Download international business

LESSON
2-1
ECONOMICS
AND DECISION
MAKING
INTERNATIONAL BUSINESS
GOALS
 Describe the basic
economic problem.
 List the steps of the
decision-making
process.
© SOUTH-WESTERN THOMSON
2
The Basic Economic Problem
Scarcity refers to the limited resources
available to satisfy the unlimited needs
and wants of people.
Economics is the study of how people
choose to use limited resources to satisfy
their unlimited needs and wants.
INTERNATIONAL BUSINESS
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3
The Decision-Making Process
6
Review
decision
1
Define
problem
5
2
Take
action
Identify
alternatives
4
Make
choice
INTERNATIONAL BUSINESS
3
Evaluate
alternatives
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LESSON
2-2
BASICS OF
ECONOMICS
INTERNATIONAL BUSINESS
GOALS
 Describe how the
market sets prices.
 Explain the causes
of inflation.
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5
Price-Setting Activities
 Supply is the relationship between the amount
of a good or service that businesses are willing
and able to make available and the price.
 Demand is the relationship between the amount
of a good or service that consumers are willing
and able to purchase and the price.
 Market price is the point at which supply and
demand cross.
INTERNATIONAL BUSINESS
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6
Supply and Demand
Demand
$12
Supply
Price per Video
$10
$8
$6
Market Price
$4
$2
$0
0
10
20
30
40
50
60
70
Number of Video
INTERNATIONAL BUSINESS
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7
Changing Prices
Inflation
Demand-pull inflation
Cost-push inflation
INTERNATIONAL BUSINESS
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LESSON
2-3
ECONOMIC
SYSTEMS
INTERNATIONAL BUSINESS
GOALS
 Name the three main
factors of production.
 Understand how different
countries make economic
decisions.
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9
Economic Resources Satisfy Needs
Natural resources
 also known as land
Human resources
 also known as labor
Capital resources
 also known as capital
INTERNATIONAL BUSINESS
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10
Types of Economic Systems
Command Economies
Market Economies
 Private property
 Profit motive
 Free, competitive marketplace
Mixed Economies
INTERNATIONAL BUSINESS
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LESSON
2-4
ACHIEVING
ECONOMIC
DEVELOPMENT
INTERNATIONAL BUSINESS
GOALS
 Describe the factors
that affect economic
development.
 Identify the different
levels of economic
development.
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12
Development Factors
Literacy level
Technology
Agricultural dependency
INTERNATIONAL BUSINESS
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13
Types of Development
Industrialized countries
Less-developed countries
Developing countries
INTERNATIONAL BUSINESS
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14
Levels of Economic Development
Less-Developed
Country
 Low literacy
 Limited
technology
 Agricultural
or mining
economy
INTERNATIONAL BUSINESS
Developing
Country
 Improving
literacy
 Improving
technology
 Decreasing
dependence
on agriculture
or mining
Industrialized
Country
 High literacy
 Modern
technology
 Industrial
economy
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LESSON
2-5
RESOURCES
SATISFY
NEEDS
INTERNATIONAL BUSINESS
GOALS
 Discuss economic
principles that explain
the need for
international trade.
 Identify various
measures of economic
progress and
development.
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16
The Economics of Foreign Trade
Absolute advantage exists when a
country can produce a good or service at a
lower cost than other countries.
Comparative advantage exists when a
country can produce a good or service
with more efficiency than other countries.
INTERNATIONAL BUSINESS
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17
Measuring Economic Progress
Measure of Production
 Gross domestic product (GDP)
 Gross national product (GNP)
International Trade Activity
 Balance of trade
 Foreign exchange rate
 Foreign debt
Other Economic Measurements
 Consumer price index (CPI)
 Unemployment rate
INTERNATIONAL BUSINESS
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