Ch 01 busi20 Custom

Chapter 1

Understanding the U.S. Business

System

PowerPoint Presentation by Charlie Cook

Copyright © 2005 Prentice Hall, Inc.

All rights reserved.

Key Topics

• Nature and goals of US business

• Global economic systems

• Supply and demand

• Private enterprise and competition

• Evaluating economic performance

• Status and outlook for the US economy

Copyright © 2005 Prentice Hall, Inc. All rights reserved. 1 –3

What Is “A Business”?

• An organization that provides goods and services to earn profits

Profits:

The positive difference between revenues and expenses


Functions of Business:

From society’s perspective

Choice

Opportunity

Quality of Life

Enterprise


Goals of Business:

From a business perspective

Survival

Growth

Profit

Social

Responsibility


Factors of Production used by business

Physical

Resources

Information

Resources

Entrepreneurs

Labor

Copyright © 2005 Prentice Hall, Inc. All rights reserved.

Capital

1 –7

How Are Factors of Production

Allocated?

• Planned Economy:

 An economic system in which the government owns and operates the sources of production

 Slicing the pie evenly

• Market Economy:

 An economic system in which buyers and sellers interact based on freedom of choice

 “The Invisible Hand” of self interest

 Growing the pie


Economic Systems control scale

Socialistic

Capitalistic

(Planned Economy )

Communism

(Market Economy )

Pure

Capitalism

Question: Where do the people enjoy the highest standard of living with the most equal distribution of wealth?


Socialism Toward Capitalism

• Socialism

 A planned economic system in which the government owns and operates selected sources of production

• Worldwide trend

 Worldwide trend is toward more market elements.

• Privatization:

 The process of converting government enterprises into privately owned companies

• Some notable exceptions are occurring:

 Venezuela’s President Hugo Chávez’s nationalization of Venezuela’s oil production is one notable example.


Capitalism:

A Fundamentally Market-Based Economy

Individuals Choose:

• Where to work

• What to buy

• How much to pay

Producers Choose:

• Who to hire

• What to produce

• How much to charge

Government freedoms AND controls support private ownership and encourage entrepreneurship and choice


Key Topics



• Supply and demand

• Private enterprise and competition




Supply and Demand Drive the

Capitalistic U.S. Economic System

• Supply:

 The willingness and ability of producers to offer a good or service for sale

• Law of Supply:

 Producers will supply (offer) more of a product for sale as its price rises and less as its price drops.

• How much would it take to entice YOU to make cookies for the class?


Supply and Demand Drive the U.S.

Economic System (cont’d)

• Demand:

 The willingness and ability of buyers to purchase a good or service

• Law of Demand:

 Buyers will demand

(purchase) more of a product as its price drops and less as its price increases.

• How much would you

PAY to buy cookies in class?


Key Topics



• Supply and demand

• Private enterprise and competition




The U.S. Economy is a Private

Enterprise System

Four Key Elements:

• Private Property

Rights

• Freedom of Choice

• Profits

• Competition

• Individuals are free to pursue their own interests without government restriction.

• Enough government control is in place to ensure enforcement of individual and business rights


Competition

• Competition motivates businesses to produce their products better and/or cheaper

 Making our product better

 Making ours cheaper

 Why does competition do this?

• Bonus: Competitive Strategies

 Growing the market

 Bicycles

 Vs. Cannibalistic competition

 Politics


Degrees of Competition (p16)

What kind of competitive landscape do I want if: innovating?


Table 1 –1

1 –27

Understanding Economic Performance

Key Concept: The business Cycle

KEY CONCEPTS

• Business Cycle

• Aggregate Output

• Standard of Living

• Gross Domestic Product (GDP)

• Gross National Product (GNP)


U.S. GDP and GDP per Capita


Table 1 –2

1 –30

Economic Stability:

Balancing Growth

Two related factors threaten stability:

INFLATION

UNEMPLOYMENT


Recessions and Depressions

• Recession:

 Aggregate output declines, unemployment increases

• Depression:

 Severe and longlasting recession


Managing the US Economy

• Stabilization Policy:

 Government policy designed to smooth out fluctuations in the economy

 Fiscal Policies

 Monetary Policies


Evolution of American Business

• Agricultural

• Manufacturing

• Service Industries

• Future???


Looking to the Future

Four Major Forces:

• The information revolution continues evolving.

• Technological breakthroughs will create new industries.

• Increasing globalization will create larger markets and tougher competition.

• Increasing instability in energy costs create danger and opportunity


What’s next?

• Chapter 1 overview lecture

• Chapter 1 teamwork to solve the assigned questions.

• Then we will complete a short case study involving supply and demand that will require some knowledge of chapter 1.


Chapter Review

• Describe the nature and goals of US business.

• Define the key global economic systems and describe how they control the factors of production.

• Show how demand and supply affect the distribution of resources in the US.

• Identify the elements of private enterprise and the various degrees of competition.

• Explain how to evaluate an economic system.

• Describe the key projections for the US economy.


Ch 01 busi20 Custom

Functions of Business:

From society’s perspective

Goals of Business:

From a business perspective

Economic Systems control scale

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Ch 01 busi20 Custom

Functions of Business:

From society’s perspective

Goals of Business:

From a business perspective

Economic Systems control scale

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