Economics and Business Chapter 2 – 1 Download this book for free at: ttp://hdl.handle.net/10919/70961

Review What is the purpose of a business? Are profits a bad thing? Who are the major participants in a business? Who are the stakeholders? What external factors affect business?

Learning Objectives Describe capitalism and socialism Discuss private property rights and economic development Discuss the concept of GDP (gross domestic product). Explain fiscal and monetary policy Discuss the concept of the unemployment rate Discuss the concepts of inflation and deflation. Explain other key terms including: supply; demand; equilibrium price; monopoly; recession; depression. Download this book for free at: ttp://hdl.handle.net/10919/70961

Economics Download this book for free at: ttp://hdl.handle.net/10919/70961

Economics Resources – inputs to the firm Land Raw material Labor Capital (money) Factors of production – resources used to produce outputs Equipment

Economic Systems Planned Systems Government controls production and allocation of goods and services Communism Government owns all or most enterprises Socialism Government owns “essential” businesses

Economic Systems Free Markets Capitalism Most businesses are privately owned Competition determines allocation of goods and services Adam Smith - “Invisible hand” Private property rights Shareholders own their land and resources Private enterprise Shareholders entitled to profits

Captialism Private enterprise Owned by individuals vs. public enterprise – owned by government “Invisible Hand” - from Adam Smith’s book The Wealth of Nations. Individuals, acting in their own self-interest, will collectively make the best decisions. We vote with our dollars!

Economic Systems Mixed Economies Both private enterprise and government ownership Discussion – What enterprises should the government own? Why?

Economics Supply & Demand Demand curve – shows how much consumers are willing to purchase at every price What factors affect the demand curve? Download this book for free at: ttp://hdl.handle.net/10919/70961

Factors Affecting Demand Curve Customer preferences Number of buyers Incomes Price of substitute goods Price of complementary goods Future expectations

Economics Supply & Demand Supply curve – shows how much businesses are willing to produce at every price What factors affect the supply curve? Download this book for free at: ttp://hdl.handle.net/10919/70961

Factors Affecting Supply Curve Costs of goods Costs of labor Costs of technology Availability of suppliers Taxes Weather (how?)

Economics Supply & Demand Equilibrium price – price at which consumers are willing to purchase everything a business is willing to make No surplus No shortage Download this book for free at: ttp://hdl.handle.net/10919/70961