1-4 International Business and Trade

• Scarcity Economics refers to the limited resources available to satisfy the unlimited needs and wants of people
• Coping with scarcity involves time, money, making choices, and energy
• People and countries cope with scarcity by making decisions
• Decision-Making Process:

  • Define the problem: "What do I need or want?"
  • Identify the alternatives: "What are the different ways my problem can be solved?"
  • Evaluate the alternatives: "What are the advantages and disadvantages of each of the choices available?"
  • Make a choice: "Based on the advantages and disadvantages, which would be my best choice? Can I live with the consequences of that choice?"
  • Take action on the choice: "What needs to be done to put the decision into action?"
• Price System balances unlimited needs and wants with limited resources
• Market Price is the point at which supply and demand cross, also called "Equilibrium Price"
• Inflation can be caused by demand-pull or cost-push factors
• Factors of Production:

  • Natural Resources: raw materials from the earth, water, and air
  • Human Resources: people who work to create goods and services
  • Capital Resources: buildings, money, equipment, and factories used in the production process
• Fast-food chains in the Philippines combined capital resources with natural resources and human resources to provide meals
• Economic systems can be categorized based on ownership of resources and government involvement in business activities
• Industrialized or Developed Countries:

  • Have modern technology and strong infrastructure
  • Actively involved in international business and foreign trade
• Less-Developed Countries:

  • Have little economic wealth and weak infrastructure
  • Poor health care and low literacy rates
• Developing Countries:

  • Improving literacy, technology, and emerging markets
  • Decreasing dependence on agriculture or mining
• Economies are no longer limited by national borders due to expanding international trade
• Absolute Advantage arises when a country can manufacture a product or service at a lower cost than other countries
• Comparative Advantage exists when a country can manufacture a good or service more effectively than other countries
• Measuring Economic Progress:

  • Per Capita: amount per individual
  • Gross National Product: quantifies the overall worth of all products and services produced using a country's resources
  • Gross Domestic Product: quantifies the output of products produced within a country's borders
• Balance of Trade can result in a trade surplus or deficit
• Consumer Price Index tracks monthly changes in costs paid by consumers

  • Unemployment Rate measures the percentage of the labor market that is not currently employed