1. Chapters 2 and 11 Fundamentals of Business
economics
Chapters 2 and 11
Fundamentals of Business

2. What is economics? Study of how society chooses to use its resources
Societies have to deal with scarcity
Scarcity: shortage of resources
We do not have unlimited amounts of anything

3. Factors of Production
All of the components necessary to produce a society’s goods and services
“economic resources”
Examples:
Wheat that grows
Tractor to harvest the wheat
Labor that turns it into flour

4. 4 Types of Economic Resources
Natural Resources
Raw materials
Basis of many economies
Renewable and nonrenewable
Human Resources
Labor
Knowledge, effort, and skills of people
Skilled or unskilled
Physical or intellectual
Unions

5. 4 Types of Economic Resources
Capital Resources
Not money
Used to produce goods and services
Buildings, materials, and equipment
Factors of distribution
Entrepreneurial Resources
Improve use of resources
Create or produce new uses
Technologies

6. Production All societies must make choices What should be produced?
What and how many
How should it be produced?
Methods, how many people, and quality
Who should share in what is produced?
Income = what you can afford to buy

7. Economic Systems Determines how resources will be used
Provide a minimum standard of living
Three types of systems
Market
Command
Mixed

8. Market Economy
Economic decisions are based off the laws of supply and demand
Price is very important in a market economy
Minimal government control
Primary role: remove obstacles of supply and demand

9. Market Economy Demand: Supply: Equilibrium price:
Quantity of goods and services consumers are willing and able to purchase
Supply:
Quantity of goods and services producers are willing to provide
Equilibrium price:
Price in which the amount supplied equals the amount demanded

10. Command Economy Central authority makes the key economic decisions
Government
Guarantees equal standard of living
Job, place to live, and health care provided
Few choices
Fixed prices

11. Command Economy Two types: Communist Socialist
All decisions and resources for the general good
Socialist
Major resources
Some private businesses

12. Mixed Economy Combination of market and command economies
Government takes care of needs
Defense and education
Private sector takes care of wants
Cars, technology, and food
Some government regulation in private sector

13. Role of Government in Business
What role does a ref have in a wrestling match?
What aspects of being a ref are like government’s role in business?
Safety
Quality
Protection
Business and public
Unfair, unethical, and unsafe practices

14. Government as Regulator
4 Areas of Regulation in the Economy
Protecting competition
Protecting business agreements
Protecting creative properties
Regulating the production process - pollution

15. Protecting Competition
Monopoly
Oligopoly
No competition  no choices for consumer
Antitrust laws: allow government to break up monopolies, regulate them, or take them over
FTC: sets standards for honest advertising
Video

16. Protecting Business Agreements
Enforcing contracts
Rental agreements
Car insurance policies
Warranties
Student loans
Breach of contract: when one party fails to live up to the terms of a contract

17. Protecting Creative Properties
Must be legally registered
Copyright
Art work (plays, photos, music, books, etc)
70 years after life of artist
Patent
Inventions
Trademark
Brand name, characteristic, or combination
Video

18. Government as a Provider
Some things you need but can’t buy
Government provides goods and services to the public
Who decides?
Where does the money come from?

19. Providing Public Services
For the good of society
Examples:
Welfare
Unemployment
Military
Police and fire departments
Parks
Libraries
Mail
Public transportation

20. Providing Work Largest employer in the country Over 3,000,000 people
Military
Government officials
Mail carriers
Teachers
Unemployment
Welfare
Job training
Social security

21. Assisting Business Largest consumer of goods and services
Construction
Military needs
Offices
Loans
Small Business Administration (SBA)
Financial trouble
Subsidies: payments the government gives to businesses to make up for losses (foreign competition)
Tax incentives
Responsible behavior