International Economics I

INTERNATIONAL ECONOMICS?

International economics is the branch of Economics which studies the causes & consequences of economic interactions between the nations.

2.

International economic studies how economic interactions leads to inter-country & intra-country allocations of the scarce resources aimed at increasing the economic well-being of their people.

Different Nations

3.International economics deals with the economic interdependence among the nations of the world.

ECONOMIC INTERDEPENDENCE
Through the sale & purchase of goods & services
Raw material, Semi-finished and Finished products

Through the sale & purchase of financial assets

Stocks, Bonds, Private Equity, Real Estate

Through MNCs( Multinational corporations)

Employment opportunities etc.

Through domestic economic policies

Government interventions, Example: Maize in Mexico vs. US

Trade
Purchase and Sale

TRADE
Trade:-Exchange of goods & services between two individuals or association of individuals. Domestic Trade:-Exchange of goods & services between two individuals or firms in the same country. Foreign Trade:-when exchange of goods & services takes place between two individuals or firms of two different countries.

Advantages

Disadvantages
Exhaustion of resources

Use of resources

Wider range of commodity

Effects on domestic industry

Promote competition

Consumption habits

Speedy industrialization

Provide footholds to foreigners

Reduction in prices

Environmental Issues

Advantages of International Business

The main advantages of international business to a country are as follows. 1. Economy in the use of productive resources: each country tries to produce those goods in which it is best suited. As the resources of each country fully exploited. There is thus, a great economy in the use of productive resources. 2. Wider rang of commodities: international business make it possible for each country to enjoy the wide rang of commodities. 3. Promotes competition: international business promote competition among different countries. The produces in home country, being afraid of foreign competition, keep the price of their product at reasonable level. 4. Speedy Industrialization: international business enable a backward country to acquire skill, machinery and other capital equipments from advanced countries for speeding up industrialization. 5. Fall of price: a country can export her surplus products to a country which is need of them. The home price are, thus, prevented from falling.

Disadvantages of international business.

The disadvantages of international business are as follows, 1. 2. 3. 4. 5. Exhaustion of resources: in order to earn present export advantages a country may exploit her limited natural resources beyond proper limits. This may lead to exhaustion of essential resources like iron, coal, oil etc. Effect on domestic industries: if no restriction are placed on foreign trade, it may ruin the domestic industries. Effect on consumption habits: sometime it so happens that the trader in order to make profits imports commodities which are very harmful and injurious for the people. For instance, opium, wine, arms etc. Environmental: Example Nigeria and Shell Provides foothold to the foreigners: foreign trade provides foothold to the foreigners in the country. For the example the role of East India company came to sub continent as traders and than hold the whole government of subcontinent. Discus more advantages and disadvantages!!!

6.

MNCs( Multinational corporations)

MNCs? A head quarter in one country but having operation in other countries for examples, Suzuki, ford motors, MacDonald, shell etc are MNCs

Explanation: A large scale business, where the main head office situated in one country while the business operation perform in another country or countries is called Multinational corporation.

Activities of Multinational Corporations ( MNCs)

Explanation: Normally any international business in the form of MNCs perform two type of business operation throughout the world, 1. The first one, Exports and Imports,

Exports and imports

Foreign Direct investment

2. And the second one is Foreign Direct Investment

Export Goods- Money Comes Into the Country

13

Import Goods- Money Goes Out of Country

14

Explanation
Exports: Goods and services produced by a firm in one country and then sent into another country is called exports.

Imports: goods and services produced in one country and bought in by another country is known as imports.

Foreign Direct Investment

FDI ?
The investment of equity funds in another country or countries known as

Foreign Direct investment.

Why FDI is important?

The drivers of International Business and many companies wants to establish a place in world market by setting business operations in other country of countries. These drivers/firms or companies needs a large market share through out the world. So it is necessary to established their production unit or units out side from their home country.