Chapter 2: Our Global Economy PDF

CHAPTER 2 Our Global Economy 2-1 Economics and Decision Making 2-2 Basics of Economics 2-3 Economic Systems 2-4 Achieving Economic Development 2-5 Resources Satisfy Needs © 2011 South-Western | Cengage Learning INTERNATIONAL BUSINESS, 4e...

CHAPTER 2 Our Global Economy 2-1 Economics and Decision Making 2-2 Basics of Economics 2-3 Economic Systems 2-4 Achieving Economic Development 2-5 Resources Satisfy Needs © 2011 South-Western | Cengage Learning INTERNATIONAL BUSINESS, 4e CHAPTE 2 R 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. © 2011 South-Western | Cengage Learning 2 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R Making Economic Decisions Coping with scarcity Making choices © 2011 South-Western | Cengage Learning 3 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R The Decision-Making Process © 2011 South-Western | Cengage Learning 4 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R LESSON 2-2 Basics of Economics Describe how the market sets GOALS prices. Explain the causes of inflation. © 2011 South-Western | Cengage Learning 5 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R 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. © 2011 South-Western | Cengage Learning 6 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R Market Price Is Set by Supply and Demand © 2011 South-Western | Cengage Learning 7 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R Changing Prices Inflation © 2011 South-Western | Cengage Learning 8 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R Economic Resources Satisfy Needs Natural resources Human resources Capital resources © 2011 South-Western | Cengage Learning 9 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R 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 10 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R 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 11 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R 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 12 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R Development Factors Literacy level Technology Agricultural dependency © 2011 South-Western | Cengage Learning 13 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R Types of Development Industrialized countries Less-developed countries Developing countries © 2011 South-Western | Cengage Learning 14 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R Levels of Economic Development Less- Developed Developing Industrialized Country Country Country Low literacy Improving High literacy Limited literacy Modern technology Improving technology Agricultural or technology Industrial mining Decreasing economy economy dependence on agriculture or mining © 2011 South-Western | Cengage Learning 15 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R 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. © 2011 South-Western | Cengage Learning 16 INTERNATIONAL BUSINESS, 4e CHAPTE 2 R 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 © 2011 South-Western | Cengage Learning 17