1. Business 100 Introduction to Business Dr. Kathy Broneck

2. Review Overall of Businesses Factors of Production Business Environments

3. Preview Economics

4. Economics: Create Wealth Use Scarce Resources to Produce Goods & Services To Distribute Among Competing Groups/Individuals Micro v. Macro Resource Development Increase resources Create conditions for bettering the use of resources

5. $ What is produced? $ What amount is produced? $ What is the method of output distribution? $ What is the rate of economic growth? Adapted from: Adapted from: Edwin Mansfield Economics (New York: W.W. Norton, 1976), p.8 Economic Systems

6. Economic Theories Thomas Malthus (Early 1800s) “Dismal Science” Too many people, not enough food or resources Adam Smith (1776) Freedom is vital “Invisible Hand” Self-directed gain leads to social and economic benefits

7. Three Economic Systems Communism Socialism Capitalism (Highly Controlled ) (Little Control ) Mixed

8. Free-Market Capitalism Private Property Profit/Ownership Freedom of Competition Freedom of Choice

9. General Economic Terms Supply How much of a product manufacturers are willing to sell Different prices Different times Demand How much of a product buyers are willing to buy Different prices Different times

10. Supply Curve Quantity(S) High High Low Price(P) S

11. Demand Curve Price(P) Quantity(D) High Low D

12. Quantity High Low Price Equilibrium Point Market Equilibrium SD Surplus Shortage

13. Free-Market Competition Sellers OneMany Monopoly Oligopoly MonopolisticCompetition Perfect Competition

14. Many sellers to buyers Sellers do not control prices Produce IDENTICAL products

15. Monopolistic Competition Large number of sellers produce similar products Hotdogs Toothpaste Fast food Colleges Buyers perceive products as being different Branding Advertising Packaging

16. Oligopolies Few sellers dominate the market Prices and products from different companies tend to be the same Use of product differentiation Tobacco Automobiles Soft drinks

17. Monopolies Only one seller for the product Diamonds Utilities Microsoft (always battling this) Seller dictates price Illegal in the US Exception: Government regulated public utilities

18. Limits of Free-Markets Inequality of Wealth Causes National & World Tension Greed Compromises Ethics Potential Environmental Damage Limitations Push Country towards Socialism = Government Regulation

19. Socialism Private & Public Ownership Some Choices are Limited Creates Social Equality Reduces Individual Incentive Brain Drain

20. Industrialized Nations’ Tax Rates Source: Parade Magazine, Apr. 12, 1998.

21. Communism Public Ownership Productive Capacity Capital Central Planning/Controlled Economy Managers = Mandatory Party Membership

22. Types of Economies Free-Market Economy Market decides what is produced Capitalism Command Economy Government decides what is produced Socialism Communism Mixed Economy Some government, some free-market

23. US Economy: How to Look at It Key Economic Indicators Gross Domestic Product (GDP) Unemployment Rate Price Indexes Consumer Price Index(CPI) Producer Price Index(PPI) Productivity

24. SOURCE: SOURCE: U.S. Bureau of Labor Statistics Consumer Price Index

25. US Economy: How to Look at It Business Cycles Recession Depression Recovery Stabilization Fiscal Policy Monetary Policy National Debt

26. Source: Office of Management & Budget, 2002 Where the Gov’t Gets its Money

27. What Federal Dollars Buy (2002) Human Resources. – 63% Other 5.7% Defense - 17.5% Interest 7.9% Physical Resources 5.9% Source: Office of Management & Budget

28. The debt has reached $8.5 trillion+ National Debt Clock- http://www.brillig.com/debt_clock/ http://www.brillig.com/debt_clock/ Cost of War (debt) http://www.costofwar.com The National Debt