1.

Explain the goal of a business

Businesses are established to serve the needs of consumers by owners who seek to make profits.
The people who create a business may see an opportunity to produce a product or service that
is not already being offered by other firms.
2. Where the Profits Come From
A business receives revenue when it sells its products or services. It incurs expenses from
paying its employees and when it purchases machinery or facilities. The difference between the
revenue and the expenses is the profit (or earnings) generated by the business.
3. The profits that you earn from your new business are dependent on three conditions
A. First, there needs to be a demand for the service that you offer.
B. Second, you need to attract customers
C. Third, to earn high profits, you need to keep your expenses low
4. What is the nonprofit organization
an organization that serves a specific cause and is not intended to make profits

5. Identify the resources a business uses to produce a product or service

To produce a product or service, firms rely on the following factors of production:
 Natural resources include any resources that can be used in their natural form.
 Human resources: people who are able to perform work for a business
 Capital: machinery, equipment, tools, and physical facilities used by a business
 Entrepreneurship: the creation of business ideas and the willingness to take risk; the act of
creating, organizing, and managing a business

6. Identify the key stakeholders that are involved in a business.

They are referred to as stakeholders or people who have an interest (or stake) in the business.

Five types of stakeholders are involved in a business:

 Owners: An entrepreneur who creates a business initially serves as the sole owner.
 Creditors: financial institutions or individuals who provide loans
 Employees: employees who are responsible for managing job assignments of other
employees and making key business decisions
 Suppliers: Firms commonly use materials to produce their products
 Customers: To attract customers, a firm must provide a desired product or service at a
reasonable price

7. Describe the business environment to which a firm is exposed.

 The success of a business is generally dependent on the business environment. Even after a
business is created The business environment can be segmented into the following parts:
 Social environment
 Industry environment
 Economic environment
 Global environment

8. Describe the key types of business decisions

Summarized by Keyse Abdi Jama

  Marketing is the means by which products (or services) are developed, priced, distributed,
and promoted to customers
 Marketing
 Finance
 Accounting
 information systems

9. Describe the responsibilities of firms to their customers.

A firm’s responsibility to customers goes beyond the provision of products or services. Firms
have a social responsibility when producing and selling their products, as discussed next
 Responsible Production Practices
 Responsible Sales Practices
 Role of Consumerism
 Role of the Government

10. Monopoly a firm that is the sole provider of goods or services

11. Describe the responsibilities of firms to their employees.

 Firms also have a responsibility to their employees to ensure their safety, proper treatment by
other employees, and equal opportunity, and they’re
 Employee Safety
 Equal Opportunity
 Conflict with Employee Layoffs
 Satisfying Employees

12. Describe the responsibilities of firms to their stockholders

 Firms are responsible for satisfying their owners (or stockholders). Employees may be
tempted to make decisions that satisfy their own interests rather than those of the owners

13. Describe the responsibilities of firms to their creditors.

 Firms are responsible for meeting their financial obligations to their creditors. If a firm
is experiencing financial problems and is unable to meet its obligations, it should inform its
creditors.

14. Describe the responsibilities of firms to the environment.

 The production processes that firms use, as well as the products they produce,can be
harmful to the environment. The most common abuses to the environment are
 Air Pollution
 Land Pollution

15. Describe the responsibilities of firms to their communities.

 When firms establish a base in a community, they become part of that community and rely on
it for customers and employees
 Firms have many responsibilities to employees, stockholders, creditors, the environment, and
the community that must be recognized when doing business

16. Explain how economic growth affects business performance

Summarized by Keyse Abdi Jama

  Economic growth represents the change in the general level of economic activity. Sometimes
economic growth is strong, and other times it is relatively weak.
 Strong Economic Growth
 Weak Economic Growth

17. The four different types of unemployment are as follows:

 Frictional unemployment
 Seasonal unemployment
 Cyclical unemployment
 Cyclical unemployment

18. Explain how inflation affects business performance.

 Inflation the increase in the general level of prices of products and services over a
specified period of time
 Types of Inflation
 cost-push inflation the situation when higher prices charged by firms are caused by higher
costs
 demand-pull inflation the situation when prices of products and services are pulled up
because of strong consumer demand

19. Explain how interest rates affect business performance

 Interest rates determine the cost of borrowing money. They can affect a firm’s performance by
having an impact on its expenses or on its revenue, as explained next
 Impact on a Firm’s Expenses
 Impact on a Firm’s Revenue

20. Explain how market prices are determined.

 The prices of products and supplies are influenced by demand and supply conditions.

 demand schedule for a Product a schedule that indicates the quantity of a product that would
be demanded at each possible price
 supply schedule for a Product a schedule that indicates the quantity of a product that would be
supplied (produced) by firms at each possible price

 Interaction of Demand and Supply

 Surplus the situation when the quantity supplied by firms exceeds the quantity demanded by
customers
 Shortage the situation when the quantity supplied by firms is less than the quantity demanded
by customers
 equilibrium price the price at which the quantity of a product supplied by firms equals the
quantity of the product demanded by customers

21. Factors That Influence Market Prices

1. Consumer Income
2. Consumer Preferences

Summarized by Keyse Abdi Jama

 3. Production Expenses

22. Explain how the government influences economic conditions.

 the federal government implements monetary and fiscal policies, which are
 Monetary Policy In the United States, the term money supply normally refers to demand
deposits (checking accounts), currency held by the public, and traveler’s checks. This is a
narrow definition, as there are broader measures of the
1. money supply demand deposits (checking accounts), currency held by the public, and
traveler’s checks
2. Federal Reserve System the central bank of the United States
3. monetary policy decisions on the money supply level in the United States

 Fiscal policy decisions on how the federal government should set tax rates and spend money
1. excise taxes taxes imposed by the federal government on particular products
2. federal budget deficit the situation when the amount of federal government spending exceeds
the amount of federal taxes and other revenue received by the federal government
23. How International Business Can Enhance Performance
 International business can enhance a firm’s performance by increasing its revenue or reducing
its expenses. Either result leads to higher profits for the firm. There are various motives for
international business, and each of them allows the firm to benefit in a manner that can
enhance its performance. Some of the more common motives to conduct international business
are:
 _ Attract foreign demand
 _ Capitalize on technology
 _ Use inexpensive resources
 _ Diversify internationally

24. How to Conduct International Business

 A firm may use various methods to conduct international business. The more common methods of
conducting international business that a firm should consider are:
 _ Importing
 _ Exporting
 _ Direct foreign investment (DFI)
 _ Outsourcing
 _ Strategic alliances

25. Factors That Influence the Degree of Importing

The degree to which a firm imports supplies is influenced by government trade barriers. Governments
may impose a tariff (or tax) on imported products Governments can also impose a quota on imported
products

Summarized by Keyse Abdi Jama