In contrast to Cuba where the people rely on the rationing system/ the government for all their food... In Cuba, people do not have the freedom of choice (the freedom to buy/eat what they want)… *consumers do not have the freedom to purchase what they want from who they want…. And because the government controls everything, producers do not have the freedom to produce what they want for who they want. They produce for the government and have no say in how the food is distributed / allocated
Coke > Pepsi
(1960s) diet pepsi was the first diet cola to be distributed on a national scale in the US… but coca-cola immediately followed…
Apple & samsung – both trying to create the best phone possible with the resources/technology that they have available…
Communist regimes like cuba & north korea –only the government / high government officials seem to benefit!
Economic System (US, China, South Korea, India)
ECONOMIC SYSTEM (US, China,
South Korea, India)
• An economic and political
system in which a country's
trade and industry are
controlled by private
owners for profit.
Basics of Capitalism:
• Capitalism is said to
growth and the overall
standard of living.
• In other words,
CAPITAL (money) …and
lots of it.
Basics of Capitalism:
• Buyers (people) influence the market through
their demand and ability to purchase goods and
services. There is very little government
• Producers (businesses) are motivated by profit
(money) and therefore create whatever goods
people will buy.
• In other words, the businesses run the economy,
the government stays out of it!
• United States: the 3 economic decisions are
determined by individuals (…for the most
• System in which business can be conducted
freely with little government intervention.
In the US, we have the right
• 1. own private property and enter into contracts
• 2. make individual choices
• 3. engage in economic competition
• 4. make decisions based on self-interest
• 5. participate in the economy with limited
government involvement and regulation
Freedom to own private property
and enter into contracts
• Goods owned by individuals
and businesses, NOT the
You can use it as you wish
You can buy as much as you can afford
Freedom to own private property
and enter into contracts
• Agreements people make
with one another to buy
and sell goods and
*Legally binding even if not
Freedom of choice
• Free to do what you want
with what you own
• Producers have freedom
to produce what they
want for who they want
• Consumers have
freedom to purchase
what they want from who
Freedom to engage in competition
• Economic rivalry between businesses selling the same or
*keeps prices “fair” and encourages producers to improve
Freedom to make decisions
based on self-interest
• Producers and consumers make choices for
their own benefit
• Voluntary exchange: both parties benefit from
Freedom to participate in the
economy with limited government
• Individuals and businesses
make most of the decisions,
NOT the government
• Government: regulator
• Laws to protect workers,
consumers, and businesses
• Government also provides public
• Redistributes wealth (Ex:
• Ultimate goal: economic growth
Economic actors in a free
Both products and
This free exchange of
goods and services is
Kinds of Markets…
1. Product market
• All the exchanges of products (goods and
2. Resource market
• All the exchanges of resources
Capitalism - The Features
• Private Property
• Price Mechanism
• Freedom Of Enterprise
• Profit Motive
• Sovereignty of the Consumer
• Labour – As a Commodity
Capitalism - Pros
• The Rich Variety Of Goods And Services
• Proper Use Of Resources
• Inducement To Work
• Efficient Production
• Increase In Standard Of Living
• Growth Of Entrepreneurship
• Economic Freedom
Capitalism - Cons
• Unequal Distribution Of Wealth
• Class Struggle
• Exploitation Of Labour
• Wasteful Competition
• Business Fluctuations & Unemployment
• Disregard Of Public Welfare
• Lack Of Coordination
What is Communism?
• Communism - a government where people shared work
fairly and were paid equally.
• The word “Communism” comes from the Latin word
“Communis” which means common or belonging to all.
The Beliefs of Communism
• The rich get richer.
• The poor get poorer.
• People wanted to make
The Goal of Communism
• Goal: to get rid of social
classes and make
everything fair for
Problems with Communism:
• Lack of individuality
• Lack of choice
• Equal treatment for
all, even if you work
harder than all the
Chinese Economy from WWII -
• After WWII, the Communist
Party gained a lot of support.
• Mao Zedong was the leader
• Mao Zedong used
propaganda to spread
the ideas of
published “The Little
Red Book” to teach
The Great Leap Forward - 1958
• In 1958 Zedong began a radical program called the Great
Leap Forward to increase production in farms and
• The Communists rushed to increase production and
made people with little to no experience try to farm or
produce steel in their backyards.
• The steel was of poor quality making it useless and the
poor weather resulted in a widespread famine.
• An estimated 30 million people died of starvation
The Cultural Revolution - 1966
• Create a society with no ties to the past:
• Closed schools
• Urged students to rebel against their students, these
people were called “Red Guards”
• Many Ancient Chinese buildings were destroyed
• Anyone opposing Zedong was attacked by the young Red
• Finally, they began to turn against Zedong and were
• Hundreds of thousands of
people were killed
• China was in turmoil!
The Four Modernizations - 1981
• Deng Xiaoping became the new leader of China in 1981.
Over the past 20 years, China has seen slow changes in
their economy, allowing some free enterprise (meaning
that the government does control ALL aspects of the
• Xiaoping led The Four Modernizations:
• Today, China is a major economic power
• China still only has one political party, the Chinese
Communist Party, meaning there is no political freedom
• In 1989, people gathered in Tiananmen Square in China’s
capital to protest for democracy. The government sent in
troops and tanks, 1000’s were killed or wounded.
• There is still a need for human rights reforms…
• China today is one of the world’s greatest manufacturing
• While the economy is slowly changing, there is not much
room for political change given the fact that there is only
one political party allowed.
• South Korea is the 12th largest economy in the world with a
GDP (PPP) of 1.459 trillion in 2010.
• South Korea is one of the fastest growing economies from the
1960s to 1990s, and was termed as one of the Asian Tigers,
along with Hong Kong, Singapore and Taiwan
• South Korea's economic growth relied heavily on its exports,
due to a lack of natural resources, and small domestic
• This also makes them the 7th largest exporter and 10th
largest importer in the world.
• The South Korean economy has also grown from one which is
labor-intensive, to one which is more capital and technology-
• South Korea's growing economy is also one of the few
countries which avoided recession during the 2008 financial
• South Korea is also a member of world organizations including
the G-20, APEC, OECD and WTO.
• It has also signed free trade agreements with other countries,
with the most important free trade agreement signed with the
US in 2007, the Korea-US Free Trade Agreement (KORUS FTA)
which removed all trade and investment barriers between 2
• This also made US their second largest export market.
• South Korea has a land area of 96,920 square km, with 16.58
percent of arable land.
• The country's main agricultural crops are rice and barley.
Other products supplied by South Korea includes vegetables,
fruits, root crops, cattle, pigs, chicken, milk, eggs and fish.
• South Korea also enjoys few natural resources such as coal,
tungsten, graphite, molybdenum, lead and hydropower
Population and Labour Force
• South Korea has a population of 48.75 million people as of
2010, with a labour force of 24.62 million people. In 2010, the
unemployment rate in South Korea is 3.725 percent.
• South Korea has a labor force with 70 percent of its workers
employed as irregulars, people who take up temporary or
uncommon jobs. An imbalance of work protection and
benefits between the regular and irregular workers have led
to strikes and protests by the irregular workers.
• The industry of South Korea contributes 39.4 percent of the
country's GDP in 2010.
• The industry and manufacturing industries are the major
growth engine for South Korea during its economic progress in
• South Korea's largest industries are electronics, automobiles,
telecommunication and shipbuilding.
• Electronics boosted the South Korean economy in the 1980s,
by becoming the world's sixth largest manufacturer of
electronic goods such as color televisions, microwave ovens,
radio, watches and personal computers. .
• South Korea is also a major manufacturer of semiconductors,
with Samsung Electronics and Hynix Semiconductor the global
leaders in the production of memory chips.
• The automotive industry also plays a major role in the South
Korean economy today. It has grown into one of world's
largest automobile producers, coming in 5th after the United
States and Germany, with an estimate of 4.27 million
automobile produced a year.
• Some of South Korea's international automobile brands
include Hyundai, Kia and Renault.
• South Korea is a global player in the production of ships, with
a 50.6 percent share of the global shipbuilding market in 2008.
• Four of the world's largest shipbuilding companies are from
South Korea: Hyundai Heavy Industries, Samsung Heavy
Industries, Daewoo Shipbuilding & Marine Engineering and
STX Offshore & Shipbuilding.
• Europe's largest shipbuilder, STX Europe, is also owned by
• Services in South Korea contributes 57.6 percent of the
nation's total GDP, and employs 68.4 percent of the
• The government shifts its focus from manufacturing to
services in 2009, and experts predict that the services will be
the driving force of South Korea's economy for the next few
years, as current productivity level is just at 58 percent of that
The indian economy , the third largest economy
in the world in terms of PURCHASING
POWER, is going to touch new height in coming
years. According to global investment bank by
2035 india would be 3RD largest . Economy of
the work just after US and CHINA. It will
grow to 60% of size of the US. Economy
The Histroy of india economy can be broadly divided
into three Phase:
Pre- Colonial :- The economy histroy of india
since INDUS VALLEY civilization to 1700 AD can
be categorised under this phase. During this Phase
indian economy was very will developed. It has very
good trade relation with other parts of world. Before
the advent of the East India Company each village
in india was a relt sufficient entity and was
economically independent as all the economies
needs were fulfilled with in the village..
Colonial:- The arival of East India Company in
india caused a huge strain to the indian economy
and there was a two way depletion of resources-
The british would buy raw materials from india
at cheaper rates and finished foods were sold
higher than normal price in indian market.
During this phase indias share of world income
declived from 22.3% to 38% in 1952
POST COLONIAL INDIAN ECONOMY:-
After india got independence from colonial rule in
1947, the process of rebuliding started various policies
and schemes were formulated. 1st 5 years plan came in
to implemention in 1952. there 5th year plan started by
indian government, focused on the needs of the indian
Indias Economy is bound for slower growth. In
recent months, indian government has introduced Pro
business economic reforms and outlined plans to
increase. Spending on capital investment and large
scale social programs. In the first three months of 2013
the GDP growth slowed to 4.8% and it is likely to go
down further due to weak Consuption , Capital,
investment & decline government spending.
The economic activity depends mainly on
exploitation of natural resources .
Agriculture and agriculture related activities,
forestry and fishing, mining, and extraction of oil
The industrial production of physical
Involves providing intangible goods like
services , attention, advice, experience, and
Financial services, management
consultancy, telephony and IT are good
examples of service sector.
What is External Trade ?
Exchange of capital, goods, and services across
international borders or territories.
In most countries it represents significant share of
gross domestic product (GDP).
Importance Of External Trade
•International trade is exchange of capital,
goods, and services across international
borders or territories. In most countries, it
represents a significant share of gross
domestic product (GDP)
International trade is the backbone of our modern,
commercial world, as producers in various nations
try to profit from an expanded market, rather than be
limited to selling within their own borders.
India Trade: Imports
India’s major imports comprise of crude oil machinery,
military products, fertilizers, chemicals, gems, antiques
and artworks. Imported goods are divided into the
following categories: Freely importable items: For these
items, no import license is required. They can be freely
imported by an individual or a firm. Canalized items:
These items can only be imported by public sector firms.
For example petroleum products fall under this category.
Prohibited items: Items such as unprocessed ivory, animal
rennet and tallow fat cannot be exported to India.
India Trade: Exports
Indian exports comprise mainly of engineering and
textile products, precious stones, petroleum
products, jewelry, sugar, steel chemicals, zinc and
leather products. Most of the exported goods are
exempt from export duties. India also exports
services to several countries, primarily to the US. In
fact, India is among the world’s largest exporters of
services related to information and communication
technology (ICT). It is also the key destination for
business process outsourcing (BPO).
Risks in international trade
Buyer insolvency; Non-acceptance; Credit
risk; Regulatory risk; Intervention; Political
risk; and War and other uncontrollable events.
In addition, international trade also faces the
risk of unfavorable exchange rate movements
Income and consumption
What is national income ?
National income measures the total value of
goods and services produced within the
economy over a period of time
National Income can be denoted in different ways
with different meaning attached to it.
Gross Domestic Product (GDP)
Gross National product (GNP)
Net National Product (NNP)
The GDP of India has grown from a merge 93.7 billion
rupees in 1950 to about 410006.4 billion rupees in
India's per capita income (nominal) is $ 1219, ranked
142nd in the world, while its per capita purchasing
power parity (PPP) of US $3,608 is ranked 129th
Strengths of INDIANECONOMY
India is well placed to benefit from globalization
Demographics of India are favorable.
There is much scope for increases in
Problems faced in Indian Economy
Poor educational standard.
Balance of payment deterioration
High level of debt
Large budget deficit
Rigid labour laws