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MGTA01H3 Study Guide - Monopolistic Competition, Monetary Policy, Planned Economy


Department
Management (MGT)
Course Code
MGTA01H3
Professor
mcckoncey

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Chapter 1
Understanding the U.S. Business System
Chapter Overview
Businesses are organizations that produce or sell goods or services to make a profit.
Each business must operate in the context of its economic system. Economic
systems differ in terms of who owns or controls the five basic factors of production:
labor, capital, entrepreneurs, physical resources, and information resources. In
planned economies, the government controls all or most factors. In market
economies, individuals and businesses control the factors of production and engage
in free exchange.
The U.S. is a market economy, based on the principles of capitalism, and propelled
by the forces of demand and supply. Demand is the willingness and ability of
buyers to purchase a good or service. Supply is the willingness and ability of
suppliers to offer goods and services for sale. Market equilibrium is the price at
which the quantity demanded and the quantity supplied is equal.
Fundamentally, the U.S. economy is a private enterprise system, incorporating four
key elements: private property rights, freedom of choice, profits, and competition.
Degrees of competition vary from perfect competition, to monopolistic
competition, to oligopoly, to monopoly.
The basic goals of the U.S. economic system are growth and stability. Performance
indicators include aggregate output, standard of living, gross domestic product, and
productivity. Growth and stability can be threatened by inflation and
unemployment, which the government influences through fiscal and monetary
policies.
Chapter Objectives
1. Define the nature of U.S. business and identify its main goals.
2. Describe different types of global economic systems according to the means
by which they control the factors of production through input and output
markets.
3. Show how demand and supply affect resource distribution in the U.S.
4. Identify the elements of private enterprise and explain the various degrees
of competition in the U.S. economic system.
5. Explain the importance of the economic environment to business and
identify the factors used to evaluate the performance of an economic
system.
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REFERENCE OUTLINE
Opening Case: Megawatt Laundering and Other Bright Ideas
I. The Concept of Business and the Concept of Profit
A. Consumer Choice and Demand
B. Opportunity and Enterprise
C. Quality of Life
II. The U.S. Economic System
A. Factors of Production
1. Labor
2. Capital
3. Entrepreneurs
4. Physical Resources
5. Information Resources
B. Types of Economic Systems
1. Planned Economies
2. Market Economies
a. Input and Output Markets
b. Capitalism
c. Mixed Market Economies
d. Socialism
III. The Economics of a Market System
A. Demand and Supply in a Market Economy
B. The Laws of Demand and Supply
1. The Demand and Supply Schedule
2. Demand and Supply Curves
3. Surpluses and Shortages
C. Private Enterprise and Competition in a Market Economy
D. Degrees of Competition
1. Perfect Competition
2. Monopolistic Competition
3. Oligopoly
4. Monopoly
IV. Understanding Economic Performance
A. Economic Growth
1. Aggregate Output and Standard of Living
2. Gross Domestic Product (GDP)
3. Productivity
B. Economic Stability
C. Managing the U.S. Economy
1. Fiscal Policies
2. Monetary Policies
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LECTURE OUTLINE
I. The Concept of Business and the Concept of Profit (Use
PowerPoint 1.4.)
A business is an organization that provides goods and services to earn
profits. Profits are the difference between a business’ revenues and
expenses.
A. Consumer Choice and Demand
In a capitalistic system like that of the United States, consumers
have freedom of choice. In turn, businesses must take into account
consumer demand in their pursuit of profits.
B. Opportunity and Enterprise
Unmet consumer demands provide promising opportunities for
potential business success.
C. Quality of Life
New forms of technology, service businesses, and international
opportunities keep production, consumption, and employment
growing indefinitely, creating a healthy business climate that
contributes directly to our quality of life.
Notes:
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II. The U.S. Economic System
An economic system is a nation’s system for allocating its resources
among its individual citizens and organizations.
A. Factors of Production (Use PowerPoint 1.5.)
A basic difference between economic systems is the way in which
they manage their resources, known as factors of production.
1. Labor. The human resource element in businesses, labor
includes the physical and intellectual contributions people
make while engaged in economic production.
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