Chapter 1: The Foundations of Business
a. eco. turmoil in housing & mortgage -> banks stopped making loans -> $700 bil.
Wall St. bailout
b. unemployment incr.
1.2 Getting Down to Business
A. business- any activity that provides goods/services to consumers to make profit
B. nonprofit org.
a. ex: Boys and Girls Clubs
C. participants & areas of business
a. participants = owners (invest $), employees, customers
b. management- planning for org., staffing, directing, & controlling co.’s resources to
achieve its goals
c. operations- converts resources -> goods/services
d. marketing- everything co. does to identify customer’s needs & design prod. to
meet those needs
e. accounting- measuring, summarizing, communicating financial & managerial info
i. fin. accountants- prepare fin. stmts -> assess co.’s strength (both int. &
ii. managerial acc.- info. for internal use only
f. finance- planning for, obtaining, managing co.’s funds
1.3 What is economics?
A. economics- study of production, distribution, and consumption of goods & services
B. resources- inputs used to produce outputs a. factors of production
i. land/natural resources
C. circular flow model
D. 3 fundamental ?s of econ.
a. what goods/services to produce
b. how to produce goods/services
c. who should get goods/services
E. economic system- means by which society makes decisions about allocating resources
a. planned system- gov. control
i. communism- gov. owns all/most enterprises
1. ex: North Korea, Cuba ii. socialism- industries providing essential services are gov. owned, others
are privately owned
1. ex: France, Sweden
b. free market system (capitalism)- most businesses owned & operated by indiv.
i. ex: Japan (based on it)
c. mixed market eco.- relies on both markets & gov. to allocate resources
i. privatization- conversion of businesses previously gov. owned -> priv.
ii. ex: US eco.
d. Adam Smith’s Wealth of Nations
i. “invisible hand” of competition
1.4 Perfect Competition Supply & Demand
A. perfect competition
a. many consumers buying standardized products from many sellers
b. sellers are price takers
B. demand- quantity buyers willing to purchase @ various prices C. supply- quantity of products sellers willing to sell @ various prices
D. supply & demand graph intersection = equilibrium point
1.5 Monopolistic Competition, Oligopoly, & Monopoly