1. MIM 513 Pacific Rim Economies Class Four – Global Markets and Consumption

2. Midterm exams ~90 minutes Global Market discussion Consumption and Income Propensity to consume / save The effect of savings globally Current Events and Country Updates Agenda

3. Market Segments - Segmentation – distinct consumers (culture / geography) - Basic vs. advanced products -Standards and regulations -Cellular stds -Environmental stds (RhOS) -Channels -Pricing strategies -Dumping -Elasticity -Knowledge -Tacit vs. codified -What needs to be transferred? -Decision rights – Alienable versus market strategy

4. Levi Strauss – example (p. 519) Three Game changers 1. Offshored product to save $$$ 2. Expanded Product-Line, including low retail targets 3. Empowered National Mgrs with Key decision rights - Regionalism

5. Income effects -Basic relationships -Income and consumption -Income and savings -Disposable income -C=DI-S -Consumption model

6. Income effects -Propensity to consume -Marginal to C or S -Average -Non-Income Determinants -Wealth -Borrowing -Expectations -Interest rates

7. Income effects - Taxation -Division of income -Investment Demand -Durability -Irregularity of innovation -Variability in profits -Variability in expectations

8. Investment – volatility in US

9. Income effects - Multiplier - More spending results in higher GDP - Initial change in spending changes GDP by a multiple amount - Causes of the initial change in spending Changes in investment Other changes - Rationale Dollars spent are received as income Income received is spent (MPC) Initial changes in spending cause a spending chain

10. The Multiplier and the MPC 10 5 4 3 2.5.67.75.8.9 MPCMultiplier 10-10

11. Factors in MPC -External -Recession – people save -Social Security Net – in developed countries -Volatility – causes less savings -Internal -Nature of rise – versus permanency -Age – Young people spend more -Job Security

12. Debt

13. Household Consumption in China -Ratio of C to GDP is 37% -Ratio in other developed nations is 50% -High savings rate -Health risks (aging population) -Small children or 1 child – education -Spending by social sector inverse to savings in private sector -China is 6% of GDP spend; 1% spend in GDP = 1 ¼% increase in GDP

14. Foreign Spillovers -Spending in USA or China’s effect elsewhere -USA 1% has.1% in Asia -Pending trade balances -Three markets -Products -Money -Balance of payments