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GLOBAL ECONOMICS GLOBALIZATION UNIT LESSON 1 OBJECTIVES • Review economic systems. • Introduce key economic terms related to globalization. WARM UP & REVIEW • What is economy? • Way in which we manage resources to meet needs • What are resources? • Human: time, $, skill • Country: natural resources, capital, labor force and technology • Limited resources = Scarcity BASIC ECONOMIC SYSTEMS • 3 Basic Questions? • What to produce? • How to produce? • For whom to produce? • Basic Systems? • Traditional • Cultural needs, subsistence • Market • Free choice, competition • Command • Govt decides, controls • MIXED • Economics • Study of decisionmaking & resource allocation. THE LAW OF SUPPLY & DEMAND • Supply • The amt of a certain good or service producers are willing to supply when receiving a certain price • Law of Supply: The higher the price, the higher the quantity produced • • Demand • How much (quantity) of a product or service people are willing to buy at a certain price • Law of Demand: The higher the price, the less demanded WHAT’S THIS MEAN? • Desire equilibrium: At the given price, suppliers sell all the goods they’ve produced & consumers get all the goods they’re demanding. • Too much supply (surplus), not enough demand = prices drop • Too much demand & not enough supply (deficit) = prices rise • “Market fluctuations” GLOBAL ECONOMY • Goal is effective resource mgmt for most efficient production • Weigh opportunity cost • Value of alternative that must be forgone to pursue certain action • Specialization & Comparative Advantage • Nation makes certain products at lower cost (higher quality) than others GLOBAL TRADE • • • • • • Make better product Make cheaper product If can’t make on own = import Exchange rates = more for $ elsewhere Sell to more = make more $ Ease of access to markets GLOBALIZATION REVIEW • What is globalization? • Growing integration of the world’s economies and societies. • Open country to free trade • Open currency markets • Privatize business GLOBAL IMPACT • As global economy becomes more interdependent • Dvpt depends on wise use of globally scarce resources • Decisions in one location affect all others ACTIVITY • Illustrated Global Economic Terms • Working in groups of 4. create illustrations for each of the terms on your vocab page. CLOSURE • What factors drive global economic decision making? • • • • Resource Scarcity Supply & Demand Opportunity Cost Comparative Advantage HOMEWORK • Choices Reading – International Trade: Competition & Cooperation in a Globalized World • Available in classroom