Download - Our Global Economy
© 2011 South-Western | Cengage Learning
Our Global Economy
2-12-1 Economics and Decision Making
2-22-2 Basics of Economics
2-32-3 Economic Systems
2-42-4 Achieving Economic Development
2-52-5 Resources Satisfy Needs
CHAPTER 2
INTERNATIONAL BUSINESS, 4e CHAPTER
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2LESSON 2-1
Economics and Decision Making
GOALSGOALSDescribe the basic economic
problem.List the steps of the decision-
making process.
INTERNATIONAL BUSINESS, 4e CHAPTER
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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, 4e CHAPTER
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2
Making Economic Decisions
Coping with scarcityMaking choices
INTERNATIONAL BUSINESS, 4e CHAPTER
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2
The Decision-Making Process
INTERNATIONAL BUSINESS, 4e CHAPTER
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2LESSON 2-2
Basics of Economics
GOALSGOALSDescribe how the market sets
prices.Explain the causes of inflation.
INTERNATIONAL BUSINESS, 4e CHAPTER
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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, 4e CHAPTER
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2Market Price Is Set by Supply and Demand
INTERNATIONAL BUSINESS, 4e CHAPTER
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2
Changing Prices
InflationDemand-pull inflationCost-push inflation
INTERNATIONAL BUSINESS, 4e CHAPTER
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2LESSON 2-3
Economic Systems
GOALSGOALSName the three main factors of
production.Understand how different countries
make economic decisions.
INTERNATIONAL BUSINESS, 4e CHAPTER
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Economic Resources Satisfy Needs
Natural resourcesHuman resourcesCapital resources
INTERNATIONAL BUSINESS, 4e CHAPTER
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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.
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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.
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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.
INTERNATIONAL BUSINESS, 4e CHAPTER
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Economic System
The economic choices of a country relate to three basic questions:
1.1.What goods and services are to be produced?
2.2.How should the goods and services be produced?
3.3.For whom should the goods and services be produced?
INTERNATIONAL BUSINESS, 4e CHAPTER
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Types of Economic Systems
Command EconomiesMarket Economies
Private propertyProfit motiveFree, competitive marketplace
Mixed Economies
INTERNATIONAL BUSINESS, 4e CHAPTER
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2LESSON 2-4
Achieving Economic Development
GOALSGOALSDescribe the factors that affect
economic development.Identify the different levels of
economic development.
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Development Factors
Literacy levelTechnologyAgricultural dependency
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Types of Development
Industrialized countriesLess-developed countriesDeveloping countries
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Levels of Economic Development
Low literacyLimited
technologyAgricultural or
mining economy
Improving literacy
Improving technology
Decreasing dependence on agriculture or mining
High literacyModern
technologyIndustrial
economy
Less-Developed Country
Developing Country
Industrialized Country
INTERNATIONAL BUSINESS, 4e CHAPTER
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2LESSON 2-5
Resources Satisfy Needs
GOALSGOALSDiscuss economic principles that
explain the need for international trade.
Identify various measures of economic progress and development.
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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.
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Measuring Economic Progress
Measure of ProductionGross domestic product (GDP)Gross national product (GNP)
International Trade ActivityBalance of tradeForeign exchange rateForeign debt
Other Economic MeasurementsConsumer price index (CPI)Unemployment rate