Our Global Economyhusseychs.weebly.com/uploads/1/3/3/4/13346860/ch02_compatibility_mode.pdfINTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 2 2 LESSON

© 2011 South-Western | Cengage Learning

Our Global Economy2-1 Economics and Decision Making2-2 Basics of Economics2-3 Economic Systems2-4 Achieving Economic Development2-5 Resources Satisfy Needs

CHAPTER 2

INTERNATIONAL BUSINESS, 4e CHAPTER

© 2011 South-Western | Cengage Learning SLIDE 2

2LESSON 2-1Economics and Decision Making

GOALS Describe the basic economic problem.

List the steps of the decision-making process.



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.



2

Making Economic Decisions

Coping with scarcityMaking choices



2

The Decision-Making Process



2LESSON 2-2Basics of Economics

GOALS Describe how the market sets prices.

Explain the causes of inflation.



2

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.



2Market Price Is Set by Supply and Demand



2

Changing Prices

InflationDemand-pull inflationCost-push inflation



2LESSON 2-3Economic Systems

GOALS Name the three main factors of production.

Understand how different countries make economic decisions.



2

Economic Resources Satisfy Needs

Natural resourcesHuman resourcesCapital resources



2

Natural ResourcesAlso 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.



2

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.



2

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.



2

Economic SystemThe economic choices of a country relate to three basic questions:

1.What goods and services are to be produced?

2.How should the goods and services be produced?

3.For whom should the goods and services be produced?



2

Types of Economic Systems

Command EconomiesMarket EconomiesPrivate propertyProfit motiveFree, competitive marketplace

Mixed Economies



2LESSON 2-4Achieving Economic Development

GOALS Describe the factors that affect economic development.

Identify the different levels of economic development.



2

Development Factors

Literacy levelTechnologyAgricultural dependency



2

Types of Development

Industrialized countries Less-developed countriesDeveloping countries



2

Levels of Economic Development

Low literacy Limited

technologyAgricultural or

mining economy

Improving literacy

Improving technology

Decreasing dependence on agriculture or mining

High literacyModern

technology Industrial

economy

Less-Developed Country

Developing Country

Industrialized Country



2LESSON 2-5Resources Satisfy Needs

GOALS Discuss economic principles that explain the need for international trade.

Identify various measures of economic progress and development.



2

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.



2

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

Documents

Our Global Economyhusseychs.weebly.com/uploads/1/3/3/4/13346860/ch02_compatibility_mode.pdfINTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 2 2 LESSON