1. Copyright 2005 Prentice- Hall, Inc.

2. Part One: Understanding the Contemporary Business Environment
Understanding the U.S. Business System
Understanding the Environments of Business
Understanding Entrepreneurship and Business Ownership
Understanding the Global Context of Business
Conducting Business Ethically and Responsibly
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3. Understanding the U.S. Business System
Chapter 1
Understanding the U.S. Business System

4. Copyright 2005 Prentice- Hall, Inc.
Chapter Outline
The Meaning of “Business”
The Evolution of Business in the United States
Economic Systems Around the World
Economics of a Market System
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5. Rate of U.S. Real Gross Domestic Product Growth
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6. U.S. Consumer Price Index (Dec.- All Urban Consumers)
= 100
Source: U.S. Dept. of Labor-Bureau of Labor Statistics
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7. The Meaning of “Business”
Definitions
Business
Profits
Consumer Choice/Demand
Opportunity & Enterprise
Quality of Life
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8. Evolution of U.S. Business
Production Era
Marketing Era
Laissez-Faire & Entrepreneurship Era
Global Era
Information & Internet Era
Industrial Revolution
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9. Copyright 2005 Prentice- Hall, Inc.
Factors of Production
Labor
Capital
Entrepreneur
Physical Resources
Information Resources
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10. What is an Economic System?
A nation’s system for allocating resources among citizens.
Assumes resources are scarce thus requiring allocation.
Market is mechanism for exchange between Buyer/Seller
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11. Types of Economic Systems
Planned Economies
Socialism
(Mixed Market)
Communism
Capitalism vs. Market
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12. Circular Flow of Economics
Supply
Output
(Goods & Services)
Demand
Input
(Factors of Production)
Demand
Supply
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13. Copyright 2005 Prentice- Hall, Inc.
Communism
Planned Economic System
Government Owns
All Production Facilities
All Citizens Are Employees of Government
All Capital
All Economic Decisions Controlled By Government
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14. Mixed Market Economies
“Pure” Planned
“Pure” Market
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15. Privatization vs. Socialism
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16. Copyright 2005 Prentice- Hall, Inc.
Capitalism
Private Ownership of Factors of Production
Economic Decisions Made by Owners
Freedom of Decisions/Choices
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17. Copyright 2005 Prentice- Hall, Inc.
Supply & Demand
Demand- Comes From Buyers
As Price Drops Buyers Purchase More
Supply- Producers’ Willingness
As Price Increase Producers Offer More
Buyers & Suppliers Work Towards Equilibrium = Profit Maximization
Surplus vs. Shortage
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18. Pizza Supply At Given Price
High S
Low
High
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19. Pizza Demand At Given Price
High D
Low
High
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20. Equilibrium (Market Price)
High
Surplus D S
Market Equilibrium
Shortage
Low
High
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21. Copyright 2005 Prentice- Hall, Inc.
Private Enterprise
Private Property
Freedom of Choice
Profits
Competition
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22. Degrees of Competition
Monopolistic Competition
Oligopoly
One
Many
Monopoly
Perfect Competition
Sellers
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23. Perfect/Pure Competition
Competition- 2+ Businesses Vie For Same Resources/Customers
Condition- No Single Firm Dominant
Principles
Buyers View Products As Similar
Buyers/Sellers Know Each Others’ Prices/Costs
Easy To Enter/Leave Marketplace
Prices Set By Supply/Demand & Accepted by Sellers/Buyers
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24. Monopolistic Competition
Many Buyers
Fewer Sellers Than Perfect/Pure Competition
Buyer Perception of Product/Brand Differentiation
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25. Copyright 2005 Prentice- Hall, Inc.
Oligopoly
Few Large Sellers
Market Entry Difficult- High Capital Investment
Sellers Control Strategies
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26. Copyright 2005 Prentice- Hall, Inc.
Monopoly
Characteristics
Only One Producer
Controls Industry Pricing
Natural Monopoly
One Producer
Can Efficiently Supply All Goods/Services
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27. Copyright 2005 Prentice- Hall, Inc.
U.S. Monopoly Laws
Sherman Antitrust Act (1890)
Clayton Act (1914)
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