Chapter 1

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Transcript Chapter 1

Chapter 1

Exploring the World of Business and Economics

Learning Objectives

1. Discuss your future in the world of business.

2. Define

business

and identify potential risks and rewards.

3. Define

economics

and describe the two types of economic systems: capitalism and command economy.

4. Identify the ways to measure economic performance.

5. Examine the four different phases in the typical business cycle.

6. Outline the four types of competition.

7. Summarize the factors that affect the business environment and the challenges American businesses will encounter in the future.

Chapter 1 | Slide 2

Free Enterprise

“ …the system of business in which individuals are free to decide what to produce, how to produce it, and at what price to sell it.

Chapter 1 | Slide 3

Your Future in the Changing World of Business

• What do you want?

• Why do you want it?

• Write it down!

“Success is a journey, not just a destination.” Joe Dudley

Chapter 1 | Slide 4

Why Study Business?

• To choose a career • To be a successful employee • To start your own business • To become a better-informed consumer and investor Here are some interesting sites: www.careerbuilder.com

www.careeronestop.org

www.monster.com

www.hotjobs.yahoo.com

Chapter 1 | Slide 5

Median Yearly Income

Who Makes the Most Money?

Chapter 1 | Slide 6

“

Cultural (Workplace) Diversity

…differences among people in a workforce

“

owing to race, ethnicity, and gender.

Chapter 1 | Slide 7

Text Features

     

Learning Objectives Inside Business Margin Notes Boxed Features Spotlight End-of-Chapter Materials

Chapter 1 | Slide 8

Pathway to Success in This Course

Prepare before you go to class. Read the chapter.

Underline or highlight important concepts.

Take notes.

Apply the concepts.

Practice critical thinking.

Chapter 1 | Slide 9

Business

“ …the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs.

Chapter 1 | Slide 10

Figure 1.1: Combining Resources A business must combine all four resources effectively to be successful.

Chapter 1 | Slide 11

Ultimate Objective of Every Firm

“ …to satisfy the needs of its customers.

Chapter 1 | Slide 12

Business Profit

Sales Revenue

Business Expenses Profit (Loss) *

*Profit becomes property of its owners

Chapter 1 | Slide 13

Stakeholders

“ …all the different people or groups of people who are affected by the policies, decisions, and activities made by an organization.

Chapter 1 | Slide 14

Business Ownership Risks

Chapter 1 | Slide 15

Paths to E-Profits $

Amazon  Free shipping  Outside merchants = commission

eBay   Online auction Commission  Online telephone communications

Chapter 1 | Slide 16

Economics

“

…the study of how wealth

created and distributed

.**

is

Chapter 1 | Slide 17

Economy

“ …the way in which people deal with the creation and distribution of wealth.

Chapter 1 | Slide 18

Economic Perspectives



Microeconomics

The study of decisions made by   Individuals Businesses 

Macroeconomics

Chapter 1 | Slide 19

Factors of Production

“

…resources used to produce goods and services.

Chapter 1 | Slide 20

Types of Economic Systems



Capitalism

 Free Enterprise    Adam Smith (

Wealth of Nations

) The Invisible Hand Laissez-Faire Capitalism 

Command

Chapter 1 | Slide 21

Economic Systems Differ

• Economic systems differ depending on the answers to four basic economic questions about nation’s economic activity 1.

What and how much will be produced?

How will it be produced?

For whom will it be produced?

Who owns/controls factors of production?

Chapter 1 | Slide 22

Capitalism

“

…individuals own and operate the majority of businesses that provide goods and services.

Chapter 1 | Slide 23

Adam Smith

Wealth of Nations

(1776)

Chapter 1 | Slide 24

Invisible Hand

“

...describes how an individual’s own personal gain benefits others and a nation’s economy.

Chapter 1 | Slide 25

Figure 1.3: Assumptions for Laissez-Faire Capitalism

Chapter 1 | Slide 26

U.S. = Mixed Economy

“

…an economy that exhibits elements of both capitalism and socialism.

Chapter 1 | Slide 27

Figure 1.4: Circular Flow in Mixed Economy

Chapter 1 | Slide 28

Command Economy

“ …government decides what goods and services will be produced, how they will be produced, for whom available goods and services will be produced, and who owns and controls the major factors of production.

Chapter 1 | Slide 29

Command Economies



Socialism



Communism

Chapter 1 | Slide 30

Socialism

  Key industries owned/controlled by government Land, buildings, and raw materials may be property of state     Private ownership permitted to varying degrees People choose own occupations National goals determine what/how produced Uses taxes, rents, and wages to control distribution Copyright © Cengage Learning. All rights reserved.

Chapter 1 | Slide 31

Communism

 Karl Marx ─ Father   Advocated classless society Citizens own all economic resources  Workers contribute based on ability and receive benefits based on need  Examples ─ North Korea, China  Centralized planning ─ sets prices and wages  Emphasis on government needs ─ not consumers  No job choice ─ professionals better off than factory workers Copyright © Cengage Learning. All rights reserved.

Chapter 1 | Slide 32

Measuring Economic Performance



Economic Indicators

        Balance of Trade Corporate Profits Inflation Rate National Income New Housing Starts Prime Interest Rate Productivity Rate Unemployment Rate Copyright © Cengage Learning. All rights reserved.

Chapter 1 | Slide 33

Consumer Price Index for All Urban Consumers (CPI-U)

100 50 0 250 200 150

(1982 –84=100, unless otherwise noted)

U.S. Department of Labor, Bureau of Labor Statistics, Inflation & Prices, All Urban Consumers, http://www.bls.gov/data , Table 24. Historical Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, accessed July 2009.

Chapter 1 | Slide 34

Productivity

“

…the average level of output per worker per hour.

Chapter 1 | Slide 35

Results of Increased Productivity

Owners make more profit and/or sell products for less 2.

Chapter 1 | Slide 36

Figure 1.5: GDP in Current Dollars and in Inflation-Adjusted Dollars

Source: U.S. Bureau of Economic Analysis website at www.bea.gov

Chapter 1 | Slide 37

Table 1.2: Common Measures Used to Evaluate a Nation’s Economic Health



Balance of trade

The total value of a nation’s exports minus the total value of its imports over a specific period of time 

Corporate profits

The total amount of profits made by corporations over selected time periods 

Inflation rate

An economic statistic that tracks the increase in prices of goods and services over a period of time; usually calculated on a monthly or annual basis

(cont.)

Chapter 1 | Slide 38

Table 1.2: Common Measures Used to Evaluate a Nation’s Economic Health (cont.)



National income

The total income earned by various segments of the population, including employees, self-employed individuals, corporations, and other types of income 

New housing starts

The total number of new homes started during a specific time period 

Prime interest rate

The lowest interest rate that banks charge their most credit-worthy customers

(cont.)

Chapter 1 | Slide 39

Table 1.2: Common Measures Used to Evaluate a Nation’s Economic Health (cont.)



Productivity rate

An economic measure that tracks the increase and decrease in the average level of output per worker 

Unemployment rate

Chapter 1 | Slide 40

Business Cycle

“

…the recurrence of periods of growth and recession in a nation’s economic activity.

Chapter 1 | Slide 41

States of Business Cycle Peak

Dow Jones

Peak Recovery Recession Recession Depression 1 Depression 2 3 4 Trough 5 6 Quarters 7 8 9 10 11

Chapter 1 | Slide 42

Government Actions in Recession/Depression



Monetary Policy

Determines size of money supply and interest rates 

Fiscal Policy

Chapter 1 | Slide 43

Federal Deficit

“

…a shortfall created when the federal government spends more in a fiscal year than it receives.

Chapter 1 | Slide 44

Figure 1.6: Supply Curve and Demand Curve

Chapter 1 | Slide 45

Table 1.3: Four Different Types of Competition

The number of firms determines the degree of competition within an industry.

Chapter 1 | Slide 46

Product Differentiation

“

…the process of developing and promoting differences between one’s products and all similar products.

Chapter 1 | Slide 47

Standard of Living

“

…a loose subjective measure of how well off an individual or a society is mainly in terms of want satisfaction through goods and services.

Chapter 1 | Slide 48

Figure 1.7: Time Line of American Business

Chapter 1 | Slide 49

Environments of Business

Competitive Technological

Business

Global

Economic

Chapter 1 | Slide 50

The Challenges Ahead

How can we create a more stable economy and create new jobs?

How can we restore the public’s confidence in the banking and financial industries?

How can we regulate banks, savings and loan associations, credit unions, and other financial institutions to prevent the type of abuses that led to an economic crisis?

How can we encourage Iraq and Afghanistan to establish a democratic and free society and resolve possible conflict with North Korea and other countries throughout the world?

(cont.)

Chapter 1 | Slide 51

The Challenges Ahead (cont.)

How can we meet the challenges of managing culturally diverse workforces to address the needs of a culturally diverse marketplace?

How can we make American firms more productive and more competitive with foreign firms that have lower labor costs?

How can we preserve the benefits of competition and small businesses in our American economic system?

How can we encourage economic growth and at the same time continue to conserve natural resources and sustain our environment?

(cont.)

Chapter 1 | Slide 52

The Challenges Ahead (cont.)

How can we meet the needs of two-income families, single parents, older Americans, and the less fortunate who need health care and social programs to exist?

Chapter 1 | Slide 53

Chapter Quiz

General Motors and Toyota are both examples of a) b) c) d) e) marketing intermediaries.

manufacturers.

wholesalers.

international agents.

service businesses.

Chapter 1 | Slide 54

Chapter Quiz (cont.)

What remains after all business expenses have been deducted from sales revenues is referred to as a) b) c) d) e) cash.

excess return.

profit.

gross return.

operating revenue.

Chapter 1 | Slide 55

Chapter Quiz (cont.)

The total dollar value of all goods and services produced by all people within the boundaries of a country during a one-year period is called a) b) c) d) e) gross manufacturing output.

gross domestic product.

real gross national product.

economic product.

national production report.

Chapter 1 | Slide 56

Chapter Quiz (cont.)

__________ is an economic system in which individuals own and operate the majority of businesses that provide goods and services.

Chapter 1 | Slide 57

Chapter Quiz (cont.)

__________ is a loose subjective measure of how well off an individual or society is.

Chapter 1 | Slide 58

Chapter 1

Transcript Chapter 1

Chapter 1

…differences among people in a workforce

owing to race, ethnicity, and gender.

…the study of how wealth

created and distributed

is

…resources used to produce goods and services.

…individuals own and operate the majority of businesses that provide goods and services.

(1776)

...describes how an individual’s own personal gain benefits others and a nation’s economy.

…an economy that exhibits elements of both capitalism and socialism.

Socialism

Communism

Economic Indicators

…the average level of output per worker per hour.

…the recurrence of periods of growth and recession in a nation’s economic activity.

…a shortfall created when the federal government spends more in a fiscal year than it receives.

…the process of developing and promoting differences between one’s products and all similar products.

…a loose subjective measure of how well off an individual or a society is mainly in terms of want satisfaction through goods and services.

Competitive Technological

Business

Global

Economic

Directory