The Dynamics of
Business and
Economics
Chapter 1
©Steve Allen/ Getty Images
©
© 2020
2020 McGraw-Hill
McGraw-Hill Education
Education Limited
Limited
The Nature of Business
Businesses try to earn profits by providing
products that satisfy people’s needs.
Products include:
• Tangible goods
• Automobile, smartphone, pair of jeans
• Service
• Dry cleaning, doctor’s visit, movie
• Idea
• Accountants and attorneys provide ideas for solving problems
2
© 2020 McGraw-Hill Education Limited
The Nature of Business
The Goal of a Business is to earn a profit
Nonprofit organizations
• Do not share the purpose of earning profits
• May provide goods or services
• Engage in fund-raising
• Engage in management, marketing, and finance to
reach goals
Stakeholders need to be satisfied!
3
© 2020 McGraw-Hill Education Limited
The Nature of Business
The People and Activities of Business
• Management
• Involves the functions of planning, organizing, leading, and
controlling
• Marketing
• Focus of all marketing activities is satisfying customers
• Finance
• Refers to all activities concerned with obtaining money and
using it effectively
4
© 2020 McGraw-Hill Education Limited
The Economic Foundations of Business
What is economics?
Resources
• Natural resources
• Human resources (also called labor)
• Financial resources (also called capital)
• Intangible resources
5
© 2020 McGraw-Hill Education Limited
The Economic Foundations of Business
Economic Systems
• Communism
• Socialism
• Capitalism (or free enterprise)
• Pure capitalism
• Modified capitalism
• Mixed economies
6
© 2020 McGraw-Hill Education Limited
The Economic Foundations of Business
The Free-Enterprise System
• Basic individual and business rights must exist
in order for free enterprise to work
• Right to own property
• Right to earn profits and use them as one wishes
• Right to determine business operations
• Right to choose a career, where to live or locate a business,
what goods/services to purchase, and more
7
© 2020 McGraw-Hill Education Limited
The Economic Foundations of Business
The Forces of Supply and Demand
• Demand
• Supply
• Equilibrium price
8
© 2020 McGraw-Hill Education Limited
The Economic Foundations of Business 6
The Nature of Competition
• Competition
Four types of competitive environments:
• Pure competition
• Monopolistic competition
• Oligopoly
• Monopoly
9
© 2020 McGraw-Hill Education Limited
The Economic Foundations of Business
Economic Cycles and Productivity
• Economic Expansion
• Inflation
• Economic Contraction
• Recession
• Unemployment
• Depression
• Measuring the Economy
• Gross domestic product (GDP)
• Budget deficit
10
© 2020 McGraw-Hill Education Limited
Table 1.7 How Do We Evaluate Our Nation’s
Economy?
Unit of Measure
Description
Trade balance
The difference between exports and imports. If the balance is positive, it is
called a trade surplus. When the balance is negative it is called a trade deficit
and is generally viewed as unhealthy for the economy.
Consumer price index
Measures changes in prices of goods and services purchased for consumption
by typical urban households.
Per capita income
Indicates the income level of “average” Canadians. Useful in determining how
much “average” consumers spend and how much money Canadians are
earning.
Unemployment rate
Indicates how many working age Canadians are not working who otherwise
want to work.
Inflation
Monitors price increases in consumer goods and services over specified
periods of time. Used to determine if costs of goods and services are rising
faster than worker compensation over time.
Worker productivity
The amount of goods and services produced for each hour worked.
© 2020 McGraw-Hill Education Limited
11
The Canadian Economy
The Role of Government in the Canadian
Economy
• Best described as a mixed economy
• Regulate business to preserve competition and
protect consumers and employees through laws and
regulations
• Intervene occasionally to regulate economy and spur
growth
12
© 2020 McGraw-Hill Education Limited
The Canadian Economy
The Role of the Entrepreneur
• Risk their wealth, time, and effort to develop a product
or service they can sell for profit
• Let the free-enterprise system help them to succeed
• Change business practices through new technology
and innovative management techniques
13
© 2020 McGraw-Hill Education Limited
The Canadian Economy
The Role of Ethics and Social Responsibility in
Business
• Promote public confidence
• Foster business ethics
• Encourage socially responsible behaviour
• Push for diversity in workforce
• Enhance reputation and drive profits
14
© 2020 McGraw-Hill Education Limited
Can You Learn Business in a Classroom?
Absolutely!
To be successful in business you need:
• Knowledge
• Skills
• Experience
• Good judgment
15
© 2020 McGraw-Hill Education Limited