FHCE 5100 Lecture Notes - Lecture 1: North American Free Trade Agreement, Market Power, Walmart
10 Jun 2018
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U.S. Markets And Market Failure In A Global Economy
NOTE:
− For thousands of years, most people lived, worked and died within a small radius of the place
where they were born
Globalization
− An umbrella term for a complex series of economic, social, technological, cultural and political
changes seen as increasing interdependence, integration and interaction between people and
companies in disparate locations
− Breaking don the national barriers
− It is not a new phenomenon, although it has accelerated over past years
Forces Leading to Globalization
1. Technology
• Computing and telecommunications
• Can almost instantly move funds from one country to another
2. Liberalization of Trade (free trade)
• Fewer barriers to trade across countries
• Ex: NAFTA and CAFTA (Central America)
3. Fragmentation of the production process
• Firms can move to locations with low wages and/or where customers are
Aspects of Globalization
1. Trade
• At the most basic level, trade is beneficial because it allows people to specialize in the
goods and services they produce best and most efficiently
• Patterns of trade are determined by variations in a number of factors, including climate,
the location of natural resources, and the skills and knowledge of the population
• Developing countries as a whole have increased their share of world trade; however, it
varies (U.S. and Asia have done well but Africa has done poorly)
• U.S. firms increasingly seek to expand production and profits through new export
opportunities
find more resources at oneclass.com
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Document Summary
For thousands of years, most people lived, worked and died within a small radius of the place where they were born. An umbrella term for a complex series of economic, social, technological, cultural and political changes seen as increasing interdependence, integration and interaction between people and companies in disparate locations. It is not a new phenomenon, although it has accelerated over past years. Information exchange is an integral, often overlooking, aspect of globalization: knowledge represents a highly valuable resource for the developing countries. One (cid:448)ie(cid:449) is that free trade is (cid:862)good(cid:863: expanding to an international market leads to declining costs per unit. Competition from foreign producers reduces market power of domestics: consumers gain from increased variety, quality and lower prices. Countries with open trading systems grew twice as fast as those without. Ex: china can produce more goods than the u. s. for same amount of money (wal-mart) In graph: country a can produce 30m cars or 6m trucks & country.
