Download DESOTO HIGH SCHOOL INTERNATIONAL (GLOBAL) BUSINESS

DESOTO HIGH SCHOOL
INTERNATIONAL (GLOBAL) BUSINESS
OUR GLOBAL ECONOMY
STUDY GUIDE
OBJECTIVES—











Describe the basic economic problem
List the steps of the decision-making process
Describe how the market sets prices
Explain the causes of inflation
Name the three main factors of production
Understand how different countries make economic decisions
Describe the factors that affect economic development
Identify the different levels of economic development
Discuss economic principles that explain the need for international trade
Identify various measures of economic progress and development
Define terms related to economics
VOCABULARY—
Absolute advantage
Comparative advantage
Developing country
Factors of production
Gross domestic product (GDP)
Infrastructure
Market price
Privatization
Balance of trade
Consumer price index (CPI)
Economics
Foreign debt
Industrialized country
Less-developed country (LDC)
Mixed economy
Scarcity
Command economy
Demand
Economic system
Foreign exchange rate
Inflation
Market economy
Opportunity cost
supply
GLOBAL FOCUS – DUAL ECONOMIES
In Mexico City, people working for multi-national companies are often within a couple of blocks of
people selling items on the street. You will see modern buildings with the latest office technology. While
just a short drive out of the city, people are conducting business as they did more than 50 years ago.
These contrasting situations are examples of a dual economy, in which two very different business
settings exist in the same country.
Dual economies exist in every region of the world. These diverse settings represent two extreme levels
of economic development. The modern economy could be described as an industrialized economy. The
traditional business activities may be viewed as less developed.
These two different levels of economic developed are often observed in the difference between urban
and rural areas in emerging markets. Cities will often have large companies that are the foundation o a
country’s economy. The countryside is home to traditional enterprises, such as creating hand-made
crafts and operating small farms. The level of participation in international business is a characteristic of
this urban-rural dual economy. Companies in cities are more likely to be involved with cross-border
commerce and global trade, while traditional businesses in rural areas are usually involved in local
markets.
Another dimension of the dual economy within every country involves street vendors, pushcarts, homebased businesses, and other unregistered enterprises. Commonly called the informal economy, these
businesses are in contrast to formal enterprises that obtain required permits and pay taxes. Millions of
Mexican workers are employed in the informal sector. Economists estimate that nearly half of the jobs
in Mexico City involve informal business activities.
Dual economies exist in almost every country including industrialized countries such as Canada and the
United States. As some business activities lead to economic growth, others fall behind. Problems of
poverty, hunger, and homelessness are symptoms of this economic underdevelopment. Individual
countries and global development agencies work to address the gap that results from dual economies in
an effort to alleviate poverty and avoid social unrest.
THINK CRITICALLY
1. What is a dual economy?
ECONOMICS AND DECISION-MAKING
THE BASIC ECONOMIC PROBLEM
Scarcity
economics
opportunity cost
Making Economic Decisions
Every time you decide how to use your time, money, and energy, you are making an economic decision.
Companies and nations also have to make choices
The Decision-Making Process






Step 1 – Define the problem
Step 2 – identify the alternatives
Step 3 – evaluate the alternatives
Step 4 – make a choice
Step 5 – take action on the choice
Step 6 – review the decision
STUDY GUIDE: OUR GLOBAL ECONOMY
Page 2
BASICS OF ECONOMICS
PRICE-SETTING ACTIVITIES
Supply
demand
market price
inflation
Price is one of the most visible economic factors you encounter every day.
The point where supply equals demand is known as the market price.
Inflation has two basic causes. First, when demand exceeds supply, prices go up (demand-pull inflation).
The other cause of inflation occurs when the expenses of business increase (cost-push inflation).
ECONOMIC SYSTEMS
ECONOMIC RESOURCES SATISFY NEEDS
Factors of production
economic system
Every country makes economic decisions. These decisions provide a basis for solving the basic economic
problem—satisfying unlimited needs and wants with limited resources.
TYPES OF ECONOMIC SYSTEMS
Economic system
command economy
Mixed economy
privatization
market economies
Every nation decides how to use its factors of production to create goods and services for its people. The
economic choices of a country relate to three basic questions.

What goods and services are to be produced?

How should the goods and services be produced?

For whom should the goods and services be produced?
ACHIEVING ECONOMIC DEVELOPMENT
DEVELOPMENT FACTORS
Differences in living and work environments reflect the level of economic development. The main
influences on a country’s economic development are literacy level, technology, and agricultural
dependency.
TYPE OF DEVELOPMENT
Industrialized country
STUDY GUIDE: OUR GLOBAL ECONOMY
infrastructure
less-developed country (LDC)
Page 3
Developing countries
RESOURCES SATISFY NEEDS
THE ECONOMICS OF FOREIGN TRADE
Absolute advantage
comparative advantage
Countries are interdependent with each other and so are their economies. Consumers have come to
expect goods and services from around the world, not just from suppliers in their own country.
MEASURING ECONOMIC PROGRESS
Gross domestic product (GDP)
Balance of trade
gross national product (GNP)
foreign exchange
foreign debt
Consumer price index (CPI)
The World Cup, the World Series, and the Olympics are sports events that involve scorekeeping. As with
sports, international business also keeps score. Various economic measures are used toevaluate and
analyze the economic conditions of a country.
NOTES
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
___________________________________________________________________________________
STUDY GUIDE: OUR GLOBAL ECONOMY
Page 4