IE II

The comparison among producers regarding goods and their productivity.

The producer who needs less input for the same good has an absolute 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)

-reduce the quantity of the good

-rise domestic price of the good

-decrease the welfare of the domestic consumers

tariff: generates a gain for the government

quota: creates surplus for those who have a license to import

1. Germany 18.5%

2. US 12.4%

3. France 7.2%

-Germany 28.7%

-Italy 9.9%

-France 8.1%

-gap between rich & poor

-exploitation of workers

-negative externalities

-dominance of the northern countries

It's a global organization which is dealing with the trade rules between nations.

(01.01.1995)

-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

-non-discrimination

-reciprocity (Gegenseitigkeit)

-binding & enforceable commitments

-transparency (no export subsidiaries, no dumping)

-safety values (more time for less developed countries)

goods, services

+labor and investment income

+current transfer

=current account

-greenfield investment (establishing a new operation)

-acquisition/merger with existing firms

-FDI brings capital, technology, management resources

-bring jobs

-can lead to a current account surplus

-effects on competition & growth

-competition (foreign MNEs have greater power bcse. of subsidiaries)

-balance of payments (debit)

-loss of sovereignty and autonomy (foreign company make decisions)

-effect on the capital account (inward flow of foreign earnings)

-employment effect

-learned skills abroad

-the balance of payments can suffer

1. capital outflow required to finance the FDI

2. if the purpose is to serve the home market from a low cost labor location

3. if the FDI is a substitute for direct export

-reduced employment in the home country

promote: insurance the risk

restrict: tax rules

promote: offer incentives (resource transfer, employment effects)

restrict: ownership restraints, performance requirements

1. after WWll: reconsctruction of the countries

2. loans for developing countries, infrastructure

3. eliminating poverty

-helping countries in crisis (collapsing economies)

-stable world economy

Innovation: new products, processes, organizations, management practices, strategies

Entrepreneurs: they commercialize these new products etc.

-classical factors of production

-innovation & entrepreneurship

-institution & policy

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)

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.

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)

-out of collectivized agriculture

-liberalization of prices

-more autonomy for state enterprises

-different banking system & stock market

-opening to FDI

pros: outstanding economic development, less poverty, became major player globally

cons: large disparities (income per capita) between the different classes, corruption, negative externalities

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

1. inadequate physical & social infrastructure

2. limited jobs

3. poverty

4. political instability

5. growing population (a lot of young people)

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)

1. landlocked with bad neighbours

2. natural resource trap

3. conflict trap

4. bad governance trap

1. bad governance (tension between the classes = rebellion)

2. foreign intervention

3. war finance

-volatile prices (economic)

-mono-cultural economy (e)

-weak/bad governance (political)

-foreign intervention (p)

-conflict and war (p)

1. direct mining

2. looting (Plünderung), extortion (Erpressung), kidnapping

3. sale of future exploitation rights

Demanded quantity increases = price decreases

1. substitution effect

2. income effect (change in purchasing power)

3. law of dimishing marginal utility

Quantity supplied increase = price increase

It's the point where the supply and demand curve meet together.

When the quantity supplied is bigger than the quantity demanded.