLIDE 6 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Example #1 #1. How can Benson Electric Company continue to increase its sales over the next five years? Right now, the company only sells electronic products in the US. © 2011 South-Western | Cengage Learning SLIDE 7 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Step 2 Increasing Advertising to attract new customers Reducing prices to attract new customers Selling products online and e-mailing information to customers in other countries Shipping products to sell in other countries Producing and selling products in other countries © 2011 South-Western | Cengage Learning SLIDE 8 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Step 3 Each has benefits; you have to list risks and costs with each choice Ex. Reducing prices may increase the number of customers but could reduce total dollar sales. The cost of producing products in another country could be greater than the money earned from additional sales. © 2011 South-Western | Cengage Learning SLIDE 9 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Step 4 Every time a choice is made something else is given up. So, once Benson Electric selects a course of action, it probably will not be able to choose other alternatives. Opportunity Cost-most attractive alternative given up when a choice I made. For example, your decision to go to college and not work and make money; the decision to continue your education is likely to benefit you throughout your life with higher earnings. © 2011 South-Western | Cengage Learning SLIDE 10 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Step 5 Put choice into action © 2011 South-Western | Cengage Learning SLIDE 11 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Step 6 Review decision in the weeks, months, and years that follow to determine whether it needs to be changed or if other decisions need to be made. Ongoing process. © 2011 South-Western | Cengage Learning SLIDE 12 CHAPTER INTERNATIONAL BUSINESS, 4e 2 With a partner: Given the two problems below give me a list of three solutions for that particular problem (include the six-step problem solving model) #1. A computer store is losing business to a competitor. The competitor is selling imported software at a very low price. #2. A food company is having trouble selling its frozen products in other countries because it is very expensive to transport frozen foods. © 2011 South-Western | Cengage Learning SLIDE 13 CHAPTER INTERNATIONAL BUSINESS, 4e 2 LESSON 2-2 Basics of Economics GOALS Describe how the market sets prices. Explain the causes of inflation. © 2011 South-Western | Cengage Learning SLIDE 14 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Price-Setting Activities Price is the most visible economic factor you encounter every day. Determining prices involves two main elements-supply and demand. Supply-is the relationship between the amount of a good or service that businesses are willing and able to make available and the price. For Example: many years ago only a couple of companies made baseball and other sports cards for collecting. As these cards became more popular, other companies got involved in the sports card business. © 2011 South-Western | Cengage Learning SLIDE 15 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Price Setting Activities Demand-which is the relationship between the amount of a good or service that consumers are willing and able to purchase and the price. Price declines, demand increases – law of demand Price increase, supply increase-because the business can make more money The point at which the supply and demand cross is the market price. © 2011 South-Western | Cengage Learning SLIDE 16 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Market Price Is Set by Supply and Demand © 2011 South-Western | Cengage Learning SLIDE 17 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Changing Prices Inflation Demand-pull inflation Cost-push inflation © 2011 South-Western | Cengage Learning SLIDE 18 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Inflation Prices constantly change. A common economic concern is continually rising prices. An increase in the average prices of goods and services is known as inflation. Inflation allows people to buy fewer goods and services. Inflation is an indication of the buying power of a country’s monetary unit (such as US Dollar, British Pound, and Japanese Yen). © 2011 South-Western | Cengage Learning SLIDE 19 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Demand Pull Inflation Inflation has two basic causes when demand exceeds supply, prices go up this is called demand-pull inflation. It can occur when a government tries to solve economic problems by printing more money. © 2011 South-Western | Cengage Learning SLIDE 20 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Cost-Push Inflation The other cause of inflation occurs when the expenses of a business (such as cost of salary or raw materials) increases. This is called cost-push inflation. Higher price charged by a company. Ex. Recently Zimbabwe, a 231,000,000 percent inflation rate resulted from political turmoil and an economic collapse. This is what type of inflation? © 2011 South-Western | Cengage Learning SLIDE 21 CHAPTER INTERNATIONAL BUSINESS, 4e 2 LESSON 2-3 Economic Systems GOALS Name the three main factors of production. Understand how different countries make economic decisions. © 2011 South-Western | Cengage Learning SLIDE 22 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Economic Resources Satisfy Needs Natural resources Human resources Capital resources © 2011 South-Western | Cengage Learning SLIDE 23 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Natural Resources Also known as land, these resources are the raw materials that come from the earth, from the water, and from the air. Iron ore, gold, silver, agricultural products, rivers, and oxygen are examples of natural resources. These items are used in the production of goods and services consumed by individuals, businesses, and governments. © 2011 South-Western | Cengage Learning SLIDE 24 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Human Resources Also known as labor, these resources are the people who work to create goods and services. While technology has changed or eliminated certain tasks previously performed by people, new types of work are continually being created. © 2011 South-Western | Cengage Learning SLIDE 25 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Capital Resources Also called capital, these resources include buildings, money, equipment, and factories used in the production process. These items are expensive and are used over several years by business organizations. © 2011 South-Western | Cengage Learning SLIDE 26 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Economic System The economic choices of a country relate to three basic questions: 1. What goods and services are to be produced? 2. How should the goods and services be produced? 3. For whom should the goods and services be produced? © 2011 South-Western | Cengage Learning SLIDE 27 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Types of Economic Systems Command Economies the government or central planning committee regulates the amount, distribution, and price of everything produced. Referred to as communism. Ex. Cuba © 2011 South-Western | Cengage Learning SLIDE 28 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Types of Economic Systems Market Economy those in which individual companies and consumers make the decisions about what, who and for whom items will be produced. Referred to as capitalism. Ex. Japanese, Australian, Canadian economies are market. Market economy consists of three things: Private property Profit motive Free, competitive marketplace © 2011 South-Western | Cengage Learning SLIDE 29 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Types of Economic Systems Mixed Economy blending of both economies. Referred to as socialism. Political and economic system with most basic industries owned and operated by government with the government controlled by the people as a whole. Ex. Sweden and France. © 2011 South-Western | Cengage Learning SLIDE 30 CHAPTER INTERNATIONAL BUSINESS, 4e 2 LESSON 2-4 Achieving Economic Development GOALS Describe the factors that affect economic development. Identify the different levels of economic development. © 2011 South-Western | Cengage Learning SLIDE 31 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Development Factors Literacy level Technology Agricultural dependency © 2011 South-Western | Cengage Learning SLIDE 32 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Types of Development Industrialized countries the nations with the greatest power are usually those with many large companies. Is a country with strong business activity that is usually the result of advanced technology and a highly educated population. © 2011 South-Western | Cengage Learning SLIDE 33 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Infrastructure Another factor that supports international trade in industrialized countries is infrastructure. Infrastructure-nations transportation, communication and utility systems. Countries include Canada, United Kingdom, France, Germany, Italy, Japan, and the United States © 2011 South-Western | Cengage Learning SLIDE 34 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Less-Developed Countries very low standard of living. A country with little economic wealth and an emphasis on agriculture or mining. Abundant resources and no technology to make use of them. Most LD countries have annual incomes of $1,000. Compared to US $30,000 Results from inadequate housing, starvation, and poor health care. Countries include Bangladesh, Cambodia, Chad, Haiti, Nepal, and Sudan Industrialized Countries tend to assist LDC with the problems of poor health care, limited natural resources, low literacy rates, etc. © 2011 South-Western | Cengage Learning SLIDE 35 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Developing Countries evolving from less developed to industrialized. These nations are improving educational systems, increasing technology, and expanding industries. Referred to as emerging markets. Countries include Argentina, Brazil, Ecuador, India, Kenya, Hungary, Poland, South Africa, Turkey, Thailand, and Vietnam. © 2011 South-Western | Cengage Learning SLIDE 36 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Levels of Economic Development LessDeveloped Country Low literacy Limited technology Agricultural or mining economy Developing Country Industrialized Country Improving literacy Improving technology Decreasing dependence on agriculture or mining High literacy Modern technology Industrial economy © 2011 South-Western | Cengage Learning SLIDE 37 CHAPTER INTERNATIONAL BUSINESS, 4e 2 LESSON 2-5 Resources Satisfy Needs GOALS Discuss economic principles that explain the need for international trade. Identify various measures of economic progress and development. © 2011 South-Western | Cengage Learning SLIDE 38 CHAPTER INTERNATIONAL BUSINESS, 4e 2 The Economics of Foreign Trade Buying and selling among companies in different countries is based on two economic principles. Absolute advantage-exists when a country can produce a good or service at a lower cost than other countries. This situation usually occurs as a result of the natural resources or raw materials of a country. For example, South American countries have an absolute advantage in coffee production. Canada in lumber sales, and Saudi Arabia in oil production. © 2011 South-Western | Cengage Learning SLIDE 39 CHAPTER INTERNATIONAL BUSINESS, 4e 2 The Economics of Foreign Trade A country may have an absolute advantage in more than one area. For example, a country may be able to produce both computers and clothing better than other countries. The world market for computers, however, might be stronger. This means the country would better serve its own interests by producing computers and buying clothing from other countries. This is an example of the second economic principle, comparative advantage. © 2011 South-Western | Cengage Learning SLIDE 40 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Measuring Economic ProgressGDP Think of a score a sporting event. International Business keeps score as well. Various economic measures are used to evaluate and analyze the economic conditions of a country. Gross domestic product (GDP)- measures the output of goods that a country produces within its borders. It includes items produced using foreign resources. Ex. The GDP would include automobiles manufactured in the United States. © 2011 South-Western | Cengage Learning SLIDE 41 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Measuring Economic ProgressGNP Gross National Product (GNP)-measures the total value of all goods and services produced by the resources of a country. Same as GDP but also includes the production of other countries using resources of the country whose GNP is being measured. To get the real results you have to take the per capita of each GDP and GNP because of the varying population in each country. © 2011 South-Western | Cengage Learning SLIDE 42 CHAPTER INTERNATIONAL BUSINESS, 4e 2 International Trade Activity Balance of Trade-is the difference between a country’s exports and imports. When a country exports (sells) more than it imports (buys) it has a favorable balance of trade or a trade surplus. Vice Versa a trade deficit. Ex. In 2011, United Kingdom imported $645.7 billion and exported $468.7 billion. (a trade deficit) © 2011 South-Western | Cengage Learning SLIDE 43 CHAPTER INTERNATIONAL BUSINESS, 4e 2 International Trade Activity Because different nations have different monetary units, a comparison of the value of currencies is required. Foreign Exchange Rate-is the value of one country’s money in relation to the value of the money of another country. Every day changes you can see changes occur via newspaper or online. © 2011 South-Western | Cengage Learning SLIDE 44 CHAPTER INTERNATIONAL BUSINESS, 4e 2 International Trade Activity When you buy more than your current income allows, you go into debt. In the same way, when a country continually has an unfavorable balance of trade, it owes money to others. Foreign Debt-is the amount a country owes to other countries. This effects a country by: Must use future income to pay for current and past spending Limits funds for improving infrastructure and for providing services for its citizens in the future © 2011 South-Western | Cengage Learning SLIDE 45 CHAPTER INTERNATIONAL BUSINESS, 4e 2 Other Economic Measurements Inflation (increase in prices) is measured in the United States by the Consumer Price Index- (CPI). CPI-is a federal government report published by the Bureau of Labor Statistics Unemployment Rate © 2011 South-Western | Cengage Learning SLIDE 46