IBT Module 1: Living in Global Economy

International business

Exchange of goods and services across national borders

Domestic Business

Buying and selling within one country.

Imports

Goods bought from other countries.

Exports

Goods sold to other countries.

Trade Barriers

Government restrictions that limit free trade.

Quota

Limit on quantity of imports.

Tariff (Duty)

Tax on imported goods.

Boycott

Ban on imports from a country.

International Business Environment

Cultural, social, political, and economic factors affecting global trade.

Scarcity

Limited resources vs unlimited wants.

Economics

Study of how resources are used to satisfy needs and wants.

Price

Amount paid for goods and services.

Supply

Amount producers are willing to sell at a price.

Demand

Amount consumers are willing to buy at a price.

Market Price

Price where supply and demand meet.

Inflation

General rise in prices.

Demand-Pull Inflation

Prices rise when demand exceeds supply.

Cost-Push Inflation

Prices rise due to higher production costs.

Factors of Production

Resources used to produce goods.

Land (Natural Resources)

Raw materials from nature.

Labor (Human Resources)

Workers.

Capital

Tools, machines, money used in production.

Economic System

Method a country uses to produce and distribute goods.

Command Economy

Government controls production and prices.

Communism

Government owns all resources; single party controls state.

Market Economy

Individuals/businesses decide production.

Capitalism

Private ownership and profit-driven system.

Private Property

Right to own businesses/resources.

Profit Motive

Desire to earn profit.

Free Enterprise

Minimal government control in business.

Mixed Economy

Combination of government and private ownership.

Socialism

Government owns major industries.

Privatization

Transfer of business from public to private ownership.

Industrialized Country

High technology, strong economy, high living standards.

Developing Country

Transitioning toward industrialization.

Less-Developed Country (LDC)

Low income, agriculture-based economy.

Absolute Advantage

Producing a good at lower cost than others.

Comparative Advantage

Specializing in goods produced most efficiently.

GDP (Gross Domestic Product)

Value of goods produced within a country.

GNP (Gross National Product)

Value of goods produced by a country’s resources worldwide.

Balance of Trade

Difference between exports and imports.

Trade Surplus

Exports greater than imports.

Trade Deficit

Imports greater than exports.

Foreign Exchange Rate

Value of one currency compared to another.

Foreign Debt

Money owed to other countries.