Industry & Economic Leftovers

1. Industry & Economic Leftovers

2. Economic systems • Capitalism- the process of letting the competitive market determine the price of goods • Capitalism, based on competition, inevitably means that there are winners and losers and that those in poverty are largely ignored

3. Socialism- is the government control of basic items in the economy • Gov’t controls food prices as well as transportation and energy prices to ensure everybody can pay for essential services • Individual tax rates are usually higher so the government can pay for transportation and health services

4. Communism- the total government control of all prices in a society, ranging from bread to utilities • The government dictates your profession based on its assessment of your skills

5. Industrial cost • Industrial costs are either fixed or variable • Variable cost- fluctuate based on the volume of the order • Fixed cost- do not fluctuate based on the quantity ordered • The more of a product a customer orders, the less the price per individual item • The less the customer orders, the greater the cost per individual item • Businesses prefer to charge variable cost to encourage customers to buy more

6. Agglomeration- the centralization of features of an industry for the mutual benefit of the industry as a whole • Ex. Shopping mall • You go to the mall to buy jeans. While walking through the store you see a shirt that would look great with those jeans, while walking out of the mall you buy a pair of shoes to go with your new outfit

7. Deglomeration- occurs when the market has become saturated with a particular industry • This creates too much competition, forcing some of the businesses within the industry to relocate or close down • Traffic congestion, pollution, labor shortages, capital shortages, supply shortages caused by local demand, increased land prices, and a general decay of infrastructure because of the intense use of the infrastructure

8. Footloose industry- a company with no allegiance or ties to a country or a location, therefore it can move its primary locations at will • Mostly done for tax purposes • Companies will set up tax shelters in countries that have more favorable tax laws • Bermuda has many international businesses because of its tax laws

9. Structuralists • believe that the growth of the core is only possible through the systematic underdevelopment of the periphery. • Wallerstein's world systems model • Dependency model • Liberalists • All countries are on the same trajectory, passing through stages as they develop. • All countries are capable of progression along that trajectory • Rostow’s modernization model

10. 3 most Important trading blocs • trading blocs, or conglomerations of trade among countries within a region • 1) North America • 2) European Union • 3) East Asia • Most cooperation and competition within and among trading blocs takes place through transnational corporations, or companies that operate factories in countries other than the ones in which they are headquartered