1 The Dynamics of Business and Economics Mc

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The Nature of Business • To earn profits by providing products: – Tangible • Cars, food, clothing – Intangible • A service • An idea 3

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, Coca-Cola. • Nonprofit Organization – Provides products, especially services, for some purpose other than profits, ex. The Salvation Army, 4300 American colleges & universities. 4

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. 5

Overview of the Business World 6

The People and Activities of Business • Activities: – Management – Marketing – Finance • People: – – Owners Employees Customers Other stakeholders: • Investors • Regulatory Agencies 7

Why Study Business? • To develop skills and acquire knowledge to prepare for your future career • To help you better understand the many business activities that are necessary to provide satisfying goods and services • To help you become a well-informed consumer and member of society 9

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 11

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 12

Basic Questions to Be Asked of Economic Systems 1. What goods and services and what quantity will satisfy the needs of the consumer? 2. How will the goods and services be produced? a. Who will produce them and with what resources? 3. How are the goods and services to be distributed to the consumer? 13

Types of Economic Systems • Communism • Socialism • Capitalism 14

Comparison of Communism, Socialism, and Capitalism 15

Economic Systems and Where They Occur Communism Socialism China Sweden North Korea India Cuba Israel Capitalism United States Canada Japan Australia 16

Mixed Economies • Most countries of the world have elements of more than one economic system. 17

The Free-Enterprise System • Individuals must have the right to own property and pass it on to theirs. • People and businesses must have the right to earn profits and use them as they wish. • Individuals and businesses must have the right to determine how their businesses operate. • Individuals must have the right to choose their career, where to live, and what to buy. 18

The Forces of Supply and Demand Supply Demand • The number of products that businesses are willing to sell at different prices at a specific time • The number of goods and services that consumers are willing to buy at different prices at a specific time. – Consumers are usually willing to buy more of an item as its price falls because they want to save money. – Businesses are willing to supply more of a good or service at higher prices because the potential for profits is higher. 19

U. S. Hot Dog Consumption • Hot dogs consumed between Memorial Day & Labor: – 7 billion • Average number of hot dogs eaten/person from Memorial Day to Labor Day: – 24 • Rate of consumption during this time: – 818 hot dogs/second Source: National Hot Dog and Sausage Council, as reported in American Demographics, July/August 2004, p. 48. 20

Top Major League Ball Parks for Hot Dog Consumption 1. Dodger Stadium 1. 6 million 2. Coors Field 1. 5 million 3. Wrigley Field 1. 5 million 4. Yankee Stadium 1. 3 million 5. Minute Maid Park 1. 2 million Source: National Hot Dog and Sausage Council, as reported in American Demographics, July/August 2004, p. 48. 21

Equilibrium Price of Handmade Rugs 22

The Nature of Competition 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; each business supplies a large portion of the products sold in the marketplace. Monopoly There is only one producer of a product in a given market. 23

Economic Cycles and Productivity • Economic expansion occurs when an economy is growing and people are spending more money. • Economic contraction occurs when spending declines. 24

Overall Unemployment Rate in the U. S. Civilian Labor Force Source: “Overall Unemployment Rate in the Civilian Labor Force, 1920– 2002, ” Info. Please (n. d. ), www. infoplease. com/ipa/ A 0104719. html (accessed October 30, 2006). 25

Measuring the Economy • One commonly used measure is gross domestic product. – GDP is the sum of all goods and services produced in a country during a year. 26

Growth in U. S. Gross Domestic Product Dollars Source: “Gross Domestic Product or Expenditure, 1930– 2002, ” Info. Please (n. d. ), www. infoplease. com/ipa/ A 0104575. html (accessed October 30, 2006). 27

Growth of The American Economy • The Early Economy – Primarily agricultural; the use of natural resources • The Industrial Revolution – The development of new technology and factories • The Manufacturing and Marketing Economies – Devoted to manufacturing goods and providing services rather than producing agricultural products • The Service and Internet-based Economy – Devoted to the production of services that make life easier for busy consumers Did You Know? 60 percent of adult women work. 28

The Role of the Entrepreneur • An entrepreneur is an individual who risks his or her wealth, time, and effort to develop for profit an innovative product or way of doing something. 29

The Role of Government in the American Economy • Federal, state, and local governments intervene in the economy with laws and regulations designed to: – Promote competition – Protect consumers, employees, and the environment 30

The Role of Ethics and Social Responsibility in Business • To set standards and principles used by society to define appropriate and inappropriate conduct • To prohibit actions deemed unacceptable 31

Solve the Dilemma 1. Explain and demonstrate the relationship between supply and demand for Mrs. Acres Homemade Pies. 2. What challenges does Shelly face as she considers the three options? 3. What would you do in Shelly’s position? 32

Explore Your Career Options • What are some of the changes in the work environment that contribute to the transformation of the traditional career track? 33

Additional Discussion Questions and Exercises 1. Which economic system provides for central government planning to determine what goods and services will satisfy needs of citizens? 2. How did the Industrial Revolution affect the agricultural economy in the United States? 3. What characteristics of modern American entrepreneurs are similar to those of early American entrepreneurs? 34

Multiple Choice Questions About the Video 1. Wal-Mart saves the average family ____. 2. Which of the following is NOT something Wal-Mart has done to improve its image according to the case? a. b. c. d. e. $150 $10, 250 $2, 329 $1, 500 $233 a. Set up a website for customers to hear the unfiltered truth about Wal-Mart b. Built two environmentally friendly stores c. Donated $17 million to hurricane Katrina relief d. Hired a public relations firm e. Wal-Mart decreased its imports from China 37