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© 2011 South-Western | Cengage Learning Our Global Economy 2-1 2-1Economics and Decision Making 2-2 2-2Basics of Economics 2-3 2-3Economic Systems 2-4.

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Presentation on theme: "© 2011 South-Western | Cengage Learning Our Global Economy 2-1 2-1Economics and Decision Making 2-2 2-2Basics of Economics 2-3 2-3Economic Systems 2-4."— Presentation transcript:

1 © 2011 South-Western | Cengage Learning Our Global Economy Economics and Decision Making Basics of Economics Economic Systems Achieving Economic Development Resources Satisfy Needs CHAPTER 2

2 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 2 2 LESSON 2-1 Economics and Decision Making GOALS Describe the basic economic problem. List the steps of the decision- making process.

3 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 3 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.

4 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 4 2 Making Economic Decisions Coping with scarcity Making choices

5 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 5 2 The Decision-Making Process

6 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 6 2 LESSON 2-2 Basics of Economics GOALS Describe how the market sets prices. Explain the causes of inflation.

7 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 7 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.

8 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 8 2 Market Price Is Set by Supply and Demand

9 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 9 2 Changing Prices Inflation Demand-pull inflation Cost-push inflation

10 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 10 2 LESSON 2-3 Economic Systems GOALS Name the three main factors of production. Understand how different countries make economic decisions.

11 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 11 2 Economic Resources Satisfy Needs Natural resources Human resources Capital resources

12 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 12 2 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.

13 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 13 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.

14 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 14 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.

15 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 15 2 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?

16 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 16 2 Types of Economic Systems Command Economies Market Economies Private property Profit motive Free, competitive marketplace Mixed Economies

17 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 17 2 LESSON 2-4 Achieving Economic Development GOALS Describe the factors that affect economic development. Identify the different levels of economic development.

18 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 18 2 Development Factors Literacy level Technology Agricultural dependency

19 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 19 2 Types of Development Industrialized countries Less-developed countries Developing countries

20 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 20 2 Levels of Economic Development Low literacy Limited technology Agricultural or mining economy Improving literacy Improving technology Decreasing dependence on agriculture or mining High literacy Modern technology Industrial economy Less- Developed Country Developing Country Industrialized Country

21 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 21 2 LESSON 2-5 Resources Satisfy Needs GOALS Discuss economic principles that explain the need for international trade. Identify various measures of economic progress and development.

22 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 22 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.

23 INTERNATIONAL BUSINESS, 4e CHAPTER © 2011 South-Western | Cengage Learning SLIDE 23 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


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