Chapter Introduction Section 1 Globalization Characteristics and Trends

Chapter Introduction Section 1: Globalization: Characteristics and Trends Section 2: Global Problems and Economic Incentives Section 3: Applying the Economic Way of Thinking Visual Summary

Have you decided what you want to be “when you grow up”? What factors are you considering when making your plans for the future? Which career interests you the most? How will you decide? List the advantages and disadvantages of your top two career choices. Share your reasoning with other students in your class. Read Chapter 18 to find out how globalization affects your personal choices as well as those of businesses and nations.

Countries are affected by their relationships with each other.

Section Preview In this section, you will learn that globalization leads to growing interaction among countries and the development of international organizations.

Content Vocabulary • globalization • multinational • outsourcing • General • European Coal Agreement on and Steel Tariffs and Community Trade (GATT) (ECSC) • division of labor • Free Trade Area of the Americas • comparative (FTAA) advantage Academic Vocabulary • strategy • context

Why is outsourcing so controversial? A. Higher cost of production B. Loss of American jobs C. Prices for product or service will be higher A. A B. B C. C

Globalization: Characteristics and Trends • Globalization takes place today because of voluntary decisions consumers and firms make.

Characteristics of Globalization involves the global spread of products, markets, and production, while international organizations aid trade.

Characteristics of Globalization (cont. ) • Globalization involves markets, production, institutions, and culture. • Many products we use were made by multinationals that produce and sell globally.

Characteristics of Globalization (cont. ) • Globalization – Standardized products all over the world – Multinationals move production facilities all over the world. • Outsourcing

Characteristics of Globalization (cont. ) – Growth of international organizations that promote trade between nations • General Agreement on Tariffs and Trade (GATT) • World Trade Organization (WTO) • International Monetary Fund (IMF) • The World Bank • United Nations The Global Economy & YOU

What percentage of the goods your family purchases do you think involved globalization? A. 10% B. 40% C. 75% D. 100% A. B. C. D. A B C D

Globalization Trends Growing economic interdependence has led to increased regional integration.

Globalization Trends (cont. ) • Trends resulting from globalization – Growing economic interdependence among nations • Specialization and division of labor leads to greater productivity. • Producers with a comparative advantage compete more effectively. • Weakness of interdependence—a breakdown anywhere could affect everyone.

Globalization Trends (cont. ) • Growing regional economic integration around the world – Culture, currency, or laws of one country can interfere with increased economic integration. • EU and the European Coal and Steel Community (ECSC) • Association for Southeast Asian Nations (ASEAN)

Globalization Trends (cont. ) • The Common Market for Eastern and Southern Africa (COMESA) • Free Trade Area of the Americas (FTAA) The Common Market for Eastern and Southern Africa (COMESA)

Globalization Trends (cont. ) • Economic cooperation among countries usually leads to increased political cooperation. • Globalization is not always smooth: – Change can be threatening to established ways of doing business. – People fear their jobs and lifestyle may be at risk. – Politics can also hinder globalization.

Do you think the benefits of globalization across the world outweigh the negative factors individuals may perceive as a threat to their culture, politics, or religion? A. Yes B. No C. Maybe A. A B. B C. C

Section Preview In this section, you will learn that global economic challenges include overpopulation, resource depletion, and pollution.

Content Vocabulary • scarcity • biomass • pollution • subsistence • gasohol • acid rain • renewable resource • nonrenewable • pollution permit resource • hydropower • glut Academic Vocabulary • compounded • successive

The population of a developing country like Uganda or Kenya A. continues to decline. B. continues to increase. C. remains the same. A. A B. B C. C

Global Problems and Economic Incentives • A fundamental economic problem is scarcity. • Scarcity of food, energy, and other resources is compounded as world population grows.

Global Population Growth While the world’s overall population growth rate is decreasing, population in developing countries still grows faster than in developed ones.

Global Population Growth (cont. ) • Thomas Malthus published an essay in 1798 about population that is still relevant today. – Population tended to grow geometrically. – Ability of Earth to feed people would grow at a slower and more constant rate. – Eventually, populations would be reduced to subsistence (Somalia and Calcutta).

Global Population Growth (cont. ) • Since 1964, world population growth has declined or is expected to decline. • Industrialized nations—lowest rates of population growth • Developing world—highest population growth rates Projected Annual World Population Growth Rate, 1950– 2050

Global Population Growth (cont. ) • Malthus did not foresee – Productivity advances that allowed a rising standard of living to accompany population growth – That families might choose to have fewer children World Population Growth by Country

Global Population Growth (cont. ) • Malthus’s predictions still have long-term consequences for all nations. – U. S. is besieged by illegal immigrants from China, Mexico, and Haiti.

Global Population Growth (cont. ) • Economic incentives play a role in population growth: – Children are expensive to raise in an industrialized country. – Opportunity cost borne when one parent chooses to stay home to raise family. – Children in developing nations are regarded as an asset.

If you have fewer siblings than your parents did, do you feel you have gained or lost out from this change of family structure? A. Gained B. Lost out C. Both are applicable D. Neither applies A. B. C. D. A B C D

The Demand for Resources Because of scarcity, societies need to conserve nonrenewable resources while finding efficient ways to harness renewable resources.

The Demand for Resources (cont. ) • Population pressures add to the depletion of many important resources. • Two general types of resources – Renewable resource • Hydropower • Biomass—ethanol used to make gasohol and E 85 • Solar power • Wind generated electricity

The Demand for Resources (cont. ) – Nonrenewable resources • Fossil fuels—oil, natural gas, and coal • Nuclear energy

The Demand for Resources (cont. ) • Efforts made to use and preserve resources since 1973 – Appeal to everyone’s sense of civic responsibility to conserve energy – When price of oil increases, interest in alternative energy soars. Energy Flows in the United States

The Demand for Resources (cont. ) • Price of oil in 1980 s dropped—result of glut, worldwide recession, and energy savings Energy Flows in the United States

The Demand for Resources (cont. ) • Consequences – Search for alternative energy sources began to wane. – Exploration of new oil reserves slowed. – Consumers changed spending habits. Energy Flows in the United States

The Demand for Resources (cont. ) • Increased demand caught up with supply, and energy prices shot up again in 2006 and 2008. Energy Flows in the United States

About how much of the energy Americans consume comes from outside the United States? A. 19% B. 25% C. 31% D. 67% A. B. C. D. A B C D

Pollution and Economic Incentives Pollution is a problem for society that can be controlled through legislation, fees, and permits.

Pollution and Economic Incentives (cont. ) • Economists state the best way to attack pollution is to attack incentives that caused it. • Lower production costs lead to increased profits—environment being used as trash can

Pollution and Economic Incentives (cont. ) • Cost of pollution to society – Acid rain – Fertilizer build up and raw sewage runoff poison ecosystems – Air quality problems

Pollution and Economic Incentives (cont. ) • Controlling pollution – Legislative standards • Laws can be effective but are generally inflexible. – Pollution fees – Tradable pollution permits • EPA’s use of pollution permits

Which type of pollution in your community is most harmful? A. Water B. Air C. Soil D. All of the above A. B. C. D. A B C D

Section Preview Economics provides a foundation for analyzing choices and making decisions today and in the future.

Content Vocabulary • cost-benefit analysis • opportunity costs • modified free enterprise economy Academic Vocabulary • equipped • incapacitated

Can capitalism adapt to change? A. Yes B. No A. A B. B

A Framework for Decision Making The study of economics and economic tools help us make the best economic choices.

A Framework for Decision Making (cont. ) • Economics helps us make better decisions through careful and reasoned problem solving. • Steps to useful decision making – State the problem or issue. – Determine the personal or broad social goals to be attained. – Consider the principal alternative means of achieving the goals.

A Framework for Decision Making (cont. ) – Select the economic concepts needed to understand problem and use them to appraise merits of each alternative. – Decide which alternative best leads to attainment of the most important goals.

A Framework for Decision Making (cont. ) • Tools economists use to analyze problems and make decisions – Production possibilities curves – Supply and demand curves

A Framework for Decision Making (cont. ) – Production functions – Marginal analysis • Cost-benefit analysis • Opportunity costs

Can the five steps to decision making set up by the Council for Economic Education be used in deciding which college to attend? A. Yes B. No C. Maybe A. A B. B C. C

Coping With the Future The ability of capitalism to adapt to changes in the market helps economies address economic issues of the future.

Coping With the Future (cont. ) • A modified free enterprise economy allows buyers and sellers to freely make all decisions that satisfy their wants and needs. • Capitalism is the dominant economic force in the world. • It continues to evolve and adapt to changing desires and needs of the people. Profiles in Economics: Nancy Barry

Will the United States’ economy still be the world’s top economy 20 years from now? A. Highly likely B. Somewhat likely C. Not likely D. Not at all likely A. B. C. D. A B C D

Globalization With increasing globalization of products, markets, and production, global economic integration and interdependence are growing.

Global Problems An increasing world population put pressure on available resources, leads to the search for new and alternative energy sources, and requires ways to deal with pollution.

Decision Making Whenever we have to make an economic decision, we can use several tools and models to help with the decision.

Nancy Barry (1950– ) • president of Women’s World Banking since 1990 • recipient of the Forbes Trailblazer Award for her efforts in opening doors for women in business

globalization the movement toward a more integrated and interdependent world economy

multinational corporation producing and selling without regard to national boundaries and whose business activities are located in several different countries

outsourcing hiring outside firms to perform non-core operations to lower operating costs

General Agreement on Tariffs and Trade (GATT) international agreement to extend tariff concessions and reduce import quotas

division of labor separation of work into a number of individual tasks to be performed by different workers

comparative advantage a country’s ability to produce a given product at a lower opportunity cost than another country

European Coal and Steel Community (ECSC) group of six European countries formed in 1951 to coordinate iron and steel production to ensure peace among member countries

Free Trade Area of the Americas (FTAA) 34 -nation group established in 1994 in order to set up a regional free trade area in the Americas with no internal barriers to trade

strategy a plan or method

context the circumstances surrounding a situation or event

scarcity fundamental economic problem of meeting people’s virtually unlimited wants with scarce resources

subsistence state in which a society produces only enough to support itself

renewable resource natural resource that can be replenished for future use

hydropower or energy generated by moving water

biomass energy made from wood, peat, municipal solid waste, straw, corn, tires, landfill gases, fish oils, and other waste

gasohol mixture of 90 percent unleaded gasoline and 10 percent grain alcohol, or ethanol

nonrenewable resource that cannot be replenished once it is used

glut substantial oversupply of a product

pollution contamination of air, water, or soil by the discharge of a poisonous or noxious substance

acid rain pollution in the form of rainwater mixed with sulfur dioxide to create a mild form of sulfuric acid

pollution permit federal permit allowing a public utility to release pollutants into the air

compounded increased, made worse

successive consecutive

cost-benefit analysis way of thinking that compares the cost of an action to its benefits

opportunity cost of the next best alternative use of money, time, or resources when one choice is made rather than another

modified free enterprise economy free enterprise system with some government involvement

equipped prepared

incapacitated lacking the ability to function normally

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