In Pursuit of Prosperity: The Fundamentals of Business and Economics

Prentice Hall, 2007

Excellence in Business, 3e

Chapter 1 - 1

This Course Will Help Your Career

Learn what it takes to run a business
Build a business vocabulary

Develop workplace skills

Learn about various occupations Appreciate business careers today

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Excellence in Business, 3e

Chapter 1 - 2

What is a Business?
For-Profit Money motive Not-for-profit Social service

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Categories of Business
Goods-producing Services

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What is Economics?
Microeconomics Macroeconomics Economic system

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Factors of Production
Resources Capital Entrepreneurs Knowledge

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Types of Economic Systems

Free-market system Capitalism Mixed capitalism Planned system Socialism Communism
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Microeconomics
The Forces of Supply and Demand

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Chapter 1 - 8

How Does a Free-Market System Work?

Supply and demand
Competition

Government intervention

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Chapter 1 - 9

Understanding Demand
Consumer income Consumer preferences Price of substitute goods Price of complementary goods Advertising and promotion spending Expectations about future prices
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Demand Curve for Airline Tickets

A demand curve is the relationship between the amount of product that buyers will purchase at various prices. Demand curves typically slope downward.
When airlines reduce ticket prices, demand for airline tickets rises.

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Chapter 1 - 11

Expected Shifts in Demand Curve

Variable
Consumer Income Consumer Preferences Price of Substitutes Price of Complementary Goods Advertising-Promotion Consumer Expectations Number of Buyers
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Shifts Right When:

Increases More Favorable Increases Decreases Increases Optimistic Increases
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Shifts Left When:

Decreases Less Favorable Decreases Increases Decreases Pessimistic Decreases
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Understanding Supply
Goods and services Supply Price

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Chapter 1 - 13

Supply Curve for Airline Tickets

A supply curve is the relationship between prices and quantities sellers are willing to offer for sale, regardless of demand. Supply curves typically slope upward.
When ticket prices rise, quantity supplied also increases.

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Excellence in Business, 3e

Chapter 1 - 14

Expected Shifts in Supply Curve

Variable
Costs of Inputs

Shifts Right When:

Decreases

Shifts Left When:

Increases

Number of Competitors

Decreases
Decreases Production Costs Will Decline
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Increases
Increases Production Costs Will Increase
Chapter 1 - 15

New Technology Suppliers Expect That Future Sales Prices

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How Demand and Supply Interact

High price reduces demand
Low price reduces supply

Right price balances supply and

demand

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Excellence in Business, 3e

Chapter 1 - 16

Macroeconomics
Issues for the Entire Economy

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Free-Market Competition
Pure competition Monopoly Oligopoly Monopolistic competition

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Competitive Advantage
Price Speed Quality Service Innovation

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The Role of Government

Promotes competition
Regulates industries

Deregulates industries
Protects rights of stakeholders Contributes to economic stability

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Fostering Competition
Antitrust legislation
Mergers and acquisitions

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Regulating and Deregulating Industries

Fair competition

Business ethics
Working conditions

Public safety
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Protecting Stakeholders
Consumer Product Safety Commission (CPSC)
Environmental Protection Agency (EPA) Equal Opportunity Employment Commission

(EEOC)
Federal Communications Commission (FCC) Federal Aviation Administration (FAA)

Federal Energy Regulation Commission (FERC)

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Excellence in Business, 3e

Chapter 1 - 23

Protecting Stakeholders
Federal Highway Administration (FHA)
Federal Trade Commission (FTC) Food and Drug Administration (FDA)

Interstate Commerce Commission (ICC)

Occupational Safety and Health Administration (OSHA)

Securities and Exchange Commission (SEC)

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Chapter 1 - 24

Contributing to Economic Stability

Business cycle Economic expansion Economic contraction Fiscal policy Revenue and spending Monetary policy Interest rates
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Monitoring Major Economic Indicators

Interest rates Housing starts Unemployment statistics Durable-goods orders

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Measuring Price Changes

Purchasing power Inflation Deflation Consumer Price Index (CPI) Producer Price Index (PPI)

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Measuring National Output

Dollar Value
Final Goods and Services Domestic Businesses Foreign-Owned Businesses Overseas Operations
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Gross Domestic Product (GDP)

Yes Yes Yes No
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Gross National Product (GNP)

Yes Yes No Yes
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Ten Economic Performance Indicators

Prime interest rate Housing starts Unemployment rate Durable-goods orders Labor productivity rate
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Balance of trade Inflation rate Consumer price index Gross domestic product Producer price index
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Excellence in Business, 3e

History of U.S. Economic Growth

Age of Industrialization (1900-1944)
Postwar Golden Era (1945-1969) Turbulent Years (1970-1979) Rise of Global Competition (1980-1989) New Economy and Beyond (1990 to Today)

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Excellence in Business, 3e

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Challenges of Globalization
Products and services Managing a small business Globalization and workforce diversity Ethics and social responsibility Technology and electronic commerce

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