Unit 7-2: Industry and Economic Development - AP Outline

Agglomeration

Occur when firms cluster spatially in order to take advantage of geographic concentrations of skilled labor and industry suppliers, specialized infrastructure, and ease of face-to-face contact with industry participants

Clustering firms of the same industry can lower costs when close interaction with clients and suppliers and a deep pool of highly skilled labor are critical

Ex. - High technology (Silicon Valley), Music recording (Nashville), Movie/television (Hollywood/Los Angeles), Auto alley (I-65/I-75 corridor)

Comparative Advantage

A country’s ability to produce one product much more efficiently that it can produce other products within its economy

The competitive edge (in the form of lower production costs, cheaper raw materials, etc.) enjoyed by one location over another

Ex. Middle East (Saudi Arabia, Qatar, Kuwait, UAE) - oil, China/India - cheap labor

Complementarity

Measure of how well one country’s export profile matches another country’s import profile

When two regions specifically satisfy each other’s needs through exchange of raw materials and/or finished goods

Ex. Saudi Arabia trades oil to U.S. in exchange for transportation equipment and machinery

Economies of Scale

Reduction in the per unit cost of production as the volume of production increases

Concept where a company's average cost per unit of production decreases as the scale of production increases

Ex. - Automobile manufacturing, global food products (Pepsi, Coca Cola, McDonalds)

Export Processing Zone (EPZ)

Industrial zone with special incentives to attract foreign investment to places where imported materials undergo processing or assembly before being re-exported (Reduced tariffs and taxes)

Designated area within a country where foreign companies can operate with reduced tariffs and regulations to manufacture goods primarily for export

Located near ports (air/sea/rail)

Ex - China, India, Mexico

Free Trade Zones (FTZs)

Specifically designated duty-free area that provides warehousing, storage, and distribution facilities for goods intended for trade or re-export

Geographic area that allows for the import, storage, and export of goods without tariffs or customs duties

Ex. Located near ports (air/sea/rail)

Growth Pole

Geographically pinpointed center of economic activity organized around a designated industry, commonly in the high-tech sector

Geographically concentrated area where significant economic development is deliberately fostered, often through targeted investment in key industries, infrastructure, and technology, which then acts as a catalyst for economic growth in surrounding regions

Ex. Silicon Valley, California; Research Triangle, North Carolina, Dubai, United Arab Emirates

Industrialization

Began as a result of new technologies and was facilitated by the availability of natural resources

Economy shifting from primary (resource gathering) to secondary (manufacturing/processing/refining)

Caused food supplies to grow, allowed workers to migrate to urban areas, and changed class structures

Ex. Began in England/Great Britain/United Kingdom

International Division of Labor

Global distribution of economic activities where different countries specialize in producing specific goods and services based on their comparative advantages

Spatial shift of manufacturing from developed countries (MDC) to developing countries (LDC), including the global scaling of labor markets and industrial sites

Core - tertiary, semi-periphery - secondary, periphery - primary

International Lending Agency (International Monetary Fund - IMF)

International organization that seeks to foster global monetary cooperation, achieve financial stability, facilitate international trade, and promote sustainable economic growth

Provide loans to countries that are so deeply in debt that they cannot get loans from private banks

Ex. LDCs receive most of these funds

Just-In-Time Delivery

Supply chain management strategy where goods are delivered to a production facility only when they are needed

Reduces warehousing costs while shortening delivery times between suppliers and manufacturers

Ex. Motor vehicles, food production

Microlending

Small, short-term loans aimed to provide entrepreneurs and small business owners money for investment - mainly in LDCs

Provide financial support to individuals who may not qualify for traditional bank loans due to gender, lack of credit history, or collateral

Multiplier Effects

Creation of new business and jobs in other industries as a result of investment in a different industry

Phenomenon where an initial economic investment in a region creates a ripple effect, leading to further economic activity and development beyond the initial investment, essentially causing a larger overall economic impact than the original amount spent

Ex. Silicon Valley, California; Auto industry, midwest

Natural Resources

Material or substance found naturally in the environment that humans can utilize for economic gain (water, minerals, forests, fossil fuels)

Play a significant role in shaping economies and influencing political boundaries across the globe

Provides a source of raw materials for manufacturing and energy

Neoliberal Policies

Range of pro-market and antigovernmental positions on the economy, such as reducing government ownership and regulation and promoting privatization and market-based solutions

Promoting trade by reducing government barriers and deregulating global financial markets

PRO TRADE!!

Ex. Free Trade Agreements and Organizations (EU, World Trade Organization, Mercosur, and OPEC)

Outsourcing

Practice of hiring a third party to complete a company’s work, often in another country - done to cut cost, improve services, or to concentrate on core businesses

Transfer part of a company’s internal operations to a third party

Ex. Automobile manufacturing/auto parts, Company/call center

Post-Fordist Production

Contemporary economic system that has moved away from the traditional Fordist model of mass production in large factories, instead emphasizing flexible production methods, specialized markets, and smaller, adaptable manufacturing units, often facilitated by advancements in technology and globalization

Shift from standardized mass production to more customized, flexible production strategies

Ex. Small businesses in Chicagoland providing specialized products

Service Sector

Part of the economy that includes jobs that provide services to consumers, businesses, and the public

Part of contemporary economic landscape in Core (MDCs)

Tariffs

Tax imposed by a government on imported goods from another country

Acts as a trade barrier that raises the price of foreign products, aiming to protect domestic industries and encourage consumers to buy locally produced products

Organization of Petroleum Exporting Countries (OPEC)

International trade agreement composed of major oil-producing nations that work together to coordinate and influence global oil prices by regulating the supply of oil on the market

Mercosur (Southern Common Market)

South American trade bloc formed by Argentina, Brazil, Paraguay, and Uruguay, which aims to promote free trade and economic integration between its member countries by facilitating the movement of goods, services, capital, and people within the bloc; essentially creating a common market across the region

European Union (EU)

Economic alliance of European nations that coordinate trade, immigration and labor policies, making its members one economic unit

Free trade agreement with tariff and non-tariff barriers removed to create a single market