Transcript Unit IIB

Unit II (B)
Economic Goals




General
Business
Consumer
Labor
I) Modern Economic Goals
A)
•
•
•
Efficiency
Accomplished by making more for less.
Specialization – concentration on a single
task or operation in the creation of a
product. Also called “Division of Labor”
Examples – Geographic (Florida,
Northeast, Saudi, Far East) College Major
(Engineering, Business Mgmt, Political
Science? Liberal Arts?)
Leads to:
B) Growth
Assuming Demand and
Consumer Confidence:
1) Sales Increase
2) Consumption Increases
3) Profits Increase for companies and consumer.
4) Companies grow, jobs expand
* Nation-wide, as population grows, so too must
production:
0-1% = Recession
1990’s = 5% avg.
3-4% = Average
Indus. Rev = 8-10%
5-6% = Good/Above

C) Global Interdependence
A trend as the world becomes a “smaller”
place.
 Nations/states are specializing in particular
industries, and in turn becoming more
dependent on other nations or regions to
meet their needs.
 Ex. Oil/OPEC
 Member states likely have other economic
needs (Saudi Arabia?)
 It could be in the form of raw capital ($) or
in commodities (foodstuffs).
 Again Scarcity is a central theme.
 Politics – can muddy the water of efficiency
with Eco. Weapons such as Trade Sanctions
(2011 - IRAN)

















`
Globalization
International Thinking At Its Best! What is the truest definition
of Globalization?
Princess Diana's death.
An English princess with an Egyptian boyfriend
crashes in a French tunnel, driving a German car
with a Dutch engine, driven by a Belgian who was drunk on
Scotch whisky,
followed closely by Italian Paparazzi on Japanese motorcycles;
treated by an American doctor using Brazilian medicines.
This is sent to you by an American,
using Bill Gates's technology,
and you're probably reading this on your computer,
that uses Taiwanese chips and a Korean monitor,
assembled by Bangladeshi workers
in a Singapore plant,
transported by Indian truck drivers,
hijacked by Indonesians,
unloaded by Sicilian longshoremen,
and trucked to you by Mexican illegals.....
That is Globalization
1) Absolute Advantage vs Comparative Advantage


Youtube:
https://www.youtube.com/watch?v=Vvfzaq72wd0
These theories tie in nicely with the
explanation why countries are
specializing more in a particular
industry
2) World Trade Organization: 159 members
a) Negotiates trade deals
b) Settles trade disputes
c) Encourages the free flow of
traded items
d) Establishing trade rules
(Contracts) and maintaining
transparency.
Source of friction…. Why?
Because there are differing standards of living
in parts of the world….
OFFICIAL STATS (From WTO Stats)



FACT FILE Location:Geneva, Switzerland
Established:1 January 1995
Created by: Uruguay Round negotiations (1986-94)
Membership: 159 countries on 2 March 2013
Budget: 196 million Swiss francs for 2011
($220millin U.S.)
Secretariat staff: 640
Head: Roberto Azevêdo (Director-General)
Functions:
• Administering WTO trade agreements
• Forum for trade negotiations
• Handling trade disputes
• Monitoring national trade policies
• Technical assistance and training for developing
countries
• Cooperation with other international organizations
D) Related Terms


Developing Nation: due to a low standard of
living and relatively lower level of
industrialization….
Red = Graduate; Brt. Green = off radar
II) Business in the Economy
A)
•
Business decisions relate back to
the three Eco. Questions (what,
how, for whom)
Reason – they represent a
microcosm of both personal and
national economic goals
In a market economy, most of
their decisions are derived from
consumer wants/needs. Hairstyle
B) Forms of Business
Proprietorship
2) Partnership
3) Corporation
•
See handout/hwk. for primary info
C) Capital & Productivity
Cornerstones of business success.
Why?
1)

1)
2)
3)
4)
5)
Given Managerial Skills and Demand,
movement can be made toward
productivity.
Skill Samples:
Organizational
6) Common Sense
Decision Making
7) Professionalism
Ability to Delegate
8) Fairness
Compromise
9) Innovation
Communication
10) Marketing
D) Productivity



Coupled with the Profit Motive
(greed), they make up the primary
use of capital.
The more efficient a production,
revenue ($) increases, given
demand.
Greater productivity leads to higher
wages for employees, greater
profits and potential expansion of
product offerings, known as
diversification.
Starbucks Logo Evolution….
III) Consumer in the Economy
* Consumers vote with their wallets.
A) Spending Decisions based on:
1) Income – money received through
employment, exchange of property.
2) Wealth – any resource used to produce
income. Valued
possessions, assets (car,
house)
3) Necessities – goods like food, shelter,
or clothing needed by consumers.
4) Utility – satisfaction derived from
a good or service.
5) Marginal Utility – the amount of satisfaction
a consumer derives from consuming one
additional unit of a good or service.
Ex. Snickers Bars
6) Average Propensity to Consume: % of total
disposable income people spend on goods
and services.
?What happens to this % over time?
7) Fixed Expenses – permanent costs in
budgets, will not change. Be careful !!
mortgage, student loan, car payment, Lease payments: apartment, car,
self-storage unit... Services contracts: cell phone service
B) Savings Decisions – based on:
Average Propensity to Save: % of after tax
income, which on average consumers
save.
1) It is recommended that working adults
save between 10-15%
History (U.S)
1970’s/1980’s Americans saved 5-7%

1990’s – 1-3% saved

2000-07, Americans saved -1%.

2007-08 (up to 1%) Reason?

2013 – 4%
Consumer Advocates

Saving/Investments:
Stocks
* Bonds
 Banks/Credit Unions
* I.R.A.
 C.D’s
* Bed Mattress
Goal – to gain as much $ in interest as
possible.
Interest – payment for the use of
capital ($) that can cost people (loan)
or expand their income (investments)

IV) Labor in the Economy
Provides all human resources
necessary in production
 Wages are price paid for these
resources and are directly impacted
by supply and demand for skills,
experience and expertise in a
given field.
Ex: Ditch Diggers vs Neurosurgeons

A) Wages Based on:
Derived Demand – demand for labor
in a field that provides indirect utility.
Mechanic
 Productivity – amount of output per
unit of input. Hard to measure at
times…
Ex: Quarts of Strawberries picked a per
day.
Vs.
Ex: Number of Fixed Cars per day (?)

B) Methods of Evaluation:
 Annual
evaluation
 Performance Review
 Ratings System
 Peer Observations
 Merit/Commission
 Self-Evaluation
1) Why so many forms?
2) How may they be helpful to employee?
3) How may they be used against employee?
C) Wages – Salary vs. Hourly
Often compared to White Collar vs. Blue.
 Minimum Wage vs. Living Wage: Min.
Wage began as a way to ensure at least
reasonable standards of living
were maintained…did it work.
 Current Minimum Wage of NY:$8.00/hr.
1938 - $.25 1986- $3.35 2015- $10.10
1995 - $4.35 2005 - $6.00
???
2009 - $7.15 2011 – $7.25

Considerations




Salaried positions typically include
overtime payments within the
standard paycheck.
Hourly wage employees may have
more overtime opportunities at 1 ½ or
2x rate.
Salaried employees tend to enjoy a
greater benefits package (Health
Insurance, Leave/Sick Time.)
Outsourcing is challenging some of the
more traditional notions of pay rates
Unemployment

1)
A variety of types:
Seasonal – based on the industry you
work (tourism); climate related
(farming); or even time of year (xmas
retail shopping)
2) Cyclical – happens as part of the
regular economic cycle
ex. Stockbrokers during the Great
Recession 2008. Lehman Brothers)
3) Structural – skills required for open
jobs are not available (tech bubble
busts in to real-estate bubble…..)
V) Outside Forces - Unions


An outgrowth of the Indus. Rev. designed to
obtain greater pay, safer working conditions,
and better hours. (A Girl’s Chance)
That largely remains the case today, although
O.S.H.A. has removed many concerns over
safety.
1) Union Organization
youtube:https://www.youtube.com/watch?v=7Lg4gGk53iY



Union Shop – anyone may be
hired, but must join within a certain
time (6 months).
Agency Shop – requires employees
to pay dues to the union, but do not
have to join. (NY Schools)
Open Shop – membership and
dues are open but not required .
2) Types of Unions
A) Craft (Horizontal) – supports a specific
type of work (painter, contractors)
Ex. Plumbers local 422
Grades: Apprentice, Journeyman, Master
B) Industrial (Vertical) – includes all
workers within a plant regardless of job
tasks.
Ex. Coal Plant
3) Unions Today - Bargaining
As set forth in the 1935 Wagner Act,
union reps will negotiate with owners on
items of interest (pay/health insurance)
 If this fails (rare) other tactics may be
employed by both sides:
A) Union:
1) Fact Finding – to seek out most accurate
info on issues of importance in negotiations
Ex. Average Prescription Card Costs.
2) Picket – raises awareness to employee
plight. Public Relations
3) Strike – refusal to work. Rare, and
controversial. Police? Writer’s? Bad P.R.
Also, Wildcat/Sympathy

B) Management Tactics
1) Lockout – preventing employees
from work. NHL, NFL.
2)Injunction – a court order that
prevents a strike. It may be a
needed job. Or the costs from a
strike may be very high. (Phila.)
3) Executive Order – may be issued
ordering people to work. Usually to
prevent national crisis.
Ex. Bill Clinton Airlines
C) Compromise – the preferred path:
Arbitration
– creates a binding
agreement by a 3rd party who both
sides agree upon before discussions
held. Sports $
Mediation – non-binding assistance
in negotiations by a 3rd party. A
preferred method since it avoids risk.
Ex. Oneida Land Claim Mediator
Eventually, a Contract is signed, that
highlights all terms of employment and
payment.
4) Professional Organizations



A popular alternative to unions in a
field that also is designed to protect
their interests.
Done more through political action
(well funded Lobbies) and literature
than through bargaining, since
many are self-employed.
Ex: AMA (American Medical Assoc)
ADA (American Dental Assoc)
UNIT II Test – “Goals” of Groups


Multiple Choice Format (40)
Topics:
1) Labor Goals (Unions, wages,
bargaining)
2)Business Goals (Types, pros/cons)
3) Consumer Goals (Protection h.o.,
Spending and Saving Choices,
Global/Economic Goals
4) Supply + Demand (Principles of and
Advertising; no graphing)