chapter  1
33 Pages

Understanding the global economy

ByJoseph P. Daniels, David D. VanHoose

The process of globalization and its impact on societies and peoples everywhere are topics of great importance. The KOF Swiss Economic Institution combines economic, political, and social measures in an attempt to measure the degree of globalization worldwide and to rank individual nations according to their degree of globalization. This chapter analyses and focuses on the economic components of globalization. It concentrates on economic integration, which refers to the extent and strength of commercial linkages—international transactions in goods and services and exchanges of financial assets—among national economies. Economic integration is arguably the most important and most contentious element of globalization. The chapter introduces the concepts of supply and demand. Next authors build on these concepts by considering consumer surplus and producer surplus. Consumer and producer surplus are concepts that economists use to gauge the benefits that consumers and producers receive from the existence of a market price.