CHAPTER 1 Understanding The Contemporary Business Environment

The Meaning of Business Business: Organization that provides goods or services that are then sold to earn profits. Profits: The difference between a business's revenues and expenses – is what encourages people to open and expand businesses.

The Evolution of Business Industrial Revolution: in the middle of the eighteenth century - change in production characterized by a shift to the factory system, mass production, and the specialization of labor. - The factory system reduced duplication of equipment and allowed firms to buy raw materials at better prices by buying in large lots.

The Evolution of Business Entrepreneurial Era: Starting/Opening up of businesses due to improvements in transportation and the liberalization of markets. Production Era: Period during the early 20th century in which business focused primarily on improving productivity and manufacturing efficiency. Marketing Era: After World War II, idea that a business must focus on identifying and satisfying consumer wants in order to be profitable.

The Evolution of Business The Global Era: Continuation of technological advances in production, computer technology, information systems, and communications capabilities enable businesses to expand into foreign markets. The Information Era: Characterized mostly by the internet – expanded rapidly after 2005.

Factors of Production Labor: Physical and mental capabilities of people as they contribute to economic production. Capital: Funds needed to create and operate a business enterprise. Entrepreneur: is an individual who accepts the risks and opportunities entailed in creating and operating a new business

Factors of Production Physical resources: Tangible items organizations use in the conduct of their businesses; include natural resources, raw materials offices, production facilities, computers etc. Information Resources: Data and other information used by businesses.

The Economics of a Market System Market: Mechanism for exchange between buyers and sellers of a particular good or service. Demand: The willingness and ability of buyers to purchase a good or a service. Supply: The willingness and ability of producers to offer a good or a service for sale.

The Economics of a Market System Law of Demand: Principle that buyers will purchase (demand) more of a product as its price drops and less as its price increases. Law of Supply: Principle that producers will offer (supply) more of product for sale as its price rises and less as its price drops. Surplus: Situation in which quantity supplied exceeds quantity demanded. Shortage: Situation in which quantity demanded exceeds quantity supplied.

The Economics of a Market System Private Enterprise system: one that allows individuals to pursue their own interests with minimal government restriction. Competition: occurs when two or more businesses vie for the same resources or customers. Perfect Competition: Market or Industry characterized by numerous small firms producing an identical product.

The Economics of a Market System Monopolistic Competition: Market or Industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors. Oligopoly: Market or Industry characterized by a generally large sellers with the power to influence the prices of their products. Monopoly: Market or Industry, in which there is only one producer, which can therefore set the prices of its products.