THE DYNAMICS OF
BUSINESS AND ECONOMICS
CHAPTER 1
THE NATURE OF BUSINESS
• To create profits by:
• Selling products – Cars, food, clothing
• Providing services – Healthcare, insurance
• Tell me more services -
BUSINESS VS. NONPROFIT
ORGANIZATION
• Business
• An individual or
organization that tries
to earn a profit by
providing products
that satisfy people’s
needs, ex. IBM, CocaCola
• Nonprofit
Organization
• Provides products,
especially services,
for some purpose
other than profits, ex.
The Salvation Army,
4300 American
colleges &
universities.
THE GOALS OF BUSINESS
• For-Profit Sector:
• PROFIT – the
difference between
what it costs to make
and sell a product
and what the
customer pays for it.
• Nonprofit Sector:
• GOALS – may
provide goods or
services but not for
the purpose of
earning profits
THE PEOPLE AND
ACTIVITIES OF BUSINESS
People:
Owners
Employees
Customers
Other stakeholders:
Investors
Regulatory Agencies
Activities:
Management
Marketing
Finance
WHY STUDY BUSINESS?
• It provides employment for most people.
• It provides the majority of products needed to
survive and enjoy life.
• It will help prepare you for your future career.
• It will help you become a better informed consumer
and member of society.
• You get to have me as a teacher!
EDUCATION PAYS
MEDIAN WEEKLY SALARY & UNEMPLOYMENT RATE
BY EDUCATION LEVEL
ECONOMICS
• Economics is the study of how scarce resources are
used to produce outputs—goods and services, in
other words the study of how individuals and groups
of individuals strive to satisfy their needs and wants
by making decisions within a social system
TYPES OF RESOURCES
USED BY BUSINESS
• Natural
• land, forests, etc. (not made by people)
• Human
• physical/mental abilities used by people
produce goods and services
• Financial
• funds necessary to acquire needed
natural and human resources
to
WHAT IS AN ECONOMIC SYSTEM?
• The way a society distributes its resources to
produce goods and services.
• Addresses the issue of how to fulfill unlimited
demand with limited supply of resources. (Scarcity)
ECONOMIC SYSTEMS ATTEMPT TO
ANSWERS 3 QUESTIONS
• What should be produced?
• How should it be produced?
• Who should share in what is produced?
TYPES OF ECONOMIC
SYSTEMS
• Communism
• Socialism
• Capitalism
• Mixed
COMPARISON OF COMMUNISM,
SOCIALISM, AND CAPITALISM
Communism
Socialism
Capitalism
Business
Ownership
Most businesses are
owned and operated
by the government.
The government owns and
operates major industries;
individuals own small
businesses.
Individuals own and
operate all businesses.
Competition
None. The
government owns and
operates everything.
Restricted in major
industries; encouraged in
small business.
Encouraged by market
forces and
government
regulations.
Profits
Excess income goes to
the government.
Profits earned by small
businesses may be
reinvested in the business;
profits from governmentowned industries go to the
government.
Individuals are free to
keep profits and use
them as they wish.
COMPARISON OF COMMUNISM,
SOCIALISM, AND CAPITALISM
Communism
Socialism
Capitalism
Product
availability
and price
Consumers have a
limited choice of
goods and services;
prices are usually
high.
Consumers have
some choice of
goods and
services; prices
are determined by
supply and
demand.
Consumers have a
wide choice of
goods and
services; prices
are determined by
supply and
demand.
Employment
options
Little choice in
choosing a career;
most people work
for governmentowned industries or
farms.
Some choice of
careers; many
people work in
government jobs.
Unlimited choice
of careers.
ECONOMIC SYSTEMS AND
WHERE THEY OCCUR
Communism:
Socialism:
Capitalism:
China
Sweden
United States
North Korea
Germany
Canada
Cuba
France
Australia
Viet Nam
Israel
Japan
Laos
Denmark
Brazil
MIXED ECONOMIES
• Most countries of the world have
elements of more than one economic
system.
THE FREE-ENTERPRISE SYSTEM
• Individuals can own property and
pass it on to their heirs.
• People and businesses can earn
profits and use them as they wish.
• Individuals and businesses can
determine how their businesses
operate.
• Individuals can choose their career,
where to live, and what to buy.
SUPPLY AND DEMAND
• Supply:
• The number of
products business
is willing to sell at
different prices at
a specific time.
• An upward
sloping curve on a
graph.
• Demand:
• The number of
goods and
services that
customers are
willing to buy at
different prices at
a specific time.
• A downward
sloping curve on a
graph.
EQUILIBRIUM PRICE
OF HANDMADE RUGS
Prices of Rugs
(dollars)
$800
Equilibrium
Price
$650
$500
$350
$200
0
1
2
3
5
6
4
Handmade Rugs
7
EQUILIBRIUM PRICE
• The price at which the number of products that
businesses are willing to supply equals the amount
of products that consumers are willing to buy at a
specific moment in time
FOUR COMPETITIVE
ENVIRONMENTS
Pure Competition
Many small businesses sell
one standardized product.
Monopolistic
competition
There are fewer businesses than in a
pure-competition system, and the
differences between the goods they
sell are small.
Oligopoly
Very few businesses sell a product;
the product they sell can be similar or
different.
Monopoly
There is only one producer of a
product in a given market.
BUSINESS CYCLE
• The rise and fall of the economic activity
over time (Draw)
• Prosperity – is a peak of economic activity
• Recession – economic activity slows, Decline in
GDP for 2
quarters
• Depression – Deep recession that affects the
entire economy & lasts for several years
• Recovery – Economic activity picks up and
consumer confidence rises, which leads to more
spending
• Contractions vs. Expansions
• Inflation – Rise in the price of goods/services
ECONOMIC INDICATORS
• What is an economic indicator?
• Why do they matter?
• What are some?
GROWTH OF THE
AMERICAN ECONOMY
The Early
Economy
The Industrial
Revolution
The Manufacturing
and
Marketing
Economies
The Service &
Internet-based
Economy
EXPLORE YOUR CAREER
OPTIONS
What are some of the changes in the work
environment that contribute to the
transformation of the traditional career
track?
FAST FACT:
Enterprise Leasing is one of the nation’s largest
employers of college graduates, hiring over
8000 graduates in 2011