3º ESO Unit 5 - The World Economy (PPT).pdf

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1. UNIT 5
THE WORLD ECONOMY. HOW
GLOBALISATION AFFECTS US

2. 1. ECONOMIC ACTIVITY
•Goods (or products): tangible
merchandise.
•Services: intangible
merchandise.
Set of actions and processes that govern the
production, distribution (marketing) and consumption
of merchandise (goods and services) in an economy, for
the satisfaction of the needs and desires of individuals
or collectives.

3. ECONOMIC ACTIVITY
INCLUDES IS ORGANISED IN ECONOMIC SECTORS
Production of
goods
Distribution
of goods
Consumption PRIMARY SECONDARY TERTIARY

5. STAGES OF ECONOMIC ACTIVITY
Phase of economic activity in
which goods are produced for
economic activities.
Phase of economic activity that
consists of transferring the goods
produced to consumers for sale on the
market
Phase of economic activity
consisting of the acquisition
of goods and services
resulting from production for
the satisfaction of needs and
wants.

6. PRODUCTION
INPUTS PRODUCTION OUTPUTS
FACTORS OF
PRODUCTION
USE-VALUE
(Utility)
EXCHANGE-
VALUE

7. DISTRIBUTION
MARKET

8. CONSUMPTION

9. PRIMARY SECTOR
SECTORS OF ECONOMIC ACTIVITY

10. SECONDARY SECTOR

11. TERTIARY SECTOR

12. Distribution of employment by economic sector (2007-2017;
USA, China and Paraguay)
The relative weight of each sector in an
economy in terms of employment and GDP
→ Gives an indication of a country's level of
development. Generally, more developed
areas have seen a decline in the importance
of the primary sector and an increase in the
tertiary sector (tertiarization).

13. Gross Domestic Product (GDP): value of all products and services in a territory. Total wealth of a territory.
ECONOMIC INDICATORS

16. GDP per capita: total GDP divided by the
number of inhabitants.

17. Human Development Index (HDI): created by the UN, and not only
related with economic factors, but is a summary measure of average
achievement in key dimensions of human development: a long and
healthy life, being knowledgeable and having a decent standard of living.

18. Big Mac Index (The
Economist): way of
measuring the purchasing
power parity, that is, the
price of specific goods in
different countries.

19. 2.1 Economic agents
Individuals or groups that carry out economic activities → organize the production and
distribution of goods and services, and consume → make decisions on what, how and for
whom to produce, and what to consume; therefore, they exchange labor, goods and services
and means of payment.
2. ECONOMIC AGENTS AND SYSTEMS: WHO CARRIES OUT ECONOMIC
ACTIVITY?

21. 2.2 ECONOMIC SYSTEMS
Way of organizing and carrying out
economic activity in a country:
•The way in which economic agents
are linked.
•The way in which work is organized.
•The way goods and services are
distributed.
The way of responding to what to produce,
how to produce and for whom to produce,
depending on the objectives (efficiency,
profitability, collective welfare, etc.).

22. 2.2.1. Capitalism (free market economy)
•Private ownership of enterprises and resources.
•Economic activity (prices, wages, etc.) freely regulated by the market → Law of supply and
demand.
•Secondary role of the public sector.
•Free competition.
•Objective: economic profit as the engine of economic activity.

24. 2.2.2. Socialism (planned economy)
•All economic activity is regulated by the State.
•Ownership of resources and enterprises.
•Objectives: joint welfare and social equality.
•No competition → State monopolies (one company controls one sector).
•State decides over production, distribution, prices, wages, etc.

25. 2.2.3. CURRENT SYSTEMS
KEYNESIANISM: social democracy, welfare state.
Sistema mixto.
•Public sector: infrastructure and basic services.
•Promotion of private property.
•Broad social provision.
•Regulation: public institutions. Labor rights,
consumer rights, environment, competition, etc.
→ Public policies.
NEOLIBERALISMO: more 'pure' version of capitalism.
•Complete liberalization of economic activity.
•Public sector: obstacle to freedom.

27. 3. PRODUCTIVE FACTORS: WHAT DO COMPANIES NEED FOR PRODUCTION?
3.1 Factors of production

28. 3.2 Labour and the labour market
LABOUR: human effort, whether physical or intellectual. It depends on the qualification or
training, the experience, the attitude and the technology available. Necessary for
businesses to produce goods, and for the workers to earn money (salaries).

29. ACTIVE
POPULATION
INACTIVE
POPULATION
EMPLOYED
UNEMPLOYED
Pensioners, students,
home-makers, etc.
Employment and unemployment

30. The behaviour of the labour market
Supply of work à Offered by companies.
Offer of work à Offered by people.
Law of supply and demand à a worker would be more demanded if s/he has the skills demanded by
companies.
•Qualified workers à fewer in number. Higher training, stability and salaries.
•Non-qualified workers à more in number è Less wages. More unstable.

31. Industrial relations à the relations between employees and employers are regulated by
laws and agreements:
•Labour law of each country, with influence of international treaties and organisations
(WTO, EU, etc.).
•Collective agreements: via negotiations between the company and the workers
(through their unions, generally).
•Contracts: agreements between employer and employee.

32. PROBLEMS of the labour market
•Globalisation of economy: international migrations at larger scales and offshoring
(production is sent from developed to developing or underdeveloped countries).
•Working conditions in developing countries: low regulation è Exploitation,
discrimination, etc.
•Temporary and part-time jobs. Good idea at first (flexibility), but adopted in the wider
picture è Precariousness, lack of stability.
•Seasonal jobs: jobs that occur mostly in specific seasons of the year (ie. Christmas,
summer, etc.).
•Unemployment à high unemployment: bad for a country because lower income (taxes),
more expenditure in social provisions (unemployment benefits), less economic activity,
etc. è Less consumption è less production è lesser economic activity.
•Informal work: not officially declared, and therefore not regulated by labour law.

33. 4. GLOBALISATION: A GLOBAL
ECONOMY
“The steady integration of national
economies into a global market
economy, resulting from the
progressive liberalisation of
international trade in goods, services,
technology, labour and financial
capital”.

34. CAUSES
▪ Advances in telecommunications.
▪ Improvements in transport.
▪ Expansion of the capitalist system and neo-liberalism
throughout the world.
EFFECTS
▪ Increased trade and greater economic integration.
Increased interdependencies.
▪ Offshoring: production organised on a global scale.
Shifting part of the production of a product to third -
usually developing - countries in order to save costs.
▪ Economic growth of developing countries: those that
have been the target of industrial offshoring.
▪ Consumption: more uniform (diffusion of tastes through
advertising).

35. ADVANTAGES DISADVANTAGES
Increase of employment where
multinational companies and their
subsidiaries are located
Increase of the inequalities among the
geoeconomic areas of the world.
Reduction of production costs,
implying (not always) a reduction of
prices
Multinationals may interfere
economically and politically in less
developed countries
Promotion of the competition, leading
to greater qualities
Favourable for large businesses
Offshoring is encouraged

36. PROMOTERS
•International organisations → Promote economies to operate on an international scale,
implementing guidelines (free flow of goods and capital, for example) and adopting
agreements.
International Monetary Fund (IMF), World Bank (WB), World Trade Organisation (WTO), G20,
etc.
•Multinational companies → Operate on a global scale seeking the greatest economic
benefit..

39. 4.1. Geo-economic areas of the world: the great powers

40. THE TRIAD
Traditional focus of economic activity (control of most of the world’s production, exports,
technology and finance).
Greater weight of the tertiary sector and lesser weight of the primary sector.
High consumption and high standard of living for the population.
Leaders in global trade in technology, services and capital.
Lower recent growth than developing countries, which are rivalling them (greater competition).

41. THE NEW POWERS: CHINA AND INDIA
With the development of globalisation, China and India have led the emerging economies.
Abundant labour force, good education systems (skills), location of offshored
industries, large foreign investment, etc.
REGIONAL ECONOMIC POWERS
Countries that have a greater economic weight than the surrounding area, but not that
relevant in world terms: Russia, Indonesia, Brazil, South Africa, Mexico, Saudi Arabia, etc.
UNDERDEVELOPED AREAS
Some countries in Latin America and Asia, and most of sub-Saharan Africa.
Economy based on the primary sector, mainly traditional. Little advanced industry. Very
limited consumption.