©2007 Prentice Hall 1-1 The Fundamentals of Business and Economics Chapter 1

Chapter 1 Objectives After studying this chapter, you will be able to: Define what a business is and identify four vital social and economic contributions that businesses make. Differentiate between goods-producing and service businesses, and list five factors contributing to the increase in the number of service businesses. Differentiate between a free-market system and a planned system. ©2007 Prentice Hall 1-2

Chapter 1 Objectives, cont. Explain how supply and demand interact to affect price. Discuss the four major economic roles of the U.S. government. Explain how a free-market system monitors its economic performance. Identify five challenges you will face as a business professional in the coming years. ©2007 Prentice Hall 1-3

How this Course Will Help Your Career Understand what it takes to be an entrepreneur Learn the lingo Develop soft skills Learn about career opportunities Understand the role business plays in society See the business world through the eyes of a business rather than a consumer ©2007 Prentice Hall 1-4

What is Business? ©2007 Prentice Hall 1-5 For-ProfitNon-Profit Money Motive Social Service Ethical Conduct Social Responsibility EfficiencyEffectiveness

Web 2.0 Definition Activities:  Blogging  Podcasting  Wikis  Newsfeeds  Tagging  Virtual Worlds ©2007 Prentice Hall 1-6

Types of Business Goods Producing Business Service Business ©2007 Prentice Hall 1-7 Capital IntensiveLabor Intensive

Why is the Service Sector Growing? More disposable income. Changing demographic patterns and lifestyle trends. Support complex goods and new technology. Professional advice. ©2007 Prentice Hall 1-8

Economics ©2007 Prentice Hall 1-9 Economics MacroMicro

Factors of Production Natural Resources Human Resources Capital Entreprene urship Knowledge ©2007 Prentice Hall 1-10

Economic System ©2007 Prentice Hall 1-11 GoodsServices Human Resources Natural Resources CapitalKnowledgeEntrepreneurs Factors of Production Scarce Resources

Types of Economic Systems ©2007 Prentice Hall 1-12 Capitalism Mixed Capitalism SocialismCommunism Privatization Free-Market System Planned System

Supply and Demand ©2007 Prentice Hall Pairs of blue jeans (quantity) Price $35 $30 $25 $20 $15 $10 Not enough demand D Right price makes supply & demand equal E Not enough supply S

Free-Market Competition ©2007 Prentice Hall 1-14

Competitive Advantage Price Speed Quality Service Innovation ©2007 Prentice Hall 1-15

Role of the Government Foster competition Regulate and Deregulate industries Protect Stakeholder and Stockholder’s rights Contribute to economic stability ©2007 Prentice Hall 1-16

Economic Indicators Interest Rates Unemployment Rates Housing Data Industrial Productivity ©2007 Prentice Hall 1-17

Inflation vs. Deflation ©2007 Prentice Hall 1-18 InflationDeflation Consumer Price Index (CPI) Purchasing Power

Producer Price Index (PPI) Gross Domestic Product (GDP) Gross National Product (GNP) Globalization ©2007 Prentice Hall 1-19

Challenges of Globalization Products and Services Managing Small Business (Entrepreneurship) Globalization and Workforce Diversity Ethics and Social Responsibility Technology and Electronic Commerce ©2007 Prentice Hall 1-20