BUSN 70 Chapter Notes - Chapter 1: Economic System, You Learn, Gross Domestic Product
5 May 2018
School
Department
Course
Professor
The Nature of Business
Business - tries to earn a profit by providing products that satisfy
people's needs
i.
Products - tangible and intangible characteristics that provide
satisfaction and benefits
ii.
The Goal of Business
To earn a Profit - difference between what it costs to make and sell
a product and what a customer pays for it
i.
Businesses have the right to keep and use these profits legally, and
must earn them responsibly
ii.
Nonprofit Organizations- do not have the fundamental purpose of
earning profits, but can provide goods and services and engage in
fundraising
iii.
Earning a profit
Management Skills, Financial Resources, Ethical Manner
1)
Produce quality products efficiently and be socially
responsible in dealing with customers, employers etc.
2)
iv.
Stakeholders- groups with a stake in a given business
v.
a.
The People and Activities of Business
Management -- Management and Employees
Coordinating employees actions to achieve the firm's goals,
organizing people to work efficiently, and motivating them to
achieve the business's goals
1)
i.
Marketing -- Marketing and Consumers
The focus of marketing is to satisfy customers
1)
All the activities designed to provide goods and services that
satisfy consumers' needs and wants and react to changes in
the markets
2)
ii.
Finance -- Owners and Finance
Primary responsibility of owners to provide financial
resources for the business
1)
Refers to all activities concerned with obtaining money and
using it effectively
2)
iii.
b.
Why Study Business?
Helps develop skills and acquire knowledge to prepare for the
future
i.
Understand business activitiesii.
c.
I)
The Economic Foundations of Business
Economics - is the study of how resources are distributed for the
production of goods and services within a social system
i.
Factors of Production
Natural resources - Land, forests, minerals, water etc.i.
Human resources - labor, refer to the physical and mental abilities
of people
ii.
Financial Resources - capital, the funds used to acquire the natural
and human resources to provide products
iii.
a.
Economic Systems
Describes how a particular society distributes its resources to
produce goods and services
i.
How to fulfill an unlimited demand for goods and services in a world
with a limited supply of resources
What goods and services, and how much of each, will satisfy
consumers' needs?
1)
How will goods and services be produced, who will produce
them, and with what resources will they be produced?
2)
How are goods and services to be distributed to consumers?3)
ii.
Communism
People without regard to class, own all the nation's resources 1)
Everyone contributes according to ability and receives
benefits according to need
2)
Good on paper, bad in practice. Poor standard of living,
corruption
3)
iii.
Socialism
Economic system in which the government owns and
operates basic industries, but individuals own most industries
1)
Central planning determines what basic goods and services
are produced, and how they are distributed
2)
Citizens depend on government for most goods and services3)
iv.
Capitalism (free-enterprise)
Individuals own and operate a majority of businesses that
provide goods and services
1)
Competition, supply and demand determine which goods and
services are produced
2)
Pure Capitalism
Free-market system- all economic decisions are made
without government intervention
a)
3)
Modified Capitalism
Government intervenes and regulates business to some
extent
a)
4)
v.
Mixed Economies
Having elements from more than one economic system1)
Countries such as China and Russia have used state capitalism
to advance their economies
2)
State Capitalism tries to integrate the powers of the state
with the advantages of Capitalism
3)
vi.
b.
The Free Enterprise System
Provides an opportunity for businesses to succeed or fail based on
market demand
i.
Efficiency is key to a successful businessii.
Basic rights that must exist for the right to own property
Individuals must have the right to own property and to pass
this property on to their heirs
1)
Individuals and businesses must have the right to earn profits
and to use the profits as they wish
2)
Individuals and businesses must have the right to make
decisions that determine the way the business operates
3)
Individuals must have the right to choose a career4)
iii.
c.
The Forces of Supply and Demand
Demand - the number of goods and services that consumers are
willing to buy at different prices
i.
Supply - the number of products that businesses are willing to sell at
different prices
ii.
Equilibrium Point- the number of products that businesses are
willing to supply equals the amount of products that consumers
want to buy
iii.
d.
The Nature of Competition
Competition - the rivalry among businesses for consumer's dollarsi.
Forces producers to offer the best product at the most reasonable
price
ii.
Pure Competition - exists when there are many small businesses
selling one standardized product
iii.
Monopolized Competition - exists when there are fewer businesses
than in a pure competition environment and the differences among
the goods they sell is small
iv.
Oligopoly - exists when there are very few businesses selling a
product
Individual businesses have control of their products' price
because each business supplies a large portion of the
products
1)
v.
Monopoly - when there is one business providing a product in a
given market
Governments generally allow this because it is too expensive
to enter into competition
1)
vi.
e.
Economic Cycles of Productivity
Expansion and Contraction
Expansion occurs when an economy is growing and people
are spending more money
1)
Rapid expansion leads to inflation, a continuing rising of
prices
2)
Contraction occurs when spending declines, can lead to
recession, a decline in production, employment and income.
3)
Unemployment is measured as the percentage of the
population that wants to work but is unable to find jobs
4)
Depression - a point in which unemployment is very high5)
i.
Measuring the Economy
Gross Domestic Product - the sum of all goods and services
produced in a country during a year
Does not include profits from companies' overseas
operations, but includes foreign companies' profits
made in that country
a)
Budget Deficit- when a nation spends more than it takes
in from taxes
b)
1)
ii.
f.
II)
The American Economy
A Brief History of the American Economy
The Early Economy
Natives - trading and hunter/gatherers1)
Colonists - agricultural economy, self sufficient 2)
i.
The Industrial Revolution
Workers become more efficient, productivity increased, more
goods available at lower prices
1)
ii.
The Manufacturing and Marketing Economies
US transitions into a manufacturing economy - make goods
and providing services rather than producing agricultural
products
1)
iii.
The Service and New Digital Economy
Post-WW II people have more money and more time1)
Beginning of paying others to perform services 2)
Transition to service economy3)
iv.
a.
The Role of the Entrepreneur
An individual who risks his or her wealth, time and effort to develop
for profit an innovative product or wat of doing something
i.
Free-enterprise system provides the conditions for entrepreneurs to
succeed
ii.
b.
The Role of Government in the American Economy
American economic system is modified capitalism
Government regulates business to preserve competition and
protect consumers and employees
1)
Multiple government agencies try to reduce disruptive effects
caused by economic fluctuation and reduce unemployment
2)
i.
c.
The Role of Ethics and Social Responsibility in Business
Business ethics generally refers to the standards and principles used
by society to define appropriate and inappropriate conduct in the
place
i.
By promoting socially responsibility, businesses can monitor
changes and trends in society's values
ii.
d.
III)
Can You Learn Business in a Classroom?
YESi.
IV)
Saturday, May 5, 2018
3:57 PM
The Nature of Business
Business - tries to earn a profit by providing products that satisfy
people's needs
i.
Products - tangible and intangible characteristics that provide
satisfaction and benefits
ii.
The Goal of Business
To earn a Profit - difference between what it costs to make and sell
a product and what a customer pays for it
i.
Businesses have the right to keep and use these profits legally, and
must earn them responsibly
ii.
Nonprofit Organizations- do not have the fundamental purpose of
earning profits, but can provide goods and services and engage in
fundraising
iii.
Earning a profit
Management Skills, Financial Resources, Ethical Manner1)
Produce quality products efficiently and be socially
responsible in dealing with customers, employers etc.
2)
iv.
Stakeholders- groups with a stake in a given businessv.
a.
The People and Activities of Business
Management -- Management and Employees
Coordinating employees actions to achieve the firm's goals,
organizing people to work efficiently, and motivating them to
achieve the business's goals
1)
i.
Marketing -- Marketing and Consumers
The focus of marketing is to satisfy customers1)
All the activities designed to provide goods and services that
satisfy consumers' needs and wants and react to changes in
the markets
2)
ii.
Finance -- Owners and Finance
Primary responsibility of owners to provide financial
resources for the business
1)
Refers to all activities concerned with obtaining money and
using it effectively
2)
iii.
b.
Why Study Business?
Helps develop skills and acquire knowledge to prepare for the
future
i.
Understand business activities
ii.
c.
I)
The Economic Foundations of Business
Economics - is the study of how resources are distributed for the
production of goods and services within a social system
i.
Factors of Production
Natural resources - Land, forests, minerals, water etc.
i.
Human resources - labor, refer to the physical and mental abilities
of people
ii.
Financial Resources - capital, the funds used to acquire the natural
and human resources to provide products
iii.
a.
Economic Systems
Describes how a particular society distributes its resources to
produce goods and services
i.
How to fulfill an unlimited demand for goods and services in a world
with a limited supply of resources
What goods and services, and how much of each, will satisfy
consumers' needs?
1)
How will goods and services be produced, who will produce
them, and with what resources will they be produced?
2)
How are goods and services to be distributed to consumers?
3)
ii.
Communism
People without regard to class, own all the nation's resources
1)
Everyone contributes according to ability and receives
benefits according to need
2)
Good on paper, bad in practice. Poor standard of living,
corruption
3)
iii.
Socialism
Economic system in which the government owns and
operates basic industries, but individuals own most industries
1)
Central planning determines what basic goods and services
are produced, and how they are distributed
2)
Citizens depend on government for most goods and services
3)
iv.
Capitalism (free-enterprise)
Individuals own and operate a majority of businesses that
provide goods and services
1)
Competition, supply and demand determine which goods and
services are produced
2)
Pure Capitalism
Free-market system- all economic decisions are made
without government intervention
a)
3)
Modified Capitalism
Government intervenes and regulates business to some
extent
a)
4)
v.
Mixed Economies
Having elements from more than one economic system1)
Countries such as China and Russia have used state capitalism
to advance their economies
2)
State Capitalism tries to integrate the powers of the state
with the advantages of Capitalism
3)
vi.
b.
The Free Enterprise System
Provides an opportunity for businesses to succeed or fail based on
market demand
i.
Efficiency is key to a successful businessii.
Basic rights that must exist for the right to own property
Individuals must have the right to own property and to pass
this property on to their heirs
1)
Individuals and businesses must have the right to earn profits
and to use the profits as they wish
2)
Individuals and businesses must have the right to make
decisions that determine the way the business operates
3)
Individuals must have the right to choose a career4)
iii.
c.
The Forces of Supply and Demand
Demand - the number of goods and services that consumers are
willing to buy at different prices
i.
Supply - the number of products that businesses are willing to sell at
different prices
ii.
Equilibrium Point- the number of products that businesses are
willing to supply equals the amount of products that consumers
want to buy
iii.
d.
The Nature of Competition
Competition - the rivalry among businesses for consumer's dollarsi.
Forces producers to offer the best product at the most reasonable
price
ii.
Pure Competition - exists when there are many small businesses
selling one standardized product
iii.
Monopolized Competition - exists when there are fewer businesses
than in a pure competition environment and the differences among
the goods they sell is small
iv.
Oligopoly - exists when there are very few businesses selling a
product
Individual businesses have control of their products' price
because each business supplies a large portion of the
products
1)
v.
Monopoly - when there is one business providing a product in a
given market
Governments generally allow this because it is too expensive
to enter into competition
1)
vi.
e.
Economic Cycles of Productivity
Expansion and Contraction
Expansion occurs when an economy is growing and people
are spending more money
1)
Rapid expansion leads to inflation, a continuing rising of
prices
2)
Contraction occurs when spending declines, can lead to
recession, a decline in production, employment and income.
3)
Unemployment is measured as the percentage of the
population that wants to work but is unable to find jobs
4)
Depression - a point in which unemployment is very high5)
i.
Measuring the Economy
Gross Domestic Product - the sum of all goods and services
produced in a country during a year
Does not include profits from companies' overseas
operations, but includes foreign companies' profits
made in that country
a)
Budget Deficit- when a nation spends more than it takes
in from taxes
b)
1)
ii.
f.
II)
The American Economy
A Brief History of the American Economy
The Early Economy
Natives - trading and hunter/gatherers1)
Colonists - agricultural economy, self sufficient 2)
i.
The Industrial Revolution
Workers become more efficient, productivity increased, more
goods available at lower prices
1)
ii.
The Manufacturing and Marketing Economies
US transitions into a manufacturing economy - make goods
and providing services rather than producing agricultural
products
1)
iii.
The Service and New Digital Economy
Post-WW II people have more money and more time1)
Beginning of paying others to perform services 2)
Transition to service economy3)
iv.
a.
The Role of the Entrepreneur
An individual who risks his or her wealth, time and effort to develop
for profit an innovative product or wat of doing something
i.
Free-enterprise system provides the conditions for entrepreneurs to
succeed
ii.
b.
The Role of Government in the American Economy
American economic system is modified capitalism
Government regulates business to preserve competition and
protect consumers and employees
1)
Multiple government agencies try to reduce disruptive effects
caused by economic fluctuation and reduce unemployment
2)
i.
c.
The Role of Ethics and Social Responsibility in Business
Business ethics generally refers to the standards and principles used
by society to define appropriate and inappropriate conduct in the
place
i.
By promoting socially responsibility, businesses can monitor
changes and trends in society's values
ii.
d.
III)
Can You Learn Business in a Classroom?
YESi.
IV)
Saturday, May 5, 2018 3:57 PM
Document Summary
Business - tries to earn a profit by providing products that satisfy people"s needs. Products - tangible and intangible characteristics that provide satisfaction and benefits a. The goal of business i. ii. iii. iv. To earn a profit - difference between what it costs to make and sell a product and what a customer pays for it. Businesses have the right to keep and use these profits legally, and must earn them responsibly. Nonprofit organizations- do not have the fundamental purpose of earning profits, but can provide goods and services and engage in fundraising. Produce quality products efficiently and be socially responsible in dealing with customers, employers etc. v. Stakeholders- groups with a stake in a given business b. Coordinating employees actions to achieve the firm"s goals, organizing people to work efficiently, and motivating them to achieve the business"s goals ii. The focus of marketing is to satisfy customers.
