IE II
ZHAW. International Management. International Business Environment. China, India, MENA, Africa, world trade.
ZHAW. International Management. International Business Environment. China, India, MENA, Africa, world trade.
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Lernkarten
What are the classical factors of production?
land, labor, capital, human resource
Y=AF (N, H, K, L)
Definition of innovation & entrepreuneurs?
Innovation: new products, processes, organizations, management practices, strategies
Entrepreneurs: they commercialize these new products etc.
What are the various factors in general that stand behind a country's development?
-classical factors of production
-innovation & entrepreneurship
-institution & policy
Why are institutions & policy important in an economy?
1. they provide the classical factors of production (N, H, K, L - infrastructure is a big issue!)
2. they formulate the rule of the game (which determines the payoffs the entrepreneurs get for their activities)
Explain "the rule of the game"?
It is about the payoffs of entrepreneurial activities and this determines if this leads to a productive/unproductinve/destructive contribution to society.
It's all about the possibilities, incentives, and profitabiity.
This has then an effect on innovativeness and the dissemination of technological discoveries.
What are the 5 elements that could lead as a motivation to innovation & entrepreneurship?
P A P E L
1. private ownership (needs a market economy because of the gains)
2. availability of production factors (start-up stock needed)
3. economic freedom
4. legal protection of property rights
5. political stability, rule of law, regulative quality
6. (democracy)
What were the economic reforms under Deng?
-out of collectivized agriculture
-liberalization of prices
-more autonomy for state enterprises
-different banking system & stock market
-opening to FDI
What are the pros & cons of "socialism with Chinese characteristics"?
pros: outstanding economic development, less poverty, became major player globally
cons: large disparities (income per capita) between the different classes, corruption, negative externalities
Explain the middle income trap?
higher wages & labor costs, loss of competitive edge in the exportation of manufactured goods
step 1: labor intensive, low productivity/wages/technology
step 2: capital & knowledge intensive, high quality/technology, innovation
What are India's major challenges regarding their long-term economic development?
1. inadequate physical & social infrastructure
2. limited jobs
3. poverty
4. political instability
5. growing population (a lot of young people)
What are the 3 development goals of India?
1. growth in manufacturing (labor intensive)
2. rural development (more knowledge & technology, more export oriented)
3. increase state revenue (money needed for better infrastructure & rural development)
What are Paul Collier's 4 development traps?
1. landlocked with bad neighbours
2. natural resource trap
3. conflict trap
4. bad governance trap
Why are natural resources increasing the risk of war?
1. bad governance (tension between the classes = rebellion)
2. foreign intervention
3. war finance
What are the development traps regarding natural resource wealth?
-volatile prices (economic)
-mono-cultural economy (e)
-weak/bad governance (political)
-foreign intervention (p)
-conflict and war (p)
What are the 3 opportunities to finance a war?
1. direct mining
2. looting (Plünderung), extortion (Erpressung), kidnapping
3. sale of future exploitation rights
Explain the law of demand?
Demanded quantity increases = price decreases
Explain why the demand function has a downward slope?
1. substitution effect
2. income effect (change in purchasing power)
3. law of dimishing marginal utility
Explain the law of supply?
Quantity supplied increase = price increase
Explain the market equilibrium?
It's the point where the supply and demand curve meet together.
What's a surplus?
When the quantity supplied is bigger than the quantity demanded.
What's a shortage?
When the quantity demanded is bigger than the quantity supplied.
Explain the consumer surplus?
It's the buyer's willingness to pay for a good minus the price he actually pays for it.
It measures the benefit to buyers.
Explain the producer surplus?
It's the amount a producer has to pay for a good minus the cost.
It measures the benefit to producers/sellers.
What are benefits from international trade?
-competition -> innovation
-cheaper
-better exchange of ideas
-variety of goods
Explain the production possibiities frontier?
It is a graphical representation of the maximal mix of outputs that an economy can achieve using its existing resources to full extent and in the most efficient way.
Explain the absolute advantage?
The comparison among producers regarding goods and their productivity.
The producer who needs less input for the same good has an absolute advantage.
Explain the comparative advantage?
The producer who needs the smaller opportunity cost of producing that good.
(needs less time/has to sacrifice less of the one good to get the other)
What have tariffs and quotas in common?
-reduce the quantity of the good
-rise domestic price of the good
-decrease the welfare of the domestic consumers
What is the only difference between a tariff and a quota?
tariff: generates a gain for the government
quota: creates surplus for those who have a license to import
What are the most important export trade partners of CH?
1. Germany 18.5%
2. US 12.4%
3. France 7.2%
What are the most important import trade partners of CH?
-Germany 28.7%
-Italy 9.9%
-France 8.1%
What are the disadvantages of international trade?
-gap between rich & poor
-exploitation of workers
-negative externalities
-dominance of the northern countries
Definition of WTO & task?
It's a global organization which is dealing with the trade rules between nations.
(01.01.1995)
Name some functions of the WTO?
-manage WTO trade agreements
-forum for trade negotiations
-handling trade disputes
-monitoring national trade policies
-assistance & training for developing countries
-cooperation with other int. organizations
Name the 5 principles of the WTO?
-non-discrimination
-reciprocity (Gegenseitigkeit)
-binding & enforceable commitments
-transparency (no export subsidiaries, no dumping)
-safety values (more time for less developed countries)
What do we need to calculate the current account?
goods, services
+labor and investment income
+current transfer
=current account
Which 2 forms of FDI do we know?
-greenfield investment (establishing a new operation)
-acquisition/merger with existing firms
How does FDI benefit the host country?
-FDI brings capital, technology, management resources
-bring jobs
-can lead to a current account surplus
-effects on competition & growth
What are the costs of FDI to the host country?
-competition (foreign MNEs have greater power bcse. of subsidiaries)
-balance of payments (debit)
-loss of sovereignty and autonomy (foreign company make decisions)
How does FDI benefit the home country?
-effect on the capital account (inward flow of foreign earnings)
-employment effect
-learned skills abroad
