Lecture 8,9,10,11,12

Front 1

What are the sectors of the economy and their meanings?

Back 1

Primary – mining and farming (raw materials)
Secondary – refining, construction, manufacturing
Tertiary – services (law, medicine, education, repair, financial services), trade, and distribution, knowledge industry (R&D)

Front 2

What is the difference between tangible and intangible?

Back 2

Tangible is something that can be measured and touched

Intangible is something that cannot be touched (imaginary)

Front 3

What are producer services?

Back 3

finance (commercial and investment baking) insurance, real estate

Business services (legal advertisement and engineering, architecture, public relations and accounting)

Front 4

What are transportation and communications services?

Back 4

electronic, trucking, shipping and airlines

Front 5

What are some wholesale and retail trade services?

Back 5

intermediaries between producers and consumers

Front 6

what are some consumer services?

Back 6

entertainment, tourist services, restaurants, personal services, repair and maintenance

Front 7

Government services?

Back 7

armed forces, education, health care, police, fire

Front 8

non profit services?

Back 8

churches, charities, museums, librarys

Front 9

what was the employment change in the economic sector in the united states from 1975-2009

Back 9

greatest employment gains have come in professional services and personal services and social services(manufacturing has remained relatively constant in absolute terms but have declined in a proportion of the total

Front 10

What is labor intensity?

Back 10

uses more labor per unit output than manufacturing

Front 11

What are limits to procductivity growth in services?

Back 11

unique attributes of many services(health care, education and research)

service producers and consumers often need to be present at the same time and place

Many services are relaitonal dependent on behavior of client (example: doctor patient)

Front 12

What is the ratio of labor productivity?

Back 12

productivity=output/input

Front 13

how is income distributed?

Back 13

income is distributes very high (lawyers and doctors) and very low (janitors and fast food workers).

number of employed have increased in low end services, but their income has decreased

Front 14

women in services?

Back 14

50% women employed in services versus 20% in manufacturing

Front 15

The better the education the less likely is _______

Back 15

job loss

Front 16

reasons that the services sector make growth?

Back 16

rising incomes, demand for health care and education, public sector growth, services export, and increasing division of labor

Front 17

what is public sector growth?

Back 17

governemnt functions : building, taxation, legal and insitutioanl system of economy

Front 18

what is externalization? and the reasons for it?

Back 18

(outsourcing) happened concurrently with the firm downsizing in response to internal competition

(may be cheaper to buy than to make own)

flexibility(specialized service only for a limited period of time)

concentration on core skills (increasing comparative advantage)

New types of services (fast changing enviornment)

new regulations (health safety, enviornmental protection, corporal financial audits)

Front 19

what are some accounting services in the producer services sector?

Back 19

auditing services and keeping track of money

Front 20

what are some financial services?

Back 20

commercial banking,investment banking, savings banks, and insurance

Front 21

when did the regulation of finance start? and what changes were made?

Back 21

1930's (after great depression; federal resevers, decentralized system over 8000 banks

Front 22

when did the DEregulation of banks start? what changes were made?

Back 22

changes policy to slow money growth, removal of interstate banking regulations, elimination of strict division between commercial and savings banks.

Front 23

What are some dynamics of financial services market?

Back 23

globalization,

disintermediation(reduction of the use of banks and savings companys)

deregulation

internalization

technological innovations(main feature, speed and accuracy of information flows)

new regulations

Front 24

What does the growth of tourism reflect?

Back 24

disposable incomes(incomes that you can just use on whatever)

income elastic demand for leisure

Front 25

what is the larges tourist destination as a region?

Back 25

europe?

Front 26

what country has the largest number of arrivals and tourism expenditures?

Back 26

US

Front 27

what is a commodity chain?

Back 27

it illustrates the transformation of initial inputs into outputs in the form of goods and services

Front 28

commodity chain formula:

Back 28

GDP=Comsumption+investment+governmentspending+net exports

Front 29

what are some baby boom impacts?

Back 29

affordable hosing
driving laws for elderly
health services
retirement benefits

Front 30

what is the average credit card dept and mortgage debt?

Back 30

15,000 and 170,000

Front 31

where did consumerism as a social category start?

Back 31

britain and the US?

Front 32

marxist views of consumption

Back 32

goods and services that were never important are now viewed as a commodity (something you need)

Front 33

What is a dupe?

Back 33

easily decived person, a person who functions as a tool of another person or power

Front 34

whats is the culturalist perspective of consumers?

Back 34

consumers construct their own identity with the things they have, they see it as a larger social force

Front 35

the two meanings of consumerism are?

Back 35

the equation od personal happiness with consumption and the possession of material things and economic policies that place emphasis on consumption (shopping malls as a cultural site of full meaning)

Front 36

what are some environmental dimensions of consumption?

Back 36

overconsumption, production of waste, pollution, footprint theory(method of monotoring humans impact on the natural environment

Front 37

what are factors of productiion?

Back 37

Labor, human capital, land, capital, and technology

Front 38

not all industries seek _____ labor

Back 38

cheap

Front 39

______ is the major factor endowment of the 21st century

Back 39

Human capital

Front 40

output=

Back 40

GDP in fixed prices (usually in basic prics over a 5 year period)

Front 41

input+

Back 41

KLEMC(capital, lbor, energy, materials, services)

Front 42

Immigrants account for approximatley _____ of the worlds population

Back 42

3%

Front 43

skilled workers are _____ mobile that unskilled

Back 43

less

Front 44

in the long run migration will lead to

Back 44

adjustments in wages, and equilibrium in migration and wages

Front 45

what are the most important factors in locational decisions?

Back 45

availability and cost of land

Front 46

what is a major factor in cost of land?

Back 46

being close to a local business district

Front 47

what was the purpose of the suburban sprawl in the 1970s

Back 47

large amounts of land, easy access to motor freights, close to highways, parking and storage areas, close to neighborhoods

Front 48

what is fixed capital?

Back 48

initial investment (machinery equipment buildings)

Front 49

places with ewer fixed capital are more ______

Back 49

productive

Front 50

what is liquid capital?

Back 50

anything in your plant that can be sold for money
(revenues, corporate profits, savings, loans, stocks, bonds and other financial instruments)

Front 51

cost of capital vary______

Back 51

geographically

Front 52

Cost of capital usually goes up during_________

Back 52

economic boom

Front 53

what is capital intensification?

Back 53

firms can substitute capital for labor

Front 54

what are + and - for capital intensification

Back 54

it can increase productivity, it may displace workers

Front 55

Foreign direct investment(FDI) represents:

Back 55

real invetments in land, nonresidential investment and equiptment and software

Front 56

more than 85% of FDI originate in_______

Back 56

developed countries

Front 57

36% of the world FDI goes to _________

Back 57

developing countries

Front 58

What is the weberian model?

Back 58

(alfred weber, 1929) transportation costs depend on distance

producers choose optimal locations(least cost maximum profits)

being close to raw materials

Front 59

What is the weberian model today?

Back 59

transportation costs are declining, natural recourses are not as important.

Front 60

Establishing a manufacturing plant in a market economy involves the interdependent decision-making criteria of…

Back 60

– SCALE (the size of the total output) and
– TECHNOLOGY (the particular combination of inputs that are used to produce an output)

Front 61

economic scale:

Back 61

Level of output

Front 62

what are some principles of scale economies

Back 62

• Division of labor
– Speeds up production
– Allows use of relatively unskilled labor
– Requires larger scale and larger labor pool
– Increasing number of shifts uses capital more efficiently
• Large firms usually pay less for material inputs than small firms

Front 63

what are traditional strategies of firm growing?

Back 63

Vertical integration: firm controls more “up and down” in the total production process
Ex.: some large car companies own iron ore companies to produce their own steel (“down”); and their own dealerships (“up”); oil companies control oil exploration, drilling, and refining
Horizontal integration: firm controls an increasingly large market share of a given niche in a particular industry (in oligopolistic markets)
Ex.: McDonald’s (franchising)
Diversification: firm enters a different product market from the one in which it has traditionally been engaged (through mergers and acquisitions)
Ex.: Walt Disney’s move from films to theme parks

Front 64

what are agglomeration economies? and what benefits are there to it?

Back 64

: benefits that firms gain by clustering near other firms in the same field/


• Innovation and new technology creation in clusters
• Organizational knowledge and learning transfer occur when firms are in physical proximity to each other
• Advertising firms in Manhattan cluster near Madison Avenue to achieve the agglomeration economies essential to labor-intensive, information-intensive, white-collar, high-value-added functions

Front 65

What two reasons do firms grow for?

Back 65

sustainability and expansion

Front 66

today small firms have ____ chance of mecoming MNC's than 100 years ago

Back 66

Less

Front 67

what is oligoply?

Back 67

control of a market by a small number of firms or producers in horizontal integration

Front 68

What is a MNC?

Back 68

• A multinational corporation is a firm that conducts part of its business across national boundaries

Front 69

what cause firms to recruit from another or move workers to another

Back 69

• Labor shortages or high cost of labor

Front 70

reasons for the existence of MNC's

Back 70

export its product, joint ventures, wholly owned sibsidiary

Front 71

there are absolutely no free _______

Back 71

markets

Front 72

what are some functions of the state in the market economy?

Back 72

– Legal system shapes economies
– Governments also set fiscal and monetary policies
• Fiscal policies: determine how governments spend money (including “pork” projects); monetary policies: determine the money supply (including setting interest rates)
– Regulations (cap-and-trade), subsidies, taxation
– International relations and trade
– Public education
– Infrastructure

Front 73

MNC - State Relationships:

Back 73

– States need firms to help in the process of material wealth creation
– Firms need states to provide the necessary supportive infrastructures (physical and institutional)
– Bargaining powers of States and MNCs
– MNCs and home economies: effect on domestic employment?
– Labor interests: increase unemployment.
– Business interests: overseas investment preserves jobs at home (production-displacement losses but gains from export, home office and supporting firm effects)

Front 74

MNCs and host economies:

Back 74

– tie national and local economies into the global economy
– inflow of capital
– transfer of technology
– industrialization and job creation
However:
– a possible squeezing out of existing domestic firms
– a suppression of new local enterprises, wage differential (only low paid jobs created?), type of jobs (only manufacturing jobs?)
– danger of overdependence on MNCs

Front 75

What are the four manufacturing phases?

Back 75

– SELECTION: Deciding what is to be produced
– ASSEMBLY: Gathering raw materials at a plant (where)
– PRODUCTION: Reworking and recombining the raw materials to produce a finished product (how)
– DISTRIBUTION: Marketing and transporting the finished product (for whom)

Front 76

Worldwide distribution of manufacturing. Main regions are

Back 76

(1) NE U.S. and southern Great Lakes; (2) NW Europe; (3) European Russia and Ukraine; (4) Japan/South Korea/East China.

Front 77

• The production of goods is a ______(not purely individual) process

Back 77

social

Front 78

• Relations among owners of plants

Back 78

– Capitalists make independent production decisions under competitive conditions
– Competition requires producers to apply a minimum of resources to achieve higher outputs
– Competition is the source of capitalism’s immense success as a mode of production

Front 79

– Surplus value

Back 79

value (the value produced by workers that exceed their wages) is the basis for profit

Front 80

the market eceonomy is known for ______

Back 80

booms and busts

Front 81

5 kondrativ waves:

Back 81

• First Kondratiev Wave
– Centered on textile industry, 1770–1820s
• Second Kondratiev Wave
– Focused on railroads and iron industry, 1820–1880/90s
• Third Kondratiev Wave
– Fordist industries, peaked around World War I,
1890s–1930s
• Fourth Kondratiev Wave
– Propelled by World War II, peaked in 1960s, centered around petrochemicals and aerospace
• Information Technology: The Fifth Wave?
– Some scholars suggest that a Kondratiev fifth wave began in 1980s with information technology
– Leading current wave are business services (producer services)

Front 82

The product life cycle.

Back 82

A typical product life cycle: Stage 1 is the monopolistic phase; Stage 2 entry of competition; Stage 3 a large share of the market has been lost to new products and other companies.

Front 83

• Industrialization

Back 83

is the process of social and economic changes in which a human group is transformed from a preindustrial society into an industrial society

Front 84

Four Asian Tigers

Back 84

(South Korea, Taiwan, Singapore, Hong Kong) – very high industrialization rates

Front 85

• Four New Asian Tigers

Back 85

Indonesia, Malaysia, Thailand, the Philippines

Front 86

• Newly Industrialized Countries

Back 86

Turkey, South Africa, Brazil, Mexico (sometimes Four New Tigers are included)

Front 87

may become the dominant economies of the 21th century)

Back 87

• BRIC – Brazil, Russia, India, China

Front 88

Deindustrialization

Back 88

• Factors underlying decline in manufacturing
– High cost of wages
– High pension costs for workers
– Technological changes made it more capital intensive
– Companies failed to save or reinvest in research and development
– Inadequate investment in public education and infrastructure

Front 89

What did globalization of manufacturing cause?

Back 89

loss of jobs (24 million jobs)

Front 90

for fdi developed countries invest in other _____countries

Back 90

developed

Front 91

I. Steel Manufacturing

Back 91

• In 1973, North America produced 90% of the world’s steel.
• By 2002, production shifted to developing countries in Latin America and East Asia.
• Now minimills producing steel from scrap metal are more numerous than big steel mills in the U.S. Located near markets to be close to their main input

Front 92

Corporate Strategies in the Textile Industry

Back 92

• Standardized goods for large markets using economies of scale to reduce costs
• Supplying large markets on the basis of utilizing low-cost labor in offshore locations
• Producing small quantities of specialized goods for specific market niches at premium prices

Front 93

Developments in the Garments Industry

Back 93

• FDI is less significant; international subcontracting and licensing arrangements are more common
• Garments manufacture is orchestrated by the large retailers and buyer groups
• The influence of MNC is less, and the involvement of local capital and entrepreneurship is greater
• Highly labor-intensive and low-skill labor in the LDC, easily fragmented and geographically separated

Front 94

– The three developed regions of the world account for over 70% of automobiles produced

Back 94

• East Asia, North America, and Europe

Front 95

– Oligopolization of the automobile industry.

Back 95

As the market expanded, larger firms could take advantage of economies scale to eliminate smaller ones.

Front 96

World distribution of automobile production and assembly:

Back 96

➢ In 1960, the U.S. made half the world’s automobiles, but by 2000 its share fell to 14%
➢ In 1960, the UK produced 10% of world’s automobiles, by 2000 – 4.5%
➢ In Europe: Spain made 5.6% of the world total in 2000
➢ In Asia: Japan produced 19% of all automobiles in 2002
➢ Emergence of South Korea: from 20,000 in 1980 to 2.4 million in 2000 (6% of the world production)
➢ Japan is the world’s second largest auto producer, and controls a big share of the market in North America, Australia, and Europe
➢ However, Japan’s share has been declining: it produced 7.9 million cars in 2009 – down from 9.7 million cars in 2006 (20% of world production), back to 9.6 in 2010 (China – 18.1 million)

Front 97

trading with • The U.S. and Britain

Back 97

unlimited access to foreign firms and equal treatment of foreign and domestic producers

Front 98

trading with • France, Germany, Japan

Back 98

discriminatory intervention in favor of domestic producers; limited access to foreign firms

Front 99

trading with south korea

Back 99

: no access to foreign firms, foreign auto imports highly restricted

Front 100

• GM (Chevrolet, Buick, Cadillac, GMC) and Ford (Ford, Lincoln, Mercury):

Back 100

increasing transnational production, increasing economies of scale, structural reorganization, taking advantage of Toyota recalls in 2009-10

Front 101

• Ford:

Back 101

: global product manufacturing strategy - new fuel-efficient small C-cars Ford Focus (new plants in the U.S., Germany, Spain, Russia, assembly plant in China)

Front 102

• Japanese automakers

Back 102

transnational expansion since the 1980s, technological investment, vertical integration with suppliers, price competitiveness

Front 103

Toyota automakers

Back 103

: shifting to the emerging markets (esp. Indonesia, Thailand, Russia), new $1 billion ad campaign in the U.S., repairing the image

Front 104

european auto makers

Back 104

manufacturers: spatial segmentation (only VW has high presence in Mexico and Brazil and Fiat in Eastern Europe), low-cost small car production (VW) or high-value markets (BMW)

Front 105

korean automakers

Back 105

late entrant, dependence on technological and marketing relations with the U.S. and Japan, creating a global network of car plants in emerging markets

Front 106

corporate strategies int he electronic industry

Back 106

• Increasing global concentration (due to the accelerating necessity of large capital investments)
• Increasing global connectedness: acquisitions, mergers, strategic alliances (Motorola-IBM-Siemens-Toshiba; NEC-Samsung, IBM-Toshiba, etc.)
• Major goal of strategic alliances – to develop new technologies (next generation of memory chips, high-end microprocessors, wireless applications)
• Vertical integration (especially, European and Japanese Co)
• The U.S. Co’s – increasing the off-shore presence (Hong Kong 1962, Taiwan 1964, in the 1970s – Indonesia, Philippines, Mexico, the Caribbean)

Front 107

– Biotechnology

Back 107

application of molecular and cellular processes to solve problems, develop products and services, or modify living organisms to carry specific desired traits

Front 108

• Fordism:

Back 108

manufacturing philosophy that aims to achieve higher productivity by standardizing the output, using conveyor assembly lines, and breaking work into small unskilled tasks

promoted consumerism nd creation of middle class

Front 109

• Post-Fordism/Flexible Production

Back 109

– Flexible manufacturing: goods manufactured cheaply, in small or large quantities
– Coincides with the microelectronics revolution

productivity increase

Front 110

• Traded interdependencies:

Back 110

firms in a cluster have formal trading relationships

Front 111

• Vertical disintegration

Back 111

: firms shed many activities and purchase them from suppliers in order to concentrate on core competencies

Front 112

• Untraded interdependencies

Back 112

: less tangible benefits of co-location: knowledge spill-over
• Staff turnover (circulation of key personnel)
• Shared suppliers
• New startup births and deaths (staff mixing)
• Informal collaboration
• Industry gossip

Front 113

• The United States

Back 113

: Population 314 million, GDP $14.58 trillion, 1.7% growth rate (in 2011)
– The U.S. is still the largest trading nation (but down to 19% from 25% in 1950s
– 70% of exports – manufactured goods; so is 75% of imports
– Major trading partners: EU, Asia, Mexico, Canada
– International competitive advantage in the following areas:
• the world leader in aircraft and has a surplus since 1992
• used to lead in in motor vehicles but a trade deficit since 1970; foreign automakers sell more cars in the U.S. than the U.S. sells abroad
• computer hardware: 75% of the world’s computer sales through global operations but trade deficit since 1992 due to shift of semiconductor industry and consumer electronics assembly to East Asia and Mexico

Front 114

• Canada

Back 114

population 33 million, GDP $1.57 trillion, 2.4% growth rate (in 2011)
– Exports cars, transportation equipment, industrial supplies, and industrial plant and machinery parts, accounting for 60% of Canada’s total exports; it has a trade surplus of $30 billion
– Export of natural resources (forestry, iron ores, oil, natural gas, and coal)
– Canada exports 20% of its GDP (the U.S. – only 11%)

Front 115

• European Union

Back 115

– Europe’s trade is disproportionately large compared to its population
– EU is world’s largest trading block; its exports totaled $2.6 trillion in 2003, about equal to imports
– Investment policy: FDI in foreign affiliates that produce abroad
– Germany: 80 million population
– Europe's largest economy
– GDP $3.3 trillion
– Growth rate 1.5% in 2011
– Unemployment rate 6.6% in 2011
– Exports: motor vehicles (19%), mechanical engineering products (17%), chemicals (14%), electrical engineering products (11.5%)
– Imports: agricultural products and foods (12.5%), electrical engineering products (11%), chemicals (10.5%), motor vehicles (10%)

Front 116

• Latin America

Back 116

– Comprised of several developing countries
– Over 6o% of all exports goes to the U.S., mainly food, minerals, fuels
– Industrialization in Mexico, Brazil, Chile
– Mexico: 108 million population
– GDP $784 billion, 3.5% growth rate (in 2011)
– Labor-intensive manufactured products trade 54% of exports; automobile assembly (VW, GM, Ford, Nissan, Chrysler)
– Petroleum and by-products 35% of export
– Agricultural products 7% export
– Brazil: 198 million population
– GDP $1.6 trillion; growth rate 3% (down from 8% in 2010)
– Exports: products of metallurgy 16.5%, transport equipment 10%, soybeans 9%, iron ore 8.5%, coffee 1.3%, footwear, autos
– Trade partners: USA (16%). Argentina (9%), China (7%), Netherlands (5.6%)
– Imports: machinery, electrical equipment, chemicals, oil

Front 117

• Japan

Back 117

: population 127 million
– GDP $5.5 trillion; -1% growth rate in 2011
– Japan took the lead in development and trade in East Asia and the Pacific
– Japan is the second leading economy in the world

Front 118

• China:

Back 118

population 1,349 million
• GDP $5 .9 trillion, growth rate 8.9% (in 2011)
• Opened up to trade in 1976
• TVEs (town-village enterprises), Open Door Policy, Special economic zones (SEZ) created along coast to produce goods for world markets
• Large worker base, low labor cost (~$900/yr.), relatively high productivity
• Entry into the WTO in 2001
• Its major trade partners are the US and Japan
– Exports: electrical equipment, iron & steel, textile, clothing, shoes, toys, TVs, computers, household appliances, office equipment
– China’s fastest growing sectors include those that develop electricity-producing power systems
– Imports: machinery, oil, metal ores, plastics, medical equipment

Front 119

• India:

Back 119

population 1,211 million
• GDP $1.79 trillion, 6.9% growth rate (in 2011)
• Second largest population, but relatively small economy
• Economic reforms since 1991: privatization and deregulation, export-oriented growth, removal of trade protection
• Most economic growth concentrated in Western India: Mumbai, Bangalore (IBM, Texas Instruments, HP, Motorola, 3M, Qualcomm)
• India exports gems, jewelry, textiles, clothing, engineering products. It imports industrial equipment, machinery, and crude oil.

Front 120

Australia

Back 120

: population 21.3 million
• GDP $925 billion, 2.1% growth rate (in 2011)
• Ranked 13th in per capita GDP after USA, Austria and UK (Japan 20th)
• Main trading partners are U.S. (11% of export, 25.8% of import), Japan (27% of export, 18.7% of import), China & 4 Tigers (15.9%-10.7%)
• One of the world’s leading raw materials suppliers (“rocks and crops”)
• Ores and minerals 27%; coal and coke 19%; gold 7%, wool 7%, and cereals 5%
– The largest exporter of iron ore and aluminum, the second-third largest exporter of nickel, coal, zinc, lead, gold, uranium

Front 121

Russia

Back 121

– Population 142 million (2011)
– GDP $1.7 trillion (4% growth rate)
– Soviet Union disintegrated in 1991
– Economic and political transitions, recession 1991-1998
– Russia’s oil industry is integrating into the world economy
– The largest producer of natural gas and the second (after Saudi Arabia) producer of petroleum
– Russia is an emerging economy; privatization of former state property (still 1/3 of all manufacturing plants – state ownership)

Front 122

• efficient transportation increases ____________

Back 122

economic productivity

Front 123

who though up the railroads

Back 123

james watt

Front 124

• Density indicates ______________

Back 124

the total purchasing power per unit of surface area

Front 125

• Division arises from ______________

Back 125

barriers to economic interaction created by differences in currencies, customs, languages, etc.

Front 126

• Distance refers to ____________

Back 126

the ease or difficulty for goods, services, labor, capital, information, and ideas to travel across the space

Front 127

• The Panama and Suez canals greatly _______________

Back 127

shortened world shipping routes, reflecting and contributing to the time-space compression of the Industrial Revolution

Front 128

• Line-haul costs:

Back 128

strictly a function of distance (fuel, tire wear and replacement); variable costs.

Front 129

• Terminal costs:

Back 129

costs that must be paid regardless of distance involved (loading, unloading, capital investment, line maintenance, etc.); fixed costs.

Front 130

• Barges have the highest terminal cost but _________________

Back 130

achieve the lowest line-haul costs over longer distances

Front 131

• Container Revolution:______________

Back 131

enabled “offshore” manufacturing in over 80 free-trade zones in developing countries

Front 132

• Intermodalism_______________

Back 132

– the movement of containerized goods using various

Front 133

• ______________ governments have spent more than $1billion each on “MagLev” research

Back 133

Japanese and German

Front 134

• Telegraph invented ___________

Back 134

by Sam Morse in 1844

Front 135

what is recource curse?

Back 135

having too much of a good thing can be bad

Front 136

what are 3 economic and political consequences that economists have been traditionally associating with the abundance of natural resources

Back 136

1. slow growth 2. enhanced risk of civil war 3. autocratic political regimes

Front 137

what is dutch disease?

Back 137

exploitation of natural resources and a decline of manufacturing sector