S is approximately 300 million the musician might not

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Unformatted text preview: th a new style of music. With a population of only the United States as a potential customer base (the population of the U.S. is approximately 300 million), the musician might not yet have enough actual customers to make it Chapter 2 Economic Systems and the Global Economy worth producing and offering to sell this particular, unique, and narrowly defined music. However, if the musician can draw on the population of the world (population 6.4 billion), then the musician might be able to find enough people who are willing to buy this particular new type of music. As we move toward a world economy, we see a greater variety within almost every category of goods you can think of: a greater variety of music to listen to, books to read, types of television shows to watch, and so on. Today, the greater variety of goods you see in your world is an effect of globalization. THINK ABOUT IT A greater variety of clubs can usually be found in large high schools than in small high schools. Does this difference have anything to do with the issue of globalization we discussed in the feature? Explain. 02 (030-053) EMC Chap 02 11/17/05 4:14 PM Page 45 Advancing Technology In the past, innovations such as the internal combustion engine, steamship, telephone, and telegraph led to increased trade between people in different countries. All of these inventions led to lower transportation or communication costs, and lower costs mean fewer barriers to trade. The cost of a three-minute telephone call from New York to London in 1930 was $250. In 1960, it was $60.42; in 1980 it was $6.32; and in 2000 it was 40 cents. Today, it is even less. As the costs of communicating continue to fall, in some sense the obstacle of physical distance (to trade) is overcome. Businesspeople in the United States, for example, can more cheaply talk with businesspeople in China. EXAMPLE: What was the cost of a computer in 1960, one comparable to the desktop computer that many people today have on their desk at home? The answer is $1.8 million. (Yes, you read that right — $1.8 million.) That computer was $199,983 in 1970, $27,938 in 1980, $7,275 in 1990, and only $1,000 in 2000. People today not only use computers for their work, but to communicate with others via the Internet. This computer and Internet technology make it possible for people to communicate with others over long distances, thus increasing the probability that people will trade with each other. EXAMPLE: Policy Changes Governments have the power to slow down the process of globalization, if they want. Suppose that two countries, A and B, have free economic relations with each other. Neither country prevents its citizens from going to the other country to live and work. Neither country hampers its citizens from investing in the other country. Then, one day, for whatever reason, the government of country A decides to limit its citizens from traveling to and investing in country B. In other words, the government of country A decides to close its political and eco...
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