1. Economics and Business
Chapter 2 – 1
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2. Review What is the purpose of a business? Are profits a bad thing?
Who are the major participants in a business?
Who are the stakeholders?
What external factors affect business?

3. Learning Objectives Describe capitalism and socialism
Discuss private property rights and economic development
Discuss the concept of GDP (gross domestic product).
Explain fiscal and monetary policy
Discuss the concept of the unemployment rate
Discuss the concepts of inflation and deflation.
Explain other key terms including: supply; demand; equilibrium price; monopoly; recession; depression.
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4. Economics
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5. Economics Resources – inputs to the firm
Land
Raw material
Labor
Capital (money)
Factors of production – resources used to produce outputs
Equipment

6. Economic Systems Planned Systems
Government controls production and allocation of goods and services
Communism
Government owns all or most enterprises
Socialism
Government owns “essential” businesses

7. Economic Systems Free Markets
Capitalism
Most businesses are privately owned
Competition determines allocation of goods and services
Adam Smith - “Invisible hand”
Private property rights
Shareholders own their land and resources
Private enterprise
Shareholders entitled to profits

8. Captialism Private enterprise
Owned by individuals
vs. public enterprise – owned by government
“Invisible Hand” - from Adam Smith’s book The Wealth of Nations.
Individuals, acting in their own self-interest, will collectively make the best decisions.
We vote with our dollars!

9. Economic Systems Mixed Economies
Both private enterprise and government ownership
Discussion – What enterprises should the government own? Why?

10. Economics Supply & Demand
Demand curve – shows how much consumers are willing to purchase at every price
What factors affect the demand curve?
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11. Factors Affecting Demand Curve
Customer preferences
Number of buyers
Incomes
Price of substitute goods
Price of complementary goods
Future expectations

12. Economics Supply & Demand
Supply curve – shows how much businesses are willing to produce at every price
What factors affect the supply curve?
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13. Factors Affecting Supply Curve
Costs of goods
Costs of labor
Costs of technology
Availability of suppliers
Taxes
Weather (how?)

14. Economics Supply & Demand
Equilibrium price – price at which consumers are willing to purchase everything a business is willing to make
No surplus
No shortage
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