Download - Us Business System Leonardo Matarrese
Outline
The Concept of Business and the Concept of Profit
Economic Systems Around the World
The U.S. Economic System
Evaluating Economic Systems
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The Concept of Business and the Concept of Profit
Business
An organization that provides goods or services to earn profits
Profits
The difference between a business’s revenues and its expenses
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Economic Systems Around the World
Economic System
A nation’s system for allocating its resources among its citizens
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Factors of Production
Resources used in the production of goods and
services
Resources used in the production of goods and
services
Four traditional factors of production:
1. Natural Resources
2. Labor
3. Capital
4. Entrepreneurs
Newer perspectives include:
5. Physical Resources
6. Information Resources
Newer perspectives include:
5. Physical Resources
6. Information Resources
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Factors of ProductionNatural Resources
Materials supplied by nature (such as land, water, mineral deposits, and trees)
Labor (or Human Resources)
Physical and mental capabilities of people as they contribute to economic production
Capital
Funds needed to create and operate a business enterprise
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Factors of ProductionEntrepreneur
Person who starts a new business or makes the decisions that expand a small business
Physical Resources
Tangible things organizations use in the conduct of their business
Information Resources
Data and other information used by a businessLeonardo Matarrese @MyPlick
Types of Economic Systems
Planned Economy
Centralized government controls all or most factors of production and makes all or most production and allocation decisions
Market Economy
Individuals control production and allocation decisions through supply and demand
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Planned Economies
Communism
Planned economic system in which the government owns and operates all major sources of production
Socialism
Planned economic system in which the government owns and operates selected major sources of production
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Market EconomiesMarket
Mechanism for exchange between buyers and sellers of a particular good or service
Input Market
Firms buy resources from supplier households
Output Market
Firms supply goods and services in response to demand on the part of households
Capitalism
Market economy that provides for private ownership of production and encourages entrepreneurship by offering profits as an incentive
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“Pure Market Economy”
1-11
OUTPUT MARKETSGoods
Services
INPUT MARKETSLabor
CapitalEntrepreneurs
Physical ResourcesInformation Resources
HOUSEHOLDS• Demand products in
output markets• Supply resources in
input markets
FIRMS• Supply products in
output markets• Demand resources
in input markets
DEMANDDEMAND
DEMANDDEMAND SUPPLYSUPPLY
SUPPLYSUPPLY
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Mixed Market Economies
Privatization
Process of converting government enterprises into privately owned companies
Socialism
Planned economic system in which the government owns and operates only selected major sources of production
Economic system featuring characteristics of both planned and market economies Economic system featuring characteristics of both planned and market economies
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The U.S. Economic System
Understanding the complex nature of the U.S. economic system is essential to understanding the
environment in which U.S. businesses operate.
Understanding the complex nature of the U.S. economic system is essential to understanding the
environment in which U.S. businesses operate.
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Markets, Demand, & Supply
Demand
The willingness and ability of buyers to purchase a good or service
Supply
The willingness and ability of producers to offer a good or service for sale
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The Laws of Demand & Supply Law of Demand
Principle that buyers will purchase (demand) more of a product as its price drops and less as its price increases
Law of Supply
Principle that producers will offer (supply) more of a product for sale as its price rises and less as its price drops
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The Laws of Demand & Supply Demand and Supply Schedule
Assessment of the relationships between different levels of demand and supply at different price levels
Demand CurveGraph showing how many units of a product will be demanded (bought) at different prices
Supply CurveGraph showing how many units of a product will be supplied (offered for sale) at different prices
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The Laws of Demand & Supply Market Price (or Equilibrium Price)
Profit-maximizing price at which the quantity of goods demanded and the quantity of goods supplied are equal
SurplusSituation in which quantity supplied exceeds quantity demanded
ShortageSituation in which quantity demanded exceeds quantity supplied
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Demand and Supply Schedules
Quantity of Quantity ofPrice Pizzas Demanded Pizzas Supplied
$2 2000 100$4 1900 400$6 1600 600$8 1200 800
$10 1000 1000$12 800 1200$14 600 1300$16 400 1600$18 200 1800$20 100 2000
Demand & Supply
1-181-181-18
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Demand & Supply
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Quantity of Pizzas Demanded
Pri
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sDemand Curve
1-191-191-19
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Demand & Supply
Quantity of Pizzas Supplied
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1-201-201-20
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Demand & Supply
Quantity of Pizzas per Week
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Pri
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Equilibrium Price
1-211-211-21
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Private Enterprise
Economic system that allows individuals to pursue their own interests without
undue governmental restriction
Economic system that allows individuals to pursue their own interests without
undue governmental restriction
Four elements of private enterprise:
1. Private Property Rights
2. Freedom of Choice
3. Profits
4. Competition Leonardo Matarrese @MyPlick
Private EnterprisePrivate Property Rights
The right to buy, own, use, and sell almost any form of property
Freedom of ChoiceThe right to sell your labor to the employer you choose, purchase products you want to buy, choose what to produce or who to hire, etc.
ProfitsAnticipated profits play a large part in individuals’ choices of what goods or services to produce
CompetitionVying among businesses for the same resources or customers Leonardo Matarrese @MyPlick
Degrees of CompetitionPure Competition
Market or industry characterized by numerous small firms producing an identical product
Monopolistic Competition
Market or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors
Oligopoly
Market or industry characterized by a handful of (generally large) sellers with the power to influence the prices of their products
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Degrees of Competition
Monopoly
Market or industry in which there is only one producer, which can therefore set the prices of its products
Natural Monopoly
Industry in which one company can most efficiently supply all needed goods or services
Natural Monopoly
Industry in which one company can most efficiently supply all needed goods or services
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Evaluating Economic Systems
Nearly every economic system has three broad goals:
– Stability
– Full Employment
– GrowthLeonardo Matarrese @MyPlick
Economic GoalsStability
Condition in which the balance between the money available in an economy and the goods produced in it are growing at about the same rate
InflationPhenomenon of widespread price increases throughout an economic system
RecessionPeriod characterized by decreases in employment, income, and production
DepressionParticularly severe and long-lasting recession
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Economic GoalsFull Employment
Everyone who wants to work has an opportunity to do so
UnemploymentLevel of joblessness among people actively seeking work
Knowledge WorkersSkilled employees in high-tech industries
GrowthIncrease in the amount of goods and services produced by a nation’s resources
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Assessing Economic PerformanceGross National Product (GNP)
The value of all goods and services produced by an economic system in a year regardless of where the factors of production are located
Real Gross National Product (real GNP)Gross national product adjusted for inflation and changes in the value of a country’s currency
Gross Domestic Product (GDP)The value of all goods and services produced in a year by a nation’s economy through domestic factors of production
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Assessing Economic PerformanceProductivity
Measure of economic growth that compares how much a system produces with the resources needed to produce it
Balance of TradeThe difference between a country’s exports to and imports from other counties
Budget DeficitSituation in which a government body spends more money than it takes in
National DebtTotal amount that a nation owes its creditors
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Managing the U.S. Economy
Fiscal PoliciesGovernment economic policies that determine how the government collects and spends its revenues
Monetary PoliciesGovernment economic policies that determine the size of a nation’s money supply
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The Global Economy in the 21st Century
The United States was riding the crest of a long-term economic boom. Growth has been strong, and unemployment and inflation remain low. Now are we in a recession?
The United States was riding the crest of a long-term economic boom. Growth has been strong, and unemployment and inflation remain low. Now are we in a recession?
What forces will drive the economy for the next decade?What forces will drive the economy for the next decade?
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Three Major Forces1. The information revolution will continue to
enhance productivity across all sectors of the economy, but most notably in such information-dependent industries as finance, media, and wholesale and retail trade.
2. New technological breakthroughs in such areas as biotechnology will create entirely new industries.
3. Increasing globalization will create much larger markets while also fostering tougher competition among global businesses; as a result, companies will need to focus even more on innovation and cost cutting.
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Projected Trends & Patterns1. The economy will maintain strong and consistent
growth rates, perhaps exceeding 3 percent per year. New technological breakthroughs in such areas as biotechnology will create entirely new industries.
2. Inflationary surges and large budget deficits will become less likely.
3. Countries that encourage free trade, innovation, and open financial systems will prosper.
4. The most successful businesses will be those that are able most effectively to master new technologies and keep abreast of their competitors.
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