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 • Nonprofit
• An individual or Organization
organization that tries • Provides products,
to earn a profit by especially services,
providing products for some purpose
that satisfy people’s other than profits, ex.
needs, ex. IBM, Coca- The Salvation Army,
Cola 4300 American
colleges &
universities.
 THE GOALS OF BUSINESS

• For-Profit Sector: • Nonprofit Sector:

• PROFIT – the • GOALS – may
difference between provide goods or
what it costs to make services but not for
and sell a product the purpose of
and what the earning profits
customer pays for it.
 THE PEOPLE AND
ACTIVITIES OF BUSINESS
People: Activities:
Owners Management
Employees Marketing
Customers Finance
Other stakeholders:
Investors
Regulatory Agencies
 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 to
produce goods and services
• Financial
• funds necessary to acquire needed
natural and human resources
 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 Most businesses are The government owns and Individuals own and
Ownership owned and operated operates major industries; operate all businesses.
by the government. individuals own small
businesses.

Competition None. The Restricted in major Encouraged by market

government owns and industries; encouraged in
operates everything. small business.
Profits Excess income goes to Profits earned by small
the government. businesses may be
reinvested in the business;
profits from government-
owned industries go to the
government.
forces and
government
regulations.
Individuals are free to
keep profits and use
them as they wish.
 COMPARISON OF COMMUNISM,
SOCIALISM, AND CAPITALISM
Communism Socialism Capitalism
Product Consumers have a Consumers have Consumers have a
availability limited choice of some choice of wide choice of
and price goods and services; goods and goods and
prices are usually services; prices services; prices
high. are determined by are determined by
supply and supply and
demand. demand.

Employment Little choice in Some choice of Unlimited choice

options choosing a career; careers; many of careers.
most people work people work in
for government- government jobs.
owned industries or
farms.
 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: • Demand:
• The number of • The number of
products business goods and
is willing to sell at services that
different prices at customers are
a specific time. willing to buy at
• An upward different prices at
sloping curve on a a specific time.
graph. • A downward
sloping curve on a
graph.
 EQUILIBRIUM PRICE
OF HANDMADE RUGS
Prices of Rugs
(dollars)
$800

$650 Equilibrium
Price
$500

$350

$200

0
1 2 3 4 5 6 7
Handmade Rugs
 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 There are fewer businesses than in a
competition 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 The Industrial The Manufacturing The Service &

Economy Revolution and Internet-based
Marketing Economy
Economies
 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