The Challenges of GlobalizationEssential Questions:

1.Why do nations carry on trade with each other?

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Productive ResourcesGeographic factors, such as

landforms, climate, natural resources, areas of human settlement, and infrastructure influence the location of economic activities.Natural Resources: those provided by nature, such as minerals, plant fibers or coal for energy.

Human Resources: All the human labor required to produce something.

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Productive Resources cont’dCapital Resources: Goods used to make other goods or services. This also includes infrastructure: technology, transportation routes, communications.

Entrepreneurship: The people who bring together and organize all of the other productive resources.

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Productive Resources cont’d

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How Geography Affects the Location of Economic ActivitiesPhysical Geography: Determines

where many of the productive resources that go into making a good or service are located.

Climate: influences the types of crops grown.

Natural Resources: Where minerals and raw materials are located can affect the location of an economic activity.

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How Geography Affects the Location of Economic Activities cont’d

Natural Transportation Routes: Rivers, lakes, oceans

Infrastructure: Includes investments in roads, railroads, electricity and the Internet.

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Geography Affects Access to Consumers

Physical barriers like mountains, forests, deserts, and some water bodies can make it difficult or impossible to bring resources to consumers.

Flatlands, valleys, and rivers often help to bring productive resources to consumers.

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Geography Affects Access to Consumers Cont’d

Business that are closer to consumers will often be more successful.

Improvements in transportation, shipping and communications can lower costs and make areas formerly unreachable more accessible.

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Specialization Leads to TradeUnequal Distribution of Resources:

Regions and countries have different natural resources, human resources, capital resources and entrepreneurship.Example: Petroleum

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Specialization Leads to Trade cont’dSpecialization: Countries

specialize in producing those goods and services that they make best, based on their available resources.

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Specialization Leads to Trade cont’dTrade: To obtain other products,

countries exchange the goods they make with other countries through trade.

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Global Trade PatternsSince ancient

times, peoples have traded goods with distant neighbors.

In the Middle Ages, Constantinople, the Islamic world and West Africa were centers of trade.

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Global Trade Patterns cont’dThe Columbian Exchange shifted major

trade routes from the Mediterranean to the Atlantic.

In the 1800s, European colonial empires increased global specialization.

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Causes of GlobalizationThe recent lowering of trade barriers.Rise of Free Trade Associations:

GATT (General Agreement on Tariff and Trade, 1947)

NAFTA (North America Free Trade Association, 1990’s)

World Trade Organization; EU (European Union)

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Causes of Globalization cont’dSpread of new information

technologies.Transportation improvements.Outsourcing: When companies hire

other companies to do some of their work.

Offshoring: When companies move operations to countries with lower labor costs.

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ReviewJapan has few natural resources, but it has

one of the most highly developed economies in the world. What best explains this achievement?A. It imported manufactured goods.B. It developed technologies that can be

exchanged for the resources it needs.C. It printed more money whenever living

standards started to decline.D. It produced goods and services without

using natural resources. ANSWER: B

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ReviewWhich statement provides an important

reason why countries and regions specialize in their economic activities?A. They become more self-sufficient.B. They do not wish to compete.C. They have different productive

resources.D. They are unable to overcome trade

barriers. ANSWER: C

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ReviewCountries generally specialize in producing

particular goods. What is one result of such specialization?A. Production and consumption gradually

decrease.B. Countries depend on trade to obtain other

goods.C. Countries become less interdependent.D. Prices increase as many goods become

more scarce. ANSWER: B