Chapter One The Dynamics of Business and Economics

Chapter OneThe Dynamics ofBusiness and EconomicsThe Nature of BusinessTo create profits by:Selling products – Cars, food, clothingProviding services – Healthcare, insuranceBusiness vs. NonprofitOrganizationBusinessAn individual or organization that tries to earn a profit by providing products that satisfy people’s needs, ex. IBM, Coca-Cola.Nonprofit Organization Provides products, especially services, for some purpose other than profits, ex. The Salvation Army, 4300 American colleges & universities.The Goals of BusinessFor-Profit Sector:PROFIT – the difference between what it costs to make and sell a product and what the customer pays for it.Nonprofit Sector:GOALS – may provide goods or services but not for the purpose of earning profits.The People andActivities of BusinessPeople: Owners Employees Customers Other stakeholders: Investors Regulatory Agencies Activities: Management Marketing FinanceManagement Hiring Issues32%SalaryLocationOpportunity for GrowthChance to learn new technologyPerksPersonal contacts25%24%15%2%2%Issues Considered by Job Seekers Before Switching JobsSource: Survey of 970 job seekers by CareerEngine.com, New York in Kemba J. Dunham, “The Jungle,” Wall Street Journal, July 3, 2001, p. B6.Why Study Business?It provides employment for most people.It provides the majority of products needed to survive and enjoy life.It will help prepare you for your future career.It will help you become a better informed consumer and member of society.Education PaysAverage Annual Salary By Education LevelAdvanced DegreeBachelor’sDegreeHigh SchoolDiplomaNoDiploma$63,229$40,478$22,895$16,124Types of ResourcesUsed by BusinessNaturalland, forests, etc. (not made by people)Humanphysical/mental abilities used by people to produce goods and servicesFinancialfunds necessary to acquire needed natural and human resourcesWhat Is An Economic System?The way a society distributes its resources to produce goods and services.Addresses the issue of how to fulfill unlimited demand with limited supply of resources.Basic Questions to Be Asked of Economic Systems1. What goods and services and what quantity will satisfy the needs of the consumer?2. How will the goods and services be produced? Who will produce them and with what resources?3. How are the goods and services to be distributed to the consumer?Types of Economic SystemsCommunismSocialismCapitalismComparison of Communism, Socialism, and CapitalismComparison of Communism, Socialism, and CapitalismEconomic Systems and Where They OccurCommunism: Socialism: Capitalism: China Sweden United States North Korea India Canada Cuba France Australia Viet Nam Israel Japan Mixed Economies Most countries of the world have elements of more than one economic system.The Free-Enterprise SystemIndividuals can own property and pass it on to their heirs.People and businesses can earn profits and use them as they wish.Individuals and businesses can determine how their businesses operate.Individuals can choose their career, where to live, and what to buy.Supply and DemandSupply:The number of products business is willing to sell at different prices at a specific time.An upward sloping curve on a graph.Demand:The number of goods and services that customers are willing to buy at different prices at a specific time.A downward sloping curve on a graph.Equilibrium Priceof Handmade Rugs$800$650$500$350$20001234567Prices of Rugs (dollars)Handmade RugsEquilibriumPriceFour Competitive EnvironmentsPure Competition Many small businesses sell one standardized product.Monopolistic There are fewer businesses than in a competition pure-competition system, and the differences between the goods they sell are small.Oligopoly Very few businesses sell a product; the product they sell can be similar or different.Monopoly There is only one producer of a product in a given market.Economic CyclesExpansionContractionTimeEconomyGrowth of The American EconomyThe EarlyEconomyThe IndustrialRevolutionThe Manufacturing andMarketing EconomiesThe Service &Internet-based EconomyExplore Your Career OptionsWhat are some of the changes in the work environment that contribute to the transformation of the traditional career track?FAST FACT: Enterprise Leasing is one of the nation’s largest employers of college graduates, hiring over 5000 graduates a year. Additional Discussion Questions and Exercises1. Which economic system provides for central government planning to determine what goods and services will satisfy needs of citizens?2. How did the Industrial Revolution affect the agricultural economy in the United States?3. What characteristics of modern American entrepreneurs are similar to those of early American entrepreneurs?Chapter 1 Quiz1. The activities designed to provide goods and services that satisfy customers are knowm as: a. management. b. marketing. c. finance. d. gross national product.2. Which of the following best describes inflation? a. a continuing decrease in product prices b. a moderate decrease in demand c. a continuing increase in unemployment d. a continuing increase in pricesChapter 1 Quiz3. The airline business in the United States is an example of what form of competition? a. pure competition b. monopolistic competition c. oligopoly d. monopoly4. The quantity of products and services that consumers are willing to buy at different prices at a specific time is a. supply. b. demand. c. competition. d. gross national product.