The Dynamics of Business and Economics Chapter One The Dynamics of Business and Economics

The Nature of Business To create profits by: Selling products – Cars, food, clothing Providing services – Healthcare, insurance

Business vs. Nonprofit Organization An 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 Business For-Profit Sector: Nonprofit 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 and Activities of Business Owners Employees Customers Other stakeholders: Investors Regulatory Agencies Activities: Management Marketing Finance

Management Hiring Issues Issues Considered by Job Seekers Before Switching Jobs Salary 32% Location 25% Opportunity for Growth 24% Chance to learn new technology 15% Perks 2% Personal contacts 2% Source: 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 Pays Average Annual Salary By Education Level $63,229 $40,478 $22,895 $16,124 Advanced Degree Bachelor’s Degree High School Diploma No Diploma

Types of Resources Used by Business Natural land, forests, etc. (not made by people) Human physical/mental abilities used by people to produce goods and services Financial funds necessary to acquire needed natural and human resources

What 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 Systems 1. 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 Systems Communism Socialism Capitalism

Comparison of Communism, Socialism, and Capitalism

Comparison of Communism, Socialism, and Capitalism

Economic Systems and Where They Occur Communism: 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 System Individuals 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 Demand Demand: Supply: 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 Price of Handmade Rugs Prices of Rugs (dollars) $800 Equilibrium Price $650 $500 $350 $200 1 2 3 4 5 6 7 Handmade Rugs

Four Competitive Environments Pure 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 Cycles Economy Contraction Expansion Time

Growth of The American Economy The Early Economy The Industrial Revolution The Manufacturing and Marketing Economies The Service & Internet-based Economy

Explore Your Career Options What 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 Exercises 1. 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 Quiz 1. 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 prices

Chapter 1 Quiz 3. The airline business in the United States is an example of what form of competition? a. pure competition b. monopolistic competition c. oligopoly d. monopoly 4. 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.