SundarTechnologies: Economics and International Business 8211 IBMI Certification

Welcome to Economics & International Business!

1. Introduction:

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Welcome to Economics & International Business!

“Economics” is the science that studies the choices of individuals, households,

and organizations, in allocating scarce resources. Scarcity means that

individuals and societies have limited resources.

Although many people don’t recognize it, we all make economic decisions every

day – we decide what products or activities fit into our budgets and needs.

Through these decisions, we define what we want to be available on the market

and at what price. The economic system is the place, where goods and services

are produced, distributed, and consumed.

Economists study how people make decisions about buying, selling, saving, and

investing. We study how people interact with one another in markets. We also

study the economy as a whole when we concern ourselves with total income,

unemployment, and inflation.

For businesses, creating a long-term global strategy is a complicated but

important task. As is evident throughout this course, no country is an economic

island, and the economy truly is global. A growing number of businesses have

become true multinational firms, with operating facilities around the world.

They have figured out how to mitigate their risks both politically and

economically, but they have also found how events in one nation can

reverberate (Echo - எதிரொலிக்கவும்) around the world.

As businesses contemplate and engage in global expansion, there are endless

opportunities, but also potential risks. The home market is also attractive to

foreign firms. For an organization to be successful in today’s global economy, its

owners and stakeholders must look across borders and understand the global

community.

Info!!!!!!! :

Economics is the social science that studies how societies manage

their scarce (பற்றாக்குறை) resources.

2. Ten Principles of Economics

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Although the study of economics is complex, the field is unified by several

central ideas. The famous Ten Principles of Economics by Gregory Mankiw are

the principles of how the global economy works. These principles include basic

concepts used by economists around the world.

Lesson Content:

How People Make Decisions

How People Interact

How the Economy Works

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How People Make Decisions

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Principle 1: People face trade-offs.

Economists often say, “There ain’t no such thing as a free lunch.” This means

that there are always trade-offs: To get one thing, you have to give up

something else. For example, if you spend money on a new computer, you won’t

be able to spend it on a new television. This principle also works for nations.

There is the classic trade-off between “guns and butter”: if society spends more

on national defense (guns), then it will have less to spend on social programs

(butter). Recognizing that trade-offs exist does not indicate what decisions

should be made.

Principle 2: The cost of something is what you give up to get it.

Making decisions requires comparing the costs and benefits of alternative

courses of action. For instance, if a firm spends $100 on electrical power, they

can’t use that money to buy new office equipment. Economists say the firm’s

opportunity cost is $100. < The opportunity cost of an item is whatever you give

up to get that item. Thus, opportunity costs are not restricted to financial costs:

By seeing a movie in a cinema, your opportunity cost is not just the price of the

ticket, but the value of the time you spend in the theater. Put another way,

opportunity costs are the benefits you could have received by taking an

alternative action. < When making decisions, managers should always consider

the opportunity costs of each possible action. >

Principle 3: Rational people think at the margin. (பகுத்தறிவு மக்கள் )

Economists generally assume that people are rational – that means, their

decisions are based on facts and reasons. Rational people make decisions by

comparing marginal benefits and marginal costs. For example, you should only

attend college for another year if the benefits from that year of schooling

exceed the cost of attending that year. Furthermore, a car company should only

produce more cars if the benefit exceeds the cost of producing them.

Principle 4: People respond to incentives.

Because rational people weigh marginal costs <விளிம்பு செலவுகளை எடைபோடுங்கள்

>and marginal benefits of activities,

they will respond when these costs or benefits change. For example,

when the price of cars rises, buyers have an incentive to buy fewer cars. Public

policy can alter the costs or benefits of activities. Some policies have

unintended consequences because they alter behavior in a manner that was

not predicted.

How People Interact

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Principle 5: Trade can make everyone better off.

வர்த்தகம் அனைவரையும் சிறந்ததாக்குகிறது. Contest - போட்டி!

Trade is not a contest in which one side wins and one side loses. Trade can make

each trader better off. Trade allows each trader to specialize in the activities he

or she does best, whether it be farming, building, engineering or manufacturing.

By trading with others, people can buy a greater variety of goods or services.

This is true for both individuals and countries. You are likely to be involved in

trade with other individuals and companies on a daily basis: Most people do not

make their own clothes or grow their own food – but by trading you are able to

get all those products.

Principle 6: Markets are usually a good way to organize economic activity.

In a market economy, the decisions about what goods and services to produce

and how much to produce are made by millions of firms and households in the

marketplace. Political economist Adam Smith made the famous observation

that although individuals are motivated by self-interest, an invisible

hand guides this self-interest into promoting society’s economic well-being.

Consequently, centrally planned economies have mostly failed because they

did not allow the market to work.

externality - வெளிப்புறம், well-being- நல்வாழ்வு, intervene - தலையீடு

Principle 7: Governments can sometimes improve market outcomes.

When a market fails to allocate resources efficiently, the government can

change the outcome through public policy. One kind of market failure is

externality – it occurs when the actions of one person affect the well-being of

other people. The second kind of market failure is market power – when a

single actor has so much power, that he can influence the price. In these cases,

the government may be able to intervene. Examples are regulations against

monopolies. The government may also intervene to improve equality with

income taxes and welfare.

How the Economy Works

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Principle 8: A country’s standard of living depends on its ability to produce

goods and services.

There is great variation in living standards across countries today as well as

within the same country over time. These are largely attributable to

differences in productivity. Productivity is the number of goods and services

produced from each unit in a specific time period. As a result, public policy

should improve education and improve access to the best available technology.

Inflation - வீக்கம்

Principle 9: Prices rise when the government prints too much money.

When a government creates large quantities of the nation’s money, the value of

the money falls. In this process, called inflation, prices increase and consumers

require more of the same money to buy goods and services. High inflation is

costly to the economy. Policymakers wishing to keep inflation low should

maintain slow growth in the quantity of money.

short-run trade-off - குறுகிய கால வர்த்தகம், monetary policy - பணவியல் கொள்கை

Principle 10: Society faces a short-run trade-off between inflation and

unemployment.

In the short run, an increase in the quantity of money (inflation) stimulates

spending, which raises production. The increase in production requires more

hiring, which reduces unemployment. The result is a temporary trade-off

between inflation and unemployment. Understanding this trade-off is

crucial for understanding the short-run effects of changes in taxes, government

spending, and monetary policy.

3. The Invisible Hand

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Adam Smith’s famous book The Wealth of Nations, published in 1776, provides

the basis for today’s market economy. Why do market economies work so well?

Is it because all people treat one another with < love and kindness? > No, Smith

argues that all participants are motivated by self-interest.

chaotic - குழப்பமான

Although a marketplace with millions of participants may appear to be chaotic,

the “invisible hand” of the marketplace guides this self-interest into promoting

desirable social outcomes and general economic well-being.

In his book, Smith wrestled with a paradox: (முரண்பாடு)

“How is it that water, which is so very useful that life is impossible

without it, has such a low price — while diamonds, which are quite

unnecessary, have such a high price?”

scarcity - பற்றாக்குறை , value in use - பயன்பாட்டில் உள்ள மதிப்பு

value in exchange - பரிமாற்றத்தில் மதிப்பு, marginal utility -விளிம்பு பயன்பாடு

The answer is connected to the principle of scarcity: Water is not a scarce item

relative to diamonds. Smith recognized that “value in use” isn’t the same as

“value in exchange.” Basically, we can’t price an item higher simply because it’s

more useful. In fact, quite the opposite is true. A product’s highest price is

determined by its marginal utility, which is the value of its last usable unit.

So, water has a relatively low price because it’s everywhere and is so useful.

Diamonds, on the other hand, have a relatively high price because they’re

scarce by comparison and not a necessity. You can take two rules away from

this case:

* If you produce very useful products (e.g. shampoo), the products will become

commodities and the price will come down. Consequently, you have to sell in

large volumes to make a profit.

* If you produce products that are limited in their use (e.g. most luxury goods),

the price will go up. You’ll probably sell fewer products, but you’ll make more

money on each product.

unintended social benefits - திட்டமிடப்படாத சமூக நன்மைகள்

Info!!!!!!! :

The “invisible hand” is a term used by Adam Smith to describe the

unintended social benefits of individual self-interested actions.

4. Micro and Macro

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In every area of science, there’s a big picture and a little picture, the macro and

the micro. Macroeconomics and Microeconomics are simply two different

points from which the economy can be observed – just think about them as

useful tools like a microscope and a telescope.

Economics

/ \

| |

Micro Macro

Microeconomics is the study of small economic units such as individual people,

families, and firms. It tries to explain how individuals and firms respond to

changes in price and why they demand what they do at particular price levels.

Briefly speaking, microeconomics analyzes all the small parts that make up the

whole economy.

Macroeconomics looks at the total output of a nation and the way the nation

allocates its limited resources of land, labor, and capital in an attempt to

maximize production levels and promote trade and growth for future

generations. After observing the society as a whole, Adam Smith noted that

there was an “invisible hand” turning the wheels of the economy: a market

force that keeps the economy functioning.

Info!!!!!!! :

Microeconomics is the study of small economic units,

macroeconomics is the study of the whole economy.

Both approaches are interrelated, as macroeconomic issues help shape the

decisions that affect individuals, families, and businesses. Therefore, we will

cover the most important concepts of both fields in this course.

5. Supply and Demand

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"Supply” and “Demand” are perhaps the most fundamental elements of

economics and the market economy. Supply points to the willingness of sellers

to provide goods and services for sale. Demand points to the ability of buyers

to purchase goods and services.

Demand,

Supply, and

Market Equilibrium

Demand :

--------

Demand refers to how much (quantity) of a product or service is desired by

buyers. Typically demand rises as the price of a product falls and demand

decreases as prices rise. ( eg. Diamond )

The law of demand states, all other factors being equal, as the price of a good

or service increases, consumer demand for the good or service will decrease,

and vice versa. The law of demand says that the higher the price, the lower the

quantity demanded, because consumers’ opportunity cost to acquire that good

or service increases, and they must make more tradeoffs to acquire the more

expensive product.

Economists graphically represent the relationship between product price and

quantity demanded with a demand curve:

c|\

e| \

| \

| \ D

| \ e

| \ m

| \ a

| \ n

| \ d

| \

---------------------------------->

Quantity

Price Elasicity :

The sensitivity of the changes in price and demand is called price elasticity.

Products and services have different degrees of price elasticity. For example,

if gasoline increases in price, overall demand may not be proportionately

reduced, as people still need gas to fuel their vehicles (low degree of price

elasticity). If, however, the price of airline travel increases greatly, it may be

likely that demand for air travel will have a greater than proportionate decline

(high degree of price elasticity).

Businesses need to carefully monitor the factors that may affect demand. If

they aren’t keeping a careful eye on these different demand elements as

related to their business, their competitors will find a competitive advantage

that can affect an organization’s long-term survival.

Supply :

--------

Supply refers to the relationship between different prices and the quantities

that sellers will offer: Generally, the higher the price, the more of a product or

service that will be offered.

The law of supply states, all other factors being equal, as the price of a good or

service increases, the amount of goods or services that suppliers offer will

increase, and vice versa. The law of supply says that as the price of an item goes

up, suppliers will attempt to maximize their profits by increasing the quantity

offered for sale.

You can see the relationship between product price and quantity supplied in a

Supply Curve:

c|\

e| \

| \

| \ /

| \ S/

| \ u/

| \ p/

| \ l/

| \ y/

| \ /

| \ D /

| \ e

| \ m

| / \ a

| / \ n

| / \ d

| / \

----------------------------------->

Quantity

< Demand and Supply , price and Quantity

தேவை மற்றும் வழங்கல், விலை மற்றும் அளவு >

prevailing market price - நிலவும் சந்தை விலை

Market Equilibrium

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The law of supply and demand states that prices are set by the intersection of the

supply and the demand. The point where supply and demand meet

identifies the prevailing market price at which you can expect to purchase

a product:

c|\

e| \

| \

| \ /

| \ S/

| \ u/

| \ p/

| \ l/

| \ y/

| \ /

| \ D /

| \ e

p|----------------X m <-- Equilibrium Point

| /|\ a

| / | \ n

| / | \ d

| / | \

----------------------------------->

q Quantity

This state where supply and demand are balanced is called the equilibrium

price or market equilibrium. The market forces described here, working

through the price mechanism, are the essence of Adam Smith’s “invisible hand”:

Supply and demand come into balance without central planning.

The market price is established through competition such that the amount of

goods or services sought by buyers is equal to the amount of goods or services

produced by sellers.

Info!!!!!!! :

When the supply and demand curves intersect, the market is in

equilibrium. This is where the quantity demanded and quantity

supplied are equal.

6. Economic Systems

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In the twentieth century, there were primarily two economic systems that

provided answers to the questions of what to produce and for whom, given

limited resources: planned economies directed by a centralized government

and market economies based on private enterprise.

* Market Economies

* Planned Economies

* Mixed Economies

*Market Economies

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/| |\

/ |--------- --------- ----------| \

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The market economy (private enterprise system) is centered on the economic

philosophy of capitalism and competition.

Capitalism is an economic system in which businesses are rewarded for

meeting the demands of consumers. It allows for private ownership of

businesses. Entrepreneurs, desiring to earn a profit, create businesses that

they believe will serve the needs of the consumers.

Economic decisions and the pricing of goods and services are guided solely by

the interactions of a country’s individual citizens and businesses. There is little

government intervention or central planning.

There are four different types of competition in a market economy:

* Pure competition is a market or industry in which there are many

competitors. It is easy to enter the market, as there are few barriers to entry

and many people/firms are able to offer products that are similar to each

other. Individual firms have very little control over the price.

* Monopolistic competition means that there are fewer competitors, but

there is still competition. In this market environment, it is somewhat difficult

to enter the market. Due to the differentiation factor, individual firms are

able to have some sort of control over the prices.

* Oligopoly is a market situation with few competitors. The few competitors

exist due to high barriers to entry. The products or services in this market

may be similar (telephone companies) or they may be different

(supermarkets). Here, firms do have some control over prices.

* A monopoly exists in the private enterprise system when there is absolutely

no other competition. That means that there is only one provider that exists

to provide a good or service. In this case, it is often the government that

regulates who can enter the market (e.g. public transportation).

A market economy has several advantages: Firstly, competition leads to

efficiency because businesses that have fewer costs are more competitive.

Secondly, innovation is encouraged because it provides a competitive edge and

increases the chance for wealth. Thirdly, a large variety of goods and services

are available as businesses try to differentiate themselves in the market.

disparity - ஏற்றத்தாழ்வு

However, market economies have also disadvantages: Firstly, the disparity in

wealth exists because wealth tends to generate wealth. It is easier for wealthy

individuals to become wealthier than it is for the poor to become wealthy.

Secondly, there tends to be a reduced social safety net, because social

programs are mostly funded by the government

* Planned Economies

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/| |\

/ |--------- --------- ----------| \

\|--------- --------- ----------|/

In addition to the private enterprise system, planned economies are another

market structure in the world economy. In a planned economy, the government

controls business ownership, profits, and resources. Countries that existed

with planned economies, however, have not been highly successful. The most

common theory of a planned economy is communism, which purports that all

property is shared equally by the people under the direction of a strong

central government.

It is an economic system that involves public ownership of businesses.

Rather than entrepreneurs, the government decides what products

consumers will be offered and in what quantities.

Communism was proposed by Karl Marx and developed and implemented by

V. I. Lenin. In Marxist theory, “communism” denotes the final stage of

human historical development in which the people rule both politically and

economically. The communist philosophy is based on each individual

contributing to the nation’s overall economic success and the country’s

resources are distributed according to each person’s needs. The central

government owns the means of production and everyone works for

state-owned enterprises.

A planned economy has some advantages: Since the government has control

over all factors of production, the risk of a monopoly are next to nil under a

planned economy. Also, it may help in reducing the gap between the poor and

the rich because all government policies are designed to bring social equality.

dissent - கருத்து வேறுபாடு, government bureaucracy - அரசாங்க அதிகாரத்துவம்

bottlenecks in production - உற்பத்தியில் உள்ள சிக்கல்கள்

However, the planned economy has some big disadvantages: Firstly, it leads

to the destruction of entrepreneurs and innovators which in turn leads to lower

productivity and also lower growth for a country.

Secondly, this system leads to dissent among the citizens as the basic right of

free will is challenged under this system. Finally, this system suffers from

government bureaucracy. Delay in decision making on the part of government

officials leads to bottlenecks in production and inefficient use of resources.

(eg. China)

* Mixed Economies

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/| |\

/ |--------- --------- ----------| \

\|--------- --------- ----------|/

sustained economic - நீடித்த பொருளாதாரம்

History has proven that, worldwide, the central command-economy model has not

sustained economic growth and was not able to provide long-term economic security

for its citizens.

The majority of economies that we see today, however, are mixed economies.

These are economic systems that display characteristics of both planned and

market economies.

In the mixed economy, government-owned firms frequently operate alongside

private enterprises. Good examples of this can be found in Europe where the

respective governments have traditionally controlled certain key industries

such as railroads, banking, and telecommunications. (eg. India)

Strictly speaking, all modern economies are mixed, though there are wide

variations in the amount of mix and the balance between public and private

influence.

Info!!!!!!! :

Today, the majority of economies are mixed economies.

7. The Business Cycle

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The business cycle is the natural fluctuation of the economy between periods of expansion (growth) and contraction (recession). Factors such as gross domestic product (GDP), interest rates, levels of employment and consumer spending can help to determine the current stage of the economic cycle.

| Boom

| ~~~~

h| / \

t| Boom / \

w| ~~~~~~~~ / \

o| / \ / \

r| / \ / \

g| / \ / \

|/ \ / \

P|------------------------------------------------------------

D| \Recession /Recovery \Recession

G| \ / \

| \ /

| ~~~~~~~

| Depression

Boom, Recession,depression and recovery - ஏற்றம், மந்தநிலை, (மனச்ச) ோர்வு மற்றும் மீட்பு

1. Boom

Firstly, the boom (or prosperity) of the business cycle occurs when

unemployment is low, strong consumer confidence leads to record purchases

and as a result, businesses expand to take advantage of the opportunities

created by the market. A good example of the market experiencing prosperity

took place in Silicon Valley from 1998 to 2001. Suddenly the market identified

technology as the next big business opportunity, so companies were adopting

online technologies at a record pace; brick and mortar businesses were creating

electronic marketplaces for the first time.

(eg. ebay and paypal, Amazon.... )

cyclical economic contraction - சுழற்சி பொருளாதார சுருக்கம்

2. Recession

Secondly, a recession is a cyclical economic contraction that lasts for at least six

months. Economists agree that a recession results in a downturn lasting for at

least two consecutive quarters. During a recession consumers frequently

postpone major purchases, such as homes and vehicles, and businesses slow

production, postpone expansion plans, reduce inventories, and cut workers.

As a result, unemployment rises and consumer demand decreases.

fiscal and monetary policy - நிதி மற்றும் பணவியல் கொள்கை.

3. Depression

Thirdly, a depression is classified as a recession, or economic slowdown, that

continues in a downward spiral over an extended period of time. It is also

characterized by continued high unemployment and low consumer spending.

Many economists suggest that sufficient government tools are available to

prevent even a severe recession from turning into a depression. For example,

federal, state, and local governments can make investments to improve the

country’s infrastructure as a means of bringing the market out of a depression.

Governments can also influence the economy through regulations in fiscal and

monetary policy.

4. Recovery

Finally, these tools contribute to the next stage in the business cycle: recovery.

The recovery period is when economic activity begins to pick up. Consumer

confidence improves, which leads to increased spending on big items such as

homes and vehicles. Unemployment also begins to fall, and people are working

and contributing to the economy again.

relative stagnation or decline - உறவினர் தேக்கம் அல்லது சரிவு

Info!!!!!!! :

The business cycle is the downward and upward movement of the

gross domestic product (GDP) around its long-term growth trend.

The length of a business cycle is the period of time containing a

single boom and contraction in sequence. These fluctuations

typically involve shifts over time between periods of relatively rapid

economic growth and periods of relative stagnation or decline

8. The Stability of an Economy

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Economists regularly measure the health of the economy – focusing on

productivity levels, inflation levels, and employment levels. Furthermore,

economic policy-makers are said to have two different kinds of instruments to

influence a country’s economy: fiscal policies and monetary policies.

Inflation and Deflation - பணவீக்கம் மற்றும் பணவாட்டம்

Lesson Content

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Productivity

Inflation and Deflation

Employment Levels

Fiscal and Monetary Policy

Productivity

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Productivity is the relationship between the goods and services produced and

the inputs needed to produce them. There are three popular methods to

measure a nation’s productivity:

---------------- ---------------- ---------

| GDP | | CPI | | |

---------------- ----------------- ---------

1. Gross Domestic Product

The Gross Domestic Product, also known as the GDP, is the total dollar value

of all goods and services produced in a country each year. It’s essentially a

record of how much workers produced for consumers to purchase. GDP looks

at only new goods – for example, new cars. It is a very popular economic

indicator and provides a benchmark for the nation’s overall economic activity.

2. Consumer Price Index

The Consumer Price Index, also known as the CPI or the cost of living

index, represents the change in price of a specific group of goods and services

over time. This group of goods and services is called a market basket, and it

includes about 400 items in such categories as food, housing, clothing,

entertainment, medical care, and personal care. As a business owner, you need

to be aware of the CPI because it affects the rent you pay on your facility or the

wages you pay your employees.

3. Income

Income is a way of measuring how much money is available to be spent

by individuals and businesses. National income includes such things as

wages and salaries, self-employed income, rental income, corporate profits,

and interest on savings and investments. Economists are most interested in

disposable and personal income. Personal income is all income received before

taxes are paid, and disposable income is what’s left over after taxes.

Info!!!!!!! :

We can measure economic productivity by checking the Gross

Domestic Product (GDP), Consumer Prices Index (CPI), or Income.

Inflation and Deflation

-----------------------

Inflation and deflation are two very important economic conditions. The

balance between these conditions, opposites of the same coin, is delicate, and

an economy can quickly swing from one condition to the other.

delicate - மென்மையான

Inflation, Hyperinflation and Deflation - பணவீக்கம், உயர் பணவீக்கம்

மற்றும் பணவாட்டம்

^ |

--> | V

---------------- ---------------- -----------

| | | | | |

| | | | | |

---------------- ----------------- -----------

பணவீக்கம்

Inflation is defined as a rise in the general level of prices of goods and

services over a specified period of time. Inflation is caused when goods and

services are in high demand, creating a drop in availability. Consumers are

willing to pay more for the items they want, causing manufacturers and service

providers to charge more. Supplies can decrease for many reasons: A natural

disaster can wipe out a food crop or a housing boom can exhaust building

supplies, among other situations. Inflation impacts the economy because more

money is needed to sustain a given standard of living. If people receive a fixed

income and suddenly the cost of bread increases dramatically, it is easy to see

the negative impact caused by this increased price.

cost of bread increases dramatically - ரொட்டியின் விலை வியத்தகு அளவில் அதிகரிக்கிறது

உயர் பணவீக்கம்

Hyperinflation is very high and typically accelerating inflation. It quickly

erodes the real value of the currency, as the prices of most or all goods

increase. Unlike regular inflation, where the process of rising prices is

protracted and not generally noticeable except by studying past market prices,

hyperinflation sees a rapid and continuing increase in nominal prices, the

nominal cost of goods, and in the supply of money. Typically, however, the

general price level rises even more rapidly than the money supply as people try

ridding themselves of the devaluing currency as quickly as possible.

பணவாட்டம்

Deflation is the price-level change referred to during a period of falling prices.

While deflation sounds good, it can have disastrous consequences; the Great

Depression was a general period of deflation. Prices fell, but so did

employment and wages for those lucky enough to be employed, as well as

availability of most goods and services.

intuitively - உள்ளுணர்வாக

Employment Levels

------------------

Employment levels have a major impact on a nation’s economy. In fact, the

unemployment rate is one of the most popular economic indicators that most

people intuitively use to understand the state of the economy. The

unemployment rate is usually expressed as the percentage of total workers

who are actively seeking work but are currently unemployed. These indicators

tend to increase during recessions and decrease during expansions.

Because the unemployment rate is so important, we’re going to introduce

four different categories that have been created to characterize an economy’s

state of unemployment:

--------------- ---------------- -------------- --------------

| | | | | | | |

| | | | | | | |

--------------- ---------------- -------------- --------------

Frictional, Seasonal, Structural and Cyclical Unemployment

பிறழ்ச்சி(Abnormal), பருவகால, கட்டமைப்பு மற்றும் சுழற்சி வேலையின்மை

* Frictional unemployment occurs when someone is temporarily not working.

A good example is a recent graduate who is looking for work but has yet to

find a job.

* Seasonal unemployment occurs when people are not working for some

months, but they are not looking for a job during that period. People

involved in the tourism industry or seasonal farmworkers are good examples

of this.

medieval economics - இடைக்கால பொருளாதாரம்

* Structural unemployment occurs when people are not working because

there is no demand for their particular skill set. An example might be

someone who graduates with a Ph.D. in medieval economics. There is a

relatively low demand for people with this skillset, so structural

unemployment results for many in that field.

* Cyclical unemployment occurs when there is an economic slowdown and

people are looking for work but there aren’t enough jobs. The economic

recession resulted in fewer jobs, and even highly skilled graduates with

advanced degrees had difficulty finding work. The unemployment rate does

not include out-of-work people who are no longer looking for jobs.

Fiscal and Monetary Policy - நிதி மற்றும் நாணயக் கொள்கை

Fiscal and Monetary Policy

---------------------------

Economic policy-makers are said to have two different kinds of instruments

to influence a country’s economy: fiscal policies and monetary policies.

/->| Tax |

/ Fiscal |/

Government |/ |\-->| Spend |

Policy |

|\ /-------> | Interest Rates |

\ Monetary |/

\-------> | Money Supply |

Fiscal policy is the decision that the government makes to spend money or

increase taxes for the specific purpose of stabilizing the economy. Government

increases in spending and lowering of taxes tend to stimulate economic

growth, while decreasing government spending and increasing taxes tends to

slow economic growth.

This makes sense when we think about the individual taxpayer’s disposable

income. The more money individuals have, the more they will be able to spend

on goods and services in the market and therefore stimulate market growth.

The primary sources of government funds to cover the costs of its

annual budget are raised through taxation of its citizens, fees collected

from business, and borrowing against assets.

Monetary policy is the regulation of the money supply and interest rates in

order to control inflation and stabilize a currency. While fiscal policy is

conducted by a nation’s government, monetary policy is handled by the

countries’ central banks (which have varying amounts of independence around

the world). In the United States, the U.S. Federal Reserve is responsible for

managing this process; in the Eurozone, it’s the task of the European Central

Bank.

9. Tool: Country Analysis

-------------------------

Managers need to be able to make predictions about a country’s future if they

think about expanding. A country analysis, as developed at the Harvard

Business School, is a four-step process that attempts to organize all available

economic, social, political, and geographic data for strategy development.

\1/ | Analyze the Past Performance |

\2/ | Identify the Country’s Strategy |

\3/ | Analyze a Country’s Context |

\4/ | Make a Prediction |

Step 1: Analyze the Past Performance

In a first step, management should analyze all available measures, e.g. the

exchange rates, GNP, inﬂation, employment, investment, consumption,

population growth, education level, etc.

Step 2: Identify the Country’s Strategy

After analyzing the past performance, management should try to identify the

main goals of the country’s government (linked to the productivity of the

economy) as well as the ﬁscal, monetary, trade, and social policies.

Step 3: Analyze a Country’s Context

In a third step, management has to evaluate the “basic facts” about the country,

e.g. several physical indicators (size, population, geography), political indicators

(government type, stability, corruption) and international indicators (trade

advantages, competitiveness).

Step 4: Make a Prediction

Now management should be able to combine all important information and

make a prediction based on steps 1, 2 and 3.

reams of economic data - பொருளாதார தரவுகளின் மறுபிரவேசம்

Info!!!!!!! :

Country analysis is a multipurpose tool that provides a way to sort

out all the reams of economic data that are available on a nation. By

using this analyst tool you possess the framework that global

strategists use in the boardrooms of multinational corporations.

last decades - கடந்த தசாப்தங்கள்

10. International Strategies

-----------------------------

During the last decades, many barriers to international trade have fallen and a

new wave of companies began pursuing global strategies to gain competitive

advantages. Today, multinational corporations (MNC) have to deal with many

cultural differences, languages and various legal and financial systems.

Lesson Content

Forces & Barriers - படைகள் & தடைகள்

International vs. Global- சர்வதேச எதிராக உலகளாவிய

Major Reasons - முக்கிய காரணங்கள்

Different Strategies - வெவ்வேறு உத்திகள்

Not a new phenomenon-ஒரு புதிய நிகழ்வு அல்ல

liberalization, privatization, and globalization :

தாராளமயமாக்கல், தனியார்மயமாக்கல் மற்றும் உலகமயமாக்கல்

advent-வருகை

Forces & Barriers - படைகள் & தடைகள்

-----------------

--|

--| ( Thumbs Up)

International Business is not a new phenomenon, trade across the globe is as

old as business itself. A number of developments can be identified as driving

forces of international business:

* The worldwide movement towards liberalization, privatization, and

globalization is one important force that drives global integration. With the

advent of MNCs (multinational corporation) culture, new opportunities have

been accelerated for going global and taking the whole world as one big

platform.

* Technology is a powerful, stateless and universal factor that crosses national

and cultural boundaries.

* Revolutions in the field of transportation and communication have been able

to reduce both time and cost barriers; making global business easier.

* Product development costs enable companies to recover investments by

placing the product in varied markets.

--|

--| ( Thumbs Down)

However, businesses that intend to expand to new countries and markets still

face many challenges since there are many factors that restrict international

business expansion:

* Countries protect local enterprises by controlling market access. If the

entry-level is too high, companies will not be able to enter those markets.

Also, trade blocs, like NAFTA, EU, or ASEAN allow free trade among member

states but make it difficult for other companies to join.

* A very high amount of capital is required to become a player in the global

market. Many firms are not able to take that risk.

* Instability in the exchange rate of domestic currencies restrict the growth of

international business and political instability in specific geographic regions

can hinder companies to expand to those countries

can hinder companies to expand - விரிவாக்க நிறுவனங்களைத் தடுக்கலாம்

International vs. Global- சர்வதேச எதிராக உலகளாவிய

------------------------

International strategies and global strategies are two categories. An

international strategy means that subsidiaries around the world act

independently and operate as if they were local companies. A global

strategy involves a carefully crafted single strategy for the entire network of

subsidiaries, encompassing many countries simultaneously and leveraging

synergies across many countries.

|\ /|

---------------| \ / |--------------

| International \ / Global |

| Strategy / \ Strategy |

---------------| / \ |--------------

|/ \|

( Background of the "International and global strategy arrows

entire wordmap image displayed )

There are three key differences between the global strategy and international

strategy:

* Coordination from the center: An international strategy does not require

strong coordination from the center. A global strategy, on the other hand,

requires significant coordination between the activities of the center and

those of subsidiaries.

* Product standardization: An international strategy assumes that the

subsidiaries should respond to local business needs. In contrast, the global

strategy assumes that the center should standardize its products in all the

different countries.

* Strategy integration: The international strategy gives subsidiaries the

independence to plan and execute competitive moves independently (based

on the analysis of local rivals). The global strategy plans competitive battles

on a global scale.

international strategy gives subsidiaries-

சர்வதேச மூலோபாயம் துணை நிறுவனங்களுக்கு வழங்குகிறது

local rivals - உள்ளூர் போட்டியாளர்கள்

Major Reasons - முக்கிய காரணங்கள்

-------------

Companies go international for a variety of reasons but the typical goal is

company growth or expansion. These are three major reasons why your

company may want to decide to go international:

~ ~ ~ ~ ~ ~

( ) ( ) ( )

( Expand ()Reduce()Reduce )

( Sales () Costs() Risk )

( ) ( ) ( )

~ ~ ~ ~ ~ ~

( The above 3 major reasons are inside the 3 circle with the intersession image )

* To expand sales by accessing new markets: Larger markets mean the

potential for greater profit, so companies go global to seek new business

opportunities and to expand the range of goods and services that they offer.

* To reduce costs: Overseas operations are often attractive to firms seeking

to reduce budgets in order to increase profit. For example, it is possible to

cut business overhead costs in countries with lower costs of living.

* To reduce risk: Going global can reduce a company’s reliance on local and

national markets. So downturns in consumer demand at home are offset by

upturns in consumer demand in international markets.

Info!!!!!!! :

There are three major reasons for going international:

1. to expand sales, 2. to reduce costs, and 3. to reduce risk.

Different Strategies - வெவ்வேறு உத்திகள்

--------------------

Foreign market entry strategies differ in degree of risk they present, the

control and commitment of resources they require and the return on

investment they promise. How do firms go international? There are six major

types of entry modes:

----------- ----------- -------------

| | | | | |

| | | | | |

----------- ----------- -------------

| | | | | |

| | | | | |

----------- ----------- -------------

Exporting, Licensing, Franchising -

ஏற்றுமதி, உரிமம், உரிமம்

Joint Venture, Strategic Alliance, Direct Investments -

கூட்டு முயற்சி, மூலோபாய , நேரடி முதலீடுகள்

* Exporting is the process of selling goods or services produced in one country

to other countries. Firms can choose between “indirect exporting” (products

are carried and sold abroad by agents) and “direct exporting” (the firm sells

its products directly in foreign markets).

* By licensing, an international firm gives the licensee patent rights or know-

how on products and processes. In return, the licensee will produce the

products and pay the licensor fees usually related to the sales volume of the

products.

* Franchising is similar to licensing. Semi-independent business owners

(franchisees) pay fees to a parent company (franchiser) in return for the right

to become identified with its trademark, to sell its products or services, and

often to use its business format and system.

* In a Joint Venture, cooperating firms create an independent firm in which

they both invest. This type of agreement gives the international firm better

control over local market knowledge.

* A strategic alliance is a cooperative agreement between different firms,

such as shared research or formal joint ventures. It usually between firms in

high-industrialized nations and the focus is often on creating new products

and technologies rather than distributing existing ones.

* A firm can also make direct investments in a production unit in a foreign

market. It is the greatest commitment since there is a 100% ownership.

Firms can make a direct acquisition in the host market or they can develop

their own facilities (called Greenfield investment). பசுமை கள முதலீடு

The market-entry techniques that offer the lowest level of risk and the least

market control are export and licensing. The highest risk, but also the highest

market control and expected return on investment are connected with direct

investments.

Info!!!!!!! :

In conclusion, international collaboration is a great opportunity…

– to combine resources (cross-border alliances are able to develop new products),

– to eliminate risks (companies are able to spread risk), and

– to learn (firms are able to gain important knowledge from their partners).

11. Case Study: EU & WTO

------------------------

No country is able – nor it has the resources necessary – to produce all the

needed goods on its own. Most countries share their trading business with

others, exchanging material, labor force or the already produced goods.

International trade creates a global market in which all countries can trade

based on their individual abilities. Cooperation within a region like Europe or

even worldwide provides stability, enhancing fair competition, free labor

movement, and fair prices.

European Union (EU)

-------------------

The European Union (EU) is a political and economic union of 28 European

states with a total population of more than 500 million citizens. The EU was

established in 1993, but the union traces its origins to the European Coal and

Steel Community established after World War II in 1951 to secure peace

through economic integration.

The EU has its own governmental bodies and legal institutions – for example,

the European Parliament, the European Commission, the European Council,

the Court of Justice, and the European Central Bank. EU legislation is binding

for all EU member states and the governments of member states must

incorporate EU laws into their national legislation.

The EU has developed an internal single market through a standardized system

of laws. This European Single Market guarantees the free movement of goods,

capital, services, and labor – the ‘four freedoms‘ – within the European Union.

Freedom of Goods

----------------

Many products on the EU market are subject to harmonized rules that

protect consumers, public health, and the environment. Once goods have

been admitted into the market they cannot be subjected to customs duties,

discriminatory taxes, or import quotas.

Freedom of Capital

------------------

Restrictions on capital movements across borders were prohibited.

European citizens and companies can open bank accounts, buy company

shares, raise money, or purchase real estate in all EU countries.

Freedom of Services

-------------------

EU companies, as well as self-employed persons, have the freedom to

establish themselves in other EU countries and the freedom to provide

services in countries other than the one in which they are established.

Freedom of Labour

-----------------

EU citizens can move freely between member states to live, work, study or

retire in another country. About 1.7 million people commute to work

across a European border each day, and in some regions, these people

constitute up to a third of the workforce.

Today, the European Single Market is the largest single market in the world,

which has lead to greater competition in services, the removal of trade \

barriers, the reduction of business costs, and the elimination of anti-

competitive practices such as monopolies.

The EU actively negotiates trade agreements with non-EU countries. These

agreements grant mutually-beneficial access to the markets of both the EU and

the countries concerned. Each agreement is unique and can include tariff

reductions, rules on matters such as intellectual property or sustainable

development, or clauses on human rights.

World Trade Organization (WTO)

------------------------------

The World Trade Organization (WTO) is an intergovernmental organization

with 164 member states dealing with the rules of international trade between

nations. The WTO officially commenced in 1995, replacing the General

Agreement on Tariffs and Trade (GATT), which commenced in 1948.

The WTO provides a forum for negotiating agreements aimed at reducing

obstacles to international trade and ensuring a level playing field for all, thus

contributing to economic growth and development. More specifically, the

WTO’s main activities are:

* negotiating the reduction or elimination of obstacles to trade (e.g. import

tariffs) and agreeing on rules governing the conduct of international trade

(e.g. anti-dumping)

* monitoring the application of the WTO rules and the trade policies of its

members

* settling disputes among its members regarding the application of the

agreements

settling disputes - மோதல்களைத் தீர்ப்பது

foster peace - அமைதியை வளர்ப்பது

systematic bias - முறையான சார்பு

WTO supporters argue that the opening of national markets to international

trade – with justifiable exceptions and some flexibility – will contribute to

sustainable development, raise people’s welfare, reduce poverty, and

foster peace and stability. However, critics reply that the WTO has a systematic bias

toward rich countries and multinational corporations, harming smaller

countries which have less negotiation power.

So far, the EU has played a central role in developing the international trading

system since World War II. Currently, the EU is exploring the possibility of

modernizing the WTO. Like the WTO, the EU was originally designed to

remove customs barriers and promote trade between its member states.

Both the European Union and all the individual EU countries are members of

the WTO. However, the EU operates as a single actor at the WTO and is

represented by the European Commission rather than by the member states.

The Commission negotiates trade agreements and defends the EU’s interests

before the WTO on behalf of all 28 member states.

stalled - ஸ்தம்பித்தது

The European Commission has put forward a first set of ideas to modernize the

WTO and to make world trade rules fit for the challenges of the global

economy. During the last decade, progress and reform initiatives have stalled

due to significant differences between developed nations (led by the European

Union, the United States, Canada, and Japan) and the major developing

countries (led by India, Brazil, China, and South Africa). There is also

considerable contention against and between the EU and the US over their

maintenance of subsidies.

Slow reform developments at the WTO are also a sign that the international

trading system has changed dramatically in the past 20 years. The system has

evolved, with new actors – essentially transition and developing countries –

playing a central role.

unprecedented phase - முன்னோடியில்லாத கட்டம்

Free trade and growth of imports/exports in Europe as well as in the WTO have

been important factors in raising living standards and in reducing poverty. The

liberalization of the international trading system has benefited some

developing countries, which have experienced an unprecedented phase of

sustained economic growth. However, the EU and the WTO have to ensure

that developing countries become fair partners and that reforms will improve

not only economic but also environmental and social conditions. Furthermore,

both institutions have to be able to reform themselves constantly to stay

successful international key figures.

scarce resources - அரிய வளங்கள்

Economics is the study of how goods and services are produced, distributed,

and consumed. It is the theory of how markets work and wealth is distributed

including how scarce resources are allocated. We hope that taking this course

helped you understand the wide range of topics that drive economics.

Info!!!!!!! :

Thank you for taking this course and good luck with the quiz!

-------

Economics and International Business – Exam

Welcome to the course quiz!

Now it’s time to test your knowledge and get your course certificate. You will

be able to download your certificate after reaching a minimum score of 70%.

You can retake this quiz as often as you like if you do not reach this score.

Question 1 of 14

What is not one of the “principles of economics” formulated by

Gregory Mankiw?

Options :

*** Correct : People don't use rationality in the decision making process.

People face trade-offs.

Rational people think at the margin.

The cost of something is what you give up to get it.

Note :

Gregory Mankiw : Principle of Economics

* How People Make Decisions

p1: People face trade-offs.

p2: The cost of something is what you give up to get it.

p3: Rational people think at the margin. (பகுத்தறிவு மக்கள் )

p4: People respond to incentives.

* How People Interact

* How the Economy Works

Question 2 of 14

What does the classic trade-off example between “guns and butter” say?

Options :

Everyday articles (butter) will always be cheaper than defense goods (guns).

Whereas the price of guns will always stay relatively constant, the price of butter will vary.

*** Correct : If society spends more on national defense (guns), then it will have less to spend on social programs (butter).

When the price of butter rises, there is a high probability that the price of guns will rise as well.

Note :

There is the classic trade-off between “guns and butter”: if society spends more

on national defense (guns), then it will have less to spend on social programs

(butter).

Question 3 of 14

What it the “opportunity cost”?

Options :

The opportunity cost of an item is the current market price in dollars.

The opportunity cost of an item is whatever you give up to get that item.

The opportunity cost of an item is the cost of all resources that where necessary to produce it.

The opportunity cost of an item is the difference between current market price and production costs.

Note:

P2 : Economists say the firm’s opportunity cost is $100. < The opportunity cost of an item is whatever you give

up to get that item.

Question 4 of 14

Which statement (according to Mankiw) is true about governmental actions?

Options :

*** Correct : Governments can sometimes improve market outcomes.

Governments can never improve market outcomes.

Governments can always improve market outcomes.

None of the given answers is correct.

Note:

* How People Interact

Principle 5: Trade can make everyone better off.

Principle 6: Markets are usually a good way to organize economic activity.

Principle 7: Governments can sometimes improve market outcomes.

Question 5 of 14

Which metaphor by Adam Smith describes social well-being resulting from individual actions?

Options :

The "invisible price" concept.

The "invisible bowl" concept.

The "invisible market" concept.

*** Correct : The "invisible hand" concept.

Note :

Political economist Adam Smith made the famous observation

that although individuals are motivated by self-interest, an invisible

hand guides this self-interest into promoting society’s economic well-being.

Consequently, centrally planned economies have mostly failed because they

did not allow the market to work.

Question 6 of 14

What are Microeconomics and Macroeconomics about?

Options :

Microeconomics is the study of small companies and Macroeconomics is the study of large companies.

*** Correct : Microeconomics is the study of small economic units and Macroeconomics looks at the way nations allocate resources.

Microeconomics focuses on individuals and Macroeconomics focuses at companies.

Microeconomics deals with small transactions and Macroeconomics is the study of large transaction processes.

Note:

* Microeconomics is the study of small economic units such as individual people,

families, and firms.

* Macroeconomics looks at the total output of a nation and the way the nation

allocates its limited resources of land, labor, and capital in an attempt to

maximize production levels and promote trade and growth for future

generations.

Info!!!!!!! :

Microeconomics is the study of small economic units,

macroeconomics is the study of the whole economy.

Question 7 of 14

What does the “law of supply and demand” state?

Options :

*** Correct : Prices are set by the intersection of the supply and the demand.

Demand rises as the price of a product falls and demand decreases as prices rise.

The higher the price, the more of a product or service that will be offered.

All products and services have different degrees of price elasticity.

Note:

Market Equilibrium

------------------

The law of supply and demand states that prices are set by the intersection of the

supply and the demand. The point where supply and demand meet

identifies the prevailing market price at which you can expect to purchase

a product:

c|\

e| \

| \

| \ /

| \ S/

| \ u/

| \ p/

| \ l/

| \ y/

| \ /

| \ D /

| \ e

p|----------------X m <-- Equilibrium Point

| /|\ a

| / | \ n

| / | \ d

| / | \

----------------------------------->

q Quantity

This state where supply and demand are balanced is called the equilibrium

price or market equilibrium. The market forces described here, working

through the price mechanism, are the essence of Adam Smith’s “invisible hand”:

Supply and demand come into balance without central planning.

Question 8 of 14

What is true about most economies today?

Options :

*** Correct : The majority of economies that we see today are "mixed economies".

The majority of economies that we see today are "pure competition economies".

The majority of economies that we see today are "monopolistic competition economies".

The majority of economies that we see today are "planned economies".

Note :

* Mixed Economies

------------------

/| |\

/ |--------- --------- ----------| \

\|--------- --------- ----------|/

sustained economic - நீடித்த பொருளாதாரம்

History has proven that, worldwide, the central command-economy model has not

sustained economic growth and was not able to provide long-term economic security

for its citizens.

The majority of economies that we see today, however, are mixed economies.

These are economic systems that display characteristics of both planned and

market economies.

Question 9 of 14

What is the second stage in the “business cycle” model?

Options :

3. Depression.

4. Recovery.

1. Boom.

*** Correct : 2. Recession.

Note:

7. The Business Cycle

---------------------

| Boom

| ~~~~

h| / \

t| Boom / \

w| ~~~~~~~~ / \

o| / \ / \

r| / \ / \

g| / \ / \

|/ \ / \

P|------------------------------------------------------------

D| \Recession /Recovery \Recession

G| \ / \

| \ /

| ~~~~~~~

| Depression

Boom, Recession,depression and recovery - ஏற்றம், மந்தநிலை, (மனச்ச) ோர்வு மற்றும் மீட்பு

1. Boom

Firstly, the boom (or prosperity) of the business cycle occurs when

unemployment is low, strong consumer confidence leads to record purchases

and as a result, businesses expand to take advantage of the opportunities

created by the market. A good example of the market experiencing prosperity

took place in Silicon Valley from 1998 to 2001. Suddenly the market identified

technology as the next big business opportunity, so companies were adopting

online technologies at a record pace; brick and mortar businesses were creating

electronic marketplaces for the first time.

(eg. ebay and paypal, Amazon.... )

cyclical economic contraction - சுழற்சி பொருளாதார சுருக்கம்

2. Recession

Secondly, a recession is a cyclical economic contraction that lasts for at least six

months. Economists agree that a recession results in a downturn lasting for at

least two consecutive quarters. During a recession consumers frequently

postpone major purchases, such as homes and vehicles, and businesses slow

production, postpone expansion plans, reduce inventories, and cut workers.

As a result, unemployment rises and consumer demand decreases.

Question 10 of 14

What are good ways to measure an economic’s productivity?

Options :

Gross Domestic Product (GDP).

Consumer Price Index (CPI).

Income.

*** Correct : All three listed answers are correct.

Note :

Productivity

-------------

Productivity is the relationship between the goods and services produced and

the inputs needed to produce them. There are three popular methods to

measure a nation’s productivity:

---------------- ---------------- ---------

| GDP | | CPI | | |

---------------- ----------------- ---------

Question 11 of 14

What is “Hyperinflation”?

Options :

A period characterized by rapidly falling exports.

A period characterized by rapidly falling prices.

*** Correct : A period characterized by rapidly rising prices.

A period characterized by rapidly rising exports.