Chapter One

The Dynamics of
Business and Economics

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 The Nature of Business
To create profits by:
Selling products Cars, food, clothing

Providing services Healthcare,

insurance

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 Business vs. Nonprofit
Organization
Business Nonprofit
An individual or Organization
organization that tries to Provides products,
earn a profit by especially services, for
providing products that some purpose other
satisfy peoples needs, than profits, ex. The
ex. IBM, Coca-Cola. Salvation Army, 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 services but not for
make and sell a the purpose of
product and what earning profits.
the customer pays
for it.

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

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 Management Hiring Issues
Issues Considered by Job Seekers Before Switching Jobs

Salary 32%

Location 25%

Opportunity for Growth 24%

Chance to learn new technology 15%

Perks 2%

Personal contacts 2%

Source: Survey of 970 job seekers by CareerEngine.com, New York in

Kemba J. Dunham, The Jungle, Wall Street Journal, July 3, 2001, p. B6.

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 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.

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 Education Pays
Average Annual Salary By Education Level

$63,229

$40,478

$22,895
$16,124

Advanced Bachelors High School No

Degree Degree Diploma Diploma

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 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

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 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.

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 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? Who will produce them
and with what resources?
3. How are the goods and services to
be distributed to the consumer?

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 Types of Economic Systems

Communism
Socialism
Capitalism

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 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 forces and
operates everything. small business. government
regulations.
Profits Excess income goes to Profits earned by small Individuals are free to
the government. businesses may be keep profits and use
reinvested in the business; them as they wish.
profits from government-
owned industries go to the
government.

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 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.

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 Economic Systems and
Where They Occur

Communism: Socialism: Capitalism:

China Sweden United States
North Korea India Canada
Cuba France Australia
Viet Nam Israel Japan

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 Mixed Economies

Most countries of the

world have elements of
more than one economic
system.

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 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.

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 Supply and Demand
Supply: Demand:
The number of The number of
products business goods and services
is willing to sell at that customers are
different prices at a willing to buy at
specific time. different prices at a
An upward sloping specific time.
curve on a graph. A downward
sloping curve on a
graph.

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 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

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 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.

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 Economic Cycles

Time

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 Growth of The
American Economy

The Early The Industrial The Manufacturing and The Service &
Economy Revolution Marketing Economies Internet-based
Economy
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 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 nations largest
employers of college graduates, hiring over
5000 graduates a year.

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 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?

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 Chapter 1 Quiz
1. The activities designed to provide goods and services that
satisfy customers are knowm as:
a. management.
b. marketing.
c. finance.
d. gross national product.
2. Which of the following best describes inflation?
a. a continuing decrease in product prices
b. a moderate decrease in demand
c. a continuing increase in unemployment
d. a continuing increase in prices

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 Chapter 1 Quiz
3. The airline business in the United States is an example of what
form of competition?
a. pure competition
b. monopolistic competition
c. oligopoly
d. monopoly
4. The quantity of products and services that consumers are
willing to buy at different prices at a specific time is
a. supply.
b. demand.
c. competition.
d. gross national product.

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