© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Fundamentals of Business and Economics

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Why Study Business? Learn what it takes to run a businessLearn what it takes to run a business Build business vocabularyBuild business vocabulary Develop workplace skillsDevelop workplace skills Learn about a various occupationsLearn about a various occupations Appreciate today’s business careersAppreciate today’s business careers

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter What is a Business? Knowledge EntrepreneursFor-ProfitFor-Profit Goods Goods Services Services Job creation Job creation Tax-base Tax-base Investments Investments Goods Goods Services Services Job creation Job creation Tax-base Tax-base Investments InvestmentsNon-ProfitNon-Profit Education Education Libraries Libraries Museums Museums Social services Social services Charities Charities Education Education Libraries Libraries Museums Museums Social services Social services Charities Charities Resources Capital

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Factors of Production Natural resources: commodities that are useful inputs in their natural state (land, forests, minerals, water) Human resources: anyone who works to produce goods & services Capital: resourcesthat a business needs to produce goods and services (money, computers, machines, buildings…) Entrepreneurs: people who are innovative and willing to take the risks Knowledge: the combined talents and skills of the workforce

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Categories of Business Providing Services Producing Goods Capital Intensive Labor Intensive Tangible goods… (Manufacturing, construction, mining, agriculture) Intangible goods (finance, insurence, transportation, banking…) BOTH

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Sectors of the U.S. Economy

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Factors Effect the Growth of Service Sector More disposable incomeMore disposable income Lifestyle and demographic changesLifestyle and demographic changes Complex goods and technologiesComplex goods and technologies Need for professional adviceNeed for professional advice Low barriers to entryLow barriers to entry

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter What is Economics? Microeconomics Macroeconomics Economic System

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Economics is the study of how a society uses its scarce resources to produce and distribute goods and services. Microeconomics is the study of economic behaviour among consumers, businesses and industries who collectively determine the quantity of goods and services demanded and supplied at different prices. Macroeconomics is the study of a country’s larger economic issues, such as how firms compete, the effect of government policies and how an economy maintains and allocates its scarce resources.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Economic Systems Capitalism Mixed Capitalism SocialismCommunism Privatization Free-Market System Planned System

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Free market system Individuals are free to decide what products to produce, how to produce them, whom to sell them to and what price to sell them. Capitalism is the term most often used to describe the free market system, in which individuals own and operate the majority of businesses and where competition, supply and demand determine which goods and services are produced.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Planned System Governments control all or part of the allocation of resources and limit the freedom of choice in order to accomplish government goals.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter MicroeconomicsMicroeconomics The Forces of Supply and Demand

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Demand is the quantitiy of a good or service that consumers will buy at a given time at various prices.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Understanding Demand Advertising and Promotion Spending Consumer Income Consumer Preferences Price of Substitute Products Price of Complementary Goods Expectations About Future Prices Price Higher Lower Demand Lower Higher

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Demand Curve for Airline Tickets

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Expected Shifts in Demand Curve Consumer Income Consumer Preferences Price of Substitutes Price of Complementary Goods Advertising-Promotion Consumer Expectations Number of Buyers Variable Shifts Right When: Increases More Favorable Increases Decreases Increases Optimistic Increases Shifts Left When: Decreases Less Favorable Decreases Increases Decreases Pessimistic Decreases

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Demand Curve for Airline Tickets

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Supply is the quantity of a good or service that producers will provide ona particular date.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Understanding Supply Goods and Services Supply Price Variables Higher MoreLess Lower

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Supply Curve for Airline Tickets

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Expected Shifts in Supply Curve Costs of Inputs Number of Competitors New Technology Suppliers Expect That Future Sales Prices Variable Shifts Right When: Decreases Production Costs Will Decline Shifts Left When: Increases Production Costs Will Increase

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Supply Curve for Airline Tickets

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter How Demand and Supply Interact

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter MacroeconomicsMacroeconomics Issues for the Entire Economy

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter PureCompetition MonopolisticCompetitionOligopoly Monopoly Free-Market Competition

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Competition is the situation in which two or more suppliers of a product are rivals in the pursuit of the same customers.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Pure Competition is characterized by; a market place of multiple buyers and sellers a product or service with nearly identical features (such as wheat or cotton) low barriers to entry When these 3 conditions exist no single firm or group can influence prices and workings of free market system.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Monopoly There is only one producer of a product in a given market, thus the producer is able to determine the price.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Oligopoly A situation in which an industry is dominated by only a few producers. (e.g. Commercial aircraft manufacturing-Boing and Airbus Industries)

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Monopolistic Competition Large number of sellers (none of which dominates the market) offer products that can be distinguished from competing products in at least some small way. (e.g. Toothpaste, soft drinks, cocmetics…etc.)

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Competitive Advantage Price Speed Quality Service Innovation

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter The Role of Government Fostering competitionFostering competition Regulating industriesRegulating industries Deregulating industriesDeregulating industries Protecting stakeholders’ rightsProtecting stakeholders’ rights Contributing to economic stabilityContributing to economic stability

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Fostering Competition Antitrust Legislation ( huge companies controlled enough of the supply and distribution in their respective industries to muscle Smaller competitors out of the way. Mergers and Acquisitions

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Regulating and Deregulating Industries GovernmentRegulationFreeCompetition Fair Competition Business Ethics Working Conditions Public Safety

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Protecting Stakeholders Agency or CommissionAreas of Responsibility Consumer Product Safety Commission (CPSC) Environmental Protection Agency (EPA) Equal Employment Opportunity Commission (EEOC) Federal Communications Commission (FCC) Federal Energy Regulatory Commission (FERC) Safety of consumer products Environmental protection Employment discrimination Telephone, telegraph, radio, television Commercial airline industry Electric power and natural gas Federal Aviation Administration (FAA)

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Protecting Stakeholders Agency or CommissionAreas of Responsibility Federal Highway Administration (FHA) Federal Trade Commission (FTC) Food and Drug Administration (FDA) Interstate Commerce Commission (ICC) Securities and Exchange Commission (SEC) Vehicle safety requirements Business practices and advertising Foods, drugs, medical devices, cosmetics Interstate transportation Safety and health of workers Investors and securities markets Occupational Safety and Health Administration (OSHA)

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Contributing to Economic Stability EconomicExpansion EconomicContraction Recovery Recession BusinessCycleBusinessCycleMonetaryPolicyFiscalPolicy Nations’ money Suppy, interest rates Revenue and Spending

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Economic expansion occurs when the economy is growing and people are spending more money. Consumer purchases stimulate businesses to produce more goods and services which in turn stimulates employment. Economic contraction, occurs when such spending declines. Businesses cut back on production employees are laid of and economy as a whole laid off. If the period of downward swing is severe, the nation may entire into a recession.(2 consecutive quarters of decline in GDP) When the downward swing or recession is over the economy enters the period of recovery, which companies buy more, factories produce more, employment is high…

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter These recurrent up-and down swings are known as the business cycle.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter How a free market system monitors its economic performance???

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Major Economic Indicators Housing Starts Durable-GoodsOrders Interest Rates UnemploymentStatistics

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Measuring Price Changes InflationDeflation Consumer Price Consumer Price Index (CPI) Index (CPI) Purchasing Power

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Measuring National Output Gross National Product (GNP) Gross Domestic Product (GDP) Dollar Value YesYes Final Goods and Services YesYes Domestic Businesses NoYesForeign-OwnedBusinesses YesNo Overseas Operations

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Gross Domestic Product measures the country’s output- its production,distribution and use of goods and services- by computing the sum of all goods and services produced for final use in a market during a specified period.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Gross National Product it excludes the value of production from foreign owned within a nation’s boundaries, but it includes receipts from the overseas operations of domestic companies.

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Ten Economic Performance Indicators Prime Interest Rate Housing Starts Labor Productivity Rate Rate of Inflation Consumer Price Index Unemployment Rate Durable-Goods Orders Balance of Trade Producer Price Index Gross Domestic Product

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter U.S. Economic Growth Age of Industrialization ( ) Postwar Golden Era ( ) Turbulent Years ( ) Rise of Global Competition ( ) New Economy and Beyond (1990 to Today)

© Prentice Hall, 2005Excellence in Business, Revised Edition Chapter Challenges of Globalization Quality products and servicesQuality products and services Changing needs of customersChanging needs of customers Managing a small businessManaging a small business Globalization and workforce diversityGlobalization and workforce diversity Ethics and social responsibilityEthics and social responsibility Technology and electronic commerceTechnology and electronic commerce