1. International Business: Our Global Economy 1

2.  Scarcity –  Refers to the limited resources available to satisfy the unlimited needs of people  Economics –  The study of how people choose to use limited resources to satisfy their unlimited needs and wants 2

3.  6 Steps  Define the problem  Identify the alternatives  Evaluate the alternatives  Make a choice  Take action on the choice  Review the decision 3

4.  Price is one of the most economic factors you encounter every day. The amount paid for goods and services results from economic decisions made by consumers, businesses, and governments. 4

5.  Supply – the relationship between the amount of a good or service that businesses are willing and able to make available and the price.  Demand – (the buyers side) the relationship between the amount of a good or service that consumers are willing and able to purchase and the price. 5

6.  Market Price – the point at which supply and demand cross 6

7.  Inflation – an increase in the average prices of goods and services in a country  To start a company that makes a product requires several elements. These elements are called factors of production 7

8.  Natural Resources (Land)  Human Resources (Labor)  Capital Resources (Capital - $) 8

9.  Command – government or central planning committee regulates amount, distribution, and price  Market – individual companies and consumers make decisions about what, how and for whom items will be produced  Mixed – where the economies are blended between government involvement in business and private ownership 9

10.  Command Economy  Government regulates Government can even regulate what job you have  Market Economy  Companies and consumers make decisions Private Property, Profit Motive, Free Marketplace  Mixed Economy  Some government involvement ex. France 10

11.  Exists when a country can produce a good or service at a lower cost than another country 11

12.  Exists when a country specializes in the production of a good or service at which it is relatively more efficient  For example, if, using machinery, a worker in one country can produce both shoes and shirts at 6 per hour, and a worker in a country with less machinery can produce either 2 shoes or 4 shirts in an hour, each country can gain from trade because their internal trade-offs between shoes and shirts are different. The less- efficient country has a comparative advantage in shirts, so it finds it more efficient to produce shirts and trade them to the more- efficient country for shoes. 12

13.  GDP (Gross Domestic Product)  Measures output of goods that a country produces within it’s borders  GNP (Gross National Product)  Measures the total value of all goods and services produced by the resources of a country 13

14.  Balance of Trade  Difference between a country’s exports and imports  Foreign Debt  Amount a country owes to other countries  Consumer Price Index (CPI)  Federal Government report that shows price levels of products & services in different regions of a country 14

15.  Literacy Level – countries with better education systems usually provide more goods and services that are of higher quality for their citizens  Technology – automated production, distribution, and communication systems quickly allow companies to create and deliver goods, services, and ideas quickly  Agricultural dependency – an economy that is involved in agriculture does not have manufacturing base for high quality products 15

16. Industrialized Country – strong business activity, technology and educated population Infrastructure – refers to nation’s transportation, communications, and utilities Less-Developed Country – little economic wealth and focus on agriculture and mining Developing Country – moving towards industrialization 16

17.  Emerging Markets – Places where consumer incomes and buying power are increasing because of economic expansion 17

18.  Gross Domestic Product (GDP)  Measures the output of goods that country produces within its borders  Gross National Product (GNP)  Measures the total value of all goods and services produced by resources of a country *It’s like GDP except the goods could be made in other countries but using resources from your country 18

19.  Balance of trade – difference between a country’s exports and imports  Example – if a country imports more than it exports, it is an unfavorable balance of trade also known as a TRADE DEFICIT  Foreign Exchange Rate – value of country’s money to another country  Foreign Debt – amount a country owes to other countries  CPI – Consumer Price Index is a federal govt. report published by Bureau of Labor 19