Lesson 1 Exploring the World of Business and Economics

Learning Objectives LO 1-1 Summarize the four benefits of studying business LO 1-2 Given an example of a business, explain how that business benefits society LO 1-3 Given an example of a business, explain potential societal concerns about that business

Learning Objectives LO 1-4 Given a factor in the business environment, discuss how that factor might affect businesses and consumers LO 1-5 Given an example of an economy, classify as one of the four types of economic systems

Learning Objectives LO 1-6 Given the type of competition for an industry, identify the key strategic considerations for companies in that industry LO 1-7 Given an example of a pricing change, identify the resulting effects on supply and demand

Learning Objectives LO 1-8 Given an example of an economic indicator, explain whether it is a positive or negative indication of economic conditions

Why Study Business? Helps in choosing a career Assists in improving career Makes a better-informed consumer and investor Aids in becoming a more influential community member Leads to more fulfilling jobs, higher incomes, and stronger communities LO 1-1

Understanding Business Basics Seeking profit by offering products to satisfy society’s needs Products - Goods or services Profit - Sales revenue is greater than expenses LO 1-2

Benefits of Business to Society Offering valuable products Providing employment Improving quality of life LO 1-2

Concerns About the Impact of Business on Society Health and safety risks Environmental damage Social disruption LO 1-3

Factors Affecting the Business Environment Economic Consider size and health of the economy when making business decisions Competitive High level of competition forces a company to focus on following strategies Cost cutting Development of new products Increased marketing and branding efforts LO 1-4

Factors Affecting the Business Environment Global Increases competition and changes the skills needed for a successful career Technology Leads to new products and can lower the prices of existing ones Social Influences kind of products companies offer and way of operating businesses LO 1-4

Economic Systems Helps examine how each system will affect opportunities to make income and create wealth Affects choices as a consumer and the prices paid LO 1-5

Types of Economic Systems Capitalism Individuals own and operate the majority of businesses, with limited government intervention Mixed economy Land and business is privately owned, with various levels of government intervention LO 1-5

Types of Economic Systems Socialism Key industries and resources are owned by the state, with some private ownership of land and businesses Communism Property and profits are owned by the state LO 1-5

Degrees of Competition and Supply and Demand Perfect competition: Market situation in which no buyer or seller is powerful enough to affect the price of a product Prices are decided by the fundamental economic concept of supply and demand Equilibrium: Price at which supply equals demand Companies must pay attention to minimize production costs to gain profits LO 1-6, 1-7

Degrees of Competition and Supply and Demand Monopolistic competition: Market situation with sellers requiring to differentiate their products Oligopoly: Market situation with few sellers Sellers match competitors price and win customers through product differentiation LO 1-6, 1-7

Degrees of Competition and Supply and Demand Monopoly: Market situation with one seller and significant barriers to entry for competitors Pricing in some monopoly industries are regulated by government Gas, water, and electricity utilities Requires massive investment to enter businesses Success depends on achieving a meaningful share of the market LO 1-6, 1-7

Measuring Economic Performance Health of nation’s economy affects: Individuals Finance needed for education, acquiring jobs, interests paid on credit card purchases Businesses Plans for hiring, investing, launching Government Level of taxes collected, fiscal policy, monetary policy LO 1-8

Business Cycle Fluctuations while graphing the economic growth rate for a country Expansion - Growing economy Contraction - Shrinking economy Recession - Economy shrinking two quarters consecutively LO 1-8

Gross Domestic Product (GDP) Total dollar value of goods and services produced by people within the boundaries of a country during a 1-year period Used to measure whether an economy has grown or shrunk Growing GDP represents good things Increasing employment and increasing incomes LO 1-8

Economic Indicators Unemployment rate: Percentage of a nation’s labor force unemployed at any time Calculated as the number of unemployed divided by the number of people currently in the labor force Inflation: Tracks the rise in prices of goods and services over a period of time Steady rate around 2% is regarded as a stable economy LO 1-8

Exploring Careers in Business Choose a career Improve your career Become a more informed consumer and investor Become a more influential member of your community LO 1-8