Uploaded by Koushick

1. Foundation of Business & Economics

advertisement
Foundation of Business
& Economics
From Skinner & James
What Is Business
From Skinner Brown & James
What Is Business

Business is any activity that seeks profit by
providing goods or services to others.
_________ Brown Clow

Business means the exchange of goods & services or
money for mutual benefit.
_______ Skinner

A business is an organized effort of individuals to
produce & sell goods & services for a profit.
_______ H James William
What does Business do?
From Brown
What does Business do
Business
provides necessitates such as food,
cloths, housing, medical care, transportation
as well as things that makes life easier.
It
also provides people with the opportunity
to become wealthy.
What to Study Business?
From Brown & James
What to Study Business?

Increasing dependence on others:


International Opportunities:



Standard of living increases as business helps to take great pride & independence.
Coping with Change:



Exciting Opportunities exist around the world.
The new era of business requires business leaders who know how to utilize those
opportunities.
Standard of Living:


Barter System
Coping with both predictable & unpredictable events can be easier, more efficient
& less traumatic.
Can take accurate strategies according to the changing demand.
Preventing Misconceptions.

Understanding business prevents accepting misconceptions, misinformation &
inaccurate data as truth.
What to Study Business?
From Skinner
Business Objectives
Survival & Growth & Social Responsibility
Survival is an obvious objective because other objectives can be pursued if
survival is ensured.
Growth
Business can not run if it stands still & no growth.
Market share increase, personal & individual development and increased
productivity are important growth objectives.

Social Responsibility
In recent years it has been an important objective.
Because business is considered as an important citizen in the societu like other
people.

So they must accept some responsibility for the society in areas like pollution,
eliminating discriminatory practices and energy conservation.

Business Objectives cont…..
Profit
It is the most important objective & plays an important role in business.
Profit means different things to different people. Because of their values,
attitudes & perceptions.
There are perceptions regarding profit:
Business Profit – the difference between business income (revenue) & business
expense (cost.)
Risk Taking – Business needs to take risk to earn profit.
Evaluation of Demand – Org that evaluate consumer needs and demands and
then move efficiently into a market can earn substantial profit.
Efficient Management – a major cause of business failure is inadequate mgt of
people, technology materials, & capital.
Economic Profit – Economist’s along with expenses also considers the
opportunity cost to get profit.
- Opportunity costs is the costs of choosing to use resources for a purpose
which results in sacrificing the next best alternatives for the use of those
resources.
Economic profit means what remains after both actual expense and opportunity
costs are subtracted from revenue earned.
Economics: The
Foundation of Business
From Skinner
What is Economics
Economics
is the study of rationale human behavior in trying to
meet basic wants & needs.
------------James
Economics is the study of how a society (people) chooses to use
scarce resources to produce goods & services and to distribute
them to people for consumption.
----------Skinner
This definition requires 3 concepts to understand clearly:
Resources – A nation’s resources consist of 3 broad areas:
natural, capital & labor
Goods & Services – A nation’s resources are used to produce
goods & services that will meet people needs & wants.
Allocation of both resources & Products – allocation is the
process of choosing how resources will be used to meet a
society’s needs & wants; includes the distribution of products to
consumers.
What is Economics cont…
Economics
is the study of rationale human behavior in trying to
meet basic wants & needs.
------------James
Economics is the study of how a society (people) chooses to use
scarce resources toNeeds:
produce
goods
& services
and to distribute
are
goods
& services
them to people forthat
consumption.
people must have simply
to exist.
----------Skinner
This definition requires 3 concepts to understand clearly:
Wants: are things they would
Resources – A nation’s resources consist of 3 broad areas:
like to have but do not
natural, capital &absolutely
labor
need for survival
Goods & Services – A nation’s resources are used to produce
goods & services that will meet people needs & wants.
Allocation of both resources & Products – allocation is the
process of choosing how resources will be used to meet a
society’s needs & wants; includes the distribution of products to
consumers.
Economic System
From Skinner, James & Brown
What is Economic System?
Economic System

An economic System is the accepted process by
which labor, capital & natural resources are
organized to produce & distribute goods & services
in a society
_______ Skinner

Every society must answer three questions: What
will be produced; How will be produced; for whom
will be produced. How a society answers these
economic questions determines its economic system.
_______ H James William
Types of Economic
System?
Types of Economic System


There are 3 basic types of economic systems.
These are:

The government can produce almost all the goods &
services (A Planned Economy)

Private enterprise can produce almost everything
(Pure Capitalism; found only in text)

There can be some government production & some
private production (A Mixed Economy)
Types of Economic System contd…

Planned Economy:




It means an economy in which the govt. owns the productive
resources, financial enterprises, retail stores & banks.
Here the govt. controls all or most of the factors of production &
makes all or most production decisions. E.g. a communist system
Consumers doesn’t have the freedom of choice.
Market Economy (Pure Capitalism):



Here individuals control al or most of the factors of production
and make all or most of the production decisions.
The market economy (capitalism) is also called the free-market or
free enterprise system.
Consumers have the freedom of choice.
Types of Economic System contd…

Mixed Economy:






As its mane suggests the system shares some of the features of
both the market & planned economics.
That means in mixed economy both private & govt. production
of good & services occurs.
It also allows the freedom to start a new business (Freedom of
Enterprise).
Freedom of Enterprise means that business and individuals
with the capital may enter in any legal business venture they
wish.
Profit is a reward to a business for using scarce resources
efficiently.
Competition is another important feature.
Which Economic System is
Best?
Best Economic System

‘Best’ depends on several factors.

Major factors are:
 Culture
 availability of resources
 educational level of people.

For Example:
 Capitalism is not appropriate for a nation that does not
encourage entrepreneurship.

Capitalism encourages people to be better educated & to make
their own business.
Economic Goals &
Performance
From James
Economic Goals & Performance

Several performance indicators provide key methods of measuring
how well an economy has achieved its goals & how much it has
grown.

Economic Growth – Nearly all economic system share the same
goals: Stability, full employment & growth.

Stability:

Stability is a condition in which the relationship among money,
goods & services, and labor remains relatively constant.

A major threat to stability is inflation.

Other threats are recession which decreases employment, income &
production & depression.
Economic Goals & Performance

Full Employment:

F/E means that everyone who wishes to work has a job.

It is near to impossible in reality; even in the best time.

Some worker will be unemployed for variety of reasons:


Frictional Unemployment – y who have left job but have not found another one

Seasonal unemployment – y who are unemployed due to seasonality of their work

Structural Unemployment – unemployment predicted by the very makeup of the
economy. Demand may be down across economy.

Cyclical Unemployment – includes Y are temporarily unemployed due to
downturn of business activity.
Thus realistic goal is not full employment but minimal unemployment. So
‘full employment’ has been rephrased as ‘5% unemployment’
Economic Goals & Performance

Measuring Growth:

Growth is an increase in the amount of goods & services produces by the
total economy in a given period in comparison with another period.

Economic performance can be measured with specific measurement tool.

But most useful tools are: GDP, Productivity rate, the balance of trade,
economic growth, inflation & deflation & federal deficit.

Gross Domestic Product (GDP):



For more than 50 years GNP had been used as a measuring tool.
But due to globalization GDP has now supplanted GNP as a measure of choice.
The difference between these two is significant:

GNP measures the total mkt value of all goods produces by US companies whether
inside or outside the country but GDP measures the total mkt value of all goods
produces in US.

GDP includes profits earned by foreign co’s inside US. but exclude profits earned by
US companied abroad.
Economic Goals & Performance


Productivity Rate

P/r measures efficiency by comparing how much is produced with the
resources consumed in the process

Total Productivity = Specified Output/ Total Inputs
Balance of Trade

Each country exports goods for which it receives money & imports goods for
which it pays money.

Balance of trade refers to a country's total exports minus total imports.

A positive BOT or trade surplus is favorable’ it indicates net inflow of
money.

Negative BOT or trade deficit is not favorable; it indicates a net outflow of
money.
Economic Goals & Performance


Inflation

Inflation is a rise in the general prices of goods 7 services.

One cause of inflation is the relationship between productivity & wages.

Productivity is the output per worker.

When worker’s wage increases faster than productivity, consumers have
more money on hand so the prices of goods inches up.

The most commonly cited measurement of inflation is consumer price Index
(CPI)
Deflation

It is general decline in the prices of goods & services.
Economic Goals & Performance

Federal Deficit

It is the measure of the excess of money spent over money reiced by the
federal govt.

It affects interest rates

The govt. finance is deficit by borrowing money.

The more money the govt. borrows , the less money is available for business.

To compete for these reduced funds, business must bid higher, raising the
cost of credit & compounding effects of interest rates.

Higher rates in turn make it more difficult & more expensive for business to
borrow money for new factories.

Thus federal deficits provide an important means of measuring the economy
& can affect business activity & productivity.
Download
Random flashcards
Arab people

15 Cards

Radiobiology

39 Cards

Pastoralists

20 Cards

Radioactivity

30 Cards

Create flashcards