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PPT6-Understanding Economics and How It Affects Business
PPT6-Understanding Economics and How It Affects Business
PPT6-Understanding Economics and How It Affects Business
Week 6
Thank You
• Macroeconomics -- Concentrates on the
operation of a nation’s economy as a whole.
• Microeconomics -- Concentrates on the
behavior of people and organizations in
markets for particular products or services.
RESOURCE
DEVELOPMENT
• Resource Development -- The study of how
to increase resources and create conditions that
will make better use of them.
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MORE PROFITS FROM the
GREEN REVOLUTION
(Thinking Green)
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• Farmers are growing more
corn and other crops to use for
biofuels.
• What can you do to help lower
carbon emissions?
THOMAS MALTHUS and
the DISMAL SCIENCE
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call economics “The Dismal Science.”
• Neo-Malthusians believe there are too many
people in the world and believe the answer
is radical birth control.
POPULATION as a
RESOURCE
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growth for their employees and communities
as well as for themselves.
ADAM SMITH the
FATHER of ECONOMICS
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the profits of a business is
essential.
• People will work hard if they
believe they will be rewarded.
The INVISIBLE HAND
THEORY
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leads to social and economic benefits for the
whole community.
UNDERSTANDING the
INVISIBLE HAND THEORY
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• When the farmer produces
more, there is plenty of food
for the community.
• The farmer helped his
employees and his community
while helping himself.
CAPITALISM
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3. The right to freedom of choice.
ROOSEVELT’S FOUR
ADDITIONAL RIGHTS
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3. Freedom from want.
4. Freedom from fear.
FREE MARKETS
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• Price tells companies how much of a product
they should produce. If something is wanted
but hard to get, the price will rise until more
products are available.
CIRCULAR FLOW MODEL
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PRICING
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SUPPLY CURVES
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DEMAND CURVES
Limitations:
• People may start to let greed drive
them.
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SOCIALISM
• Social equality
• Free education
• Free healthcare
• Free childcare
• Longer vacations
• Shorter work weeks
• Generous sick leave
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The NEGATIVES of
SOCIALISM
• Few incentives for businesspeople to take risks.
COMMUNISM
• Communism -- An economic and political system in
which the government makes almost all economic
decisions and owns almost all the major factors of
production.
MIXED ECONOMIES
Gross Domestic
Product
UNEMPLOYMENT
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• Deflation -- Prices are declining because too few
dollars are chasing too many goods.
• Stagflation -- Economy is slowing but prices are
going up.
PRICE INDEX
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if they are going up or down.
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production faster and easier.
BUSINESS CYCLES
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3. Depression – A severe recession.
4. Recovery – When the economy stabilizes and starts to
grow. This leads to an Economic Boom.
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FISCAL POLICY
LG6
MONETARY POLICY
• Monetary Policy -- The management of the
money supply and interest rates by the Federal
Reserve Bank (the Fed).