Chapter 1
The World of
Business &
Economics
Business Definition
“…a business is the organized effort of a
group of individuals that strives for a
profit by providing goods and services
that satisfy the needs and wants of its
customers.”
Another Definition
Business is goal-directed behavior aimed
at getting and using productive resources
to buy, make, trade, and sell goods and
services that can be sold at a profit.
What is the Ultimate Objective of
Every Firm?
Factors of Production
Natural
Resources
“…resources
used to
produce
goods and
services.”
Goods
Labor
Capital
Entrepreneur
Entrepreneurship
and
Services
How Does an Economy
Work?
The way nations answer the following
basic questions defines their economic
systems.
Which goods and services will be
produced?
How will they be produced?
For whom will they be produced?
Who owns and controls the major
factors of production?
Economic Systems (Fig. 1.1)
Command Economy
Communism
Socialism
High government control
Free Market
Mixed Economies
Capitalism
Low government control
Demand Schedule for
Ice-Cream Cones
Price
$0.00
0.50
1.00
1.50
2.00
2.50
3.00
Quantity
12
10
8
6
4
2
0
Demand Curve for
Ice-Cream Cones
Supply Schedule for
Ice-Cream Cones
Price
$0.50
Quantity
0
1.00
1
1.50
2
2.00
3
2.50
4
3.00
5
Supply Curve for
Ice Cream Cones
Markets Not in Equilibrium (pp. 4-5)
Price of
Ice Cream
Cone
Supply
$2.00
1.50
Shortage
(a) Excess Demand
0
4
Quantity
supplied
7
10
Quantity
demanded
Demand
Quantity of
Ice Cream
Cones
SUPPLY AND DEMAND
10
Markets Not in Equilibrium
Price of
Ice Cream
Cone
(b) Excess Supply
Supply
Surplus
$2.50
2.00
Demand
0
4
Quantity
demanded
7
10
Quantity
supplied
Quantity of
Ice Cream
Cones
SUPPLY AND DEMAND
Four Different
Types of Competition (p.5)
Business Cycle (Fig. 1.4)
Refers to the recurrence of periods of
irregular ups and downs in a nation’s
economic activity.
Read Chapter 2
Small Business and
Business Ownership
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