Chapter 2: Economic and Banking.
2-1 Define economics, and describe the different types of economic systems.
∙ Economics is the study of how individuals and businesses make decisions to best satisfy wants, needs, and desires with limited resources and how efficiently and equitably resources are allocated.
∙ There are different types of economic systems.
∙ A planned economic system is a type of economy in which the government has more control over what is produced, the resources to produce the goods and services, and the distribution of the goods and
services. Communism and socialism are planned economic systems.
∙ In market economies which are characterized by capitalism, individuals and private firms make the decisions about what to produce and how goods and services are distributed.
∙ Most modern economies in the Western world are mixed economies, which are a blend of market and planned economies.
2-2 Explain the principles of supply and demand, and describe the factors that affect each principle.
∙ Supply refers to how much of a good or service is available. The amount of it supplied will increase as its price increases. Supply is affected by five factors:
Changes in resource prices
The price of substitute goods
The number of suppliers
∙ Demand refers to how much people want to buy of a product at any given time. The amount demanded increases as a product’s price declines. Demand is affected by five factors:
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Changes in income levels
Changes in population
Changes in the prices of substitute or complementary goods
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2-3 Describe the various degrees of business competition.
∙ There are several degrees of competition, including monopoly, oligopoly, duopoly, monopolistic competition, and perfect competition.
∙ In a monopoly, where only one seller supplies a good or service, supply may be limited.
∙ The supplies may increase with a duopoly, or an oligopoly, in which two or a few sellers exist, respectively. Don't forget about the age old question of What do origin stories tell us about people?
∙ Monopolistic competition is characterized by many sellers that sell slightly different products at slightly different prices. This increases the supply of the products and choices for consumers.
∙ Similarly, there are many sellers in perfect competition, which also increases the supply of a good or service. In a perfectly competitive market, the product being sold is virtually identical across suppliers and sells for the same price. No single producer is able to affect the price at which the product is sold. Don't forget about the age old question of What is the goal behind society portraits?
2-4 Explain how the various economic indicators— particularly the gross domestic product (GDP), price indices, the unemployment rate, and productivity—reflect the health of an economy.
∙ The gross domestic product (GDP) measures the overall market value of final goods and services produced in a country in a year. GDP is an important
economic indicator of an economy’s productivity and health. When a nation’s GDP goes up, the country’s economy is moving in a positive direction.
∙ The consumer price index (CPI) and producer price index (PPI) are indicators of inflation (rise in general level of profits over time) or deflation (continuous decrease in prices over time).
∙ CPI tracks changes in prices over time by measuring changes in the prices of goods and services that represent the average buying pattern of urban households.
∙ PPI tracks the average change in prices of those goods sellers use to create products, such as raw materials and product components that require further processing, and finished goods sold to retailers.
∙ Unemployment rate is watched as an indicator of how well the economy is performing. If unemployment is high, the economy is not using all of its resources and is probably experiencing a downturn. An increasing unemployment rate generally has a corresponding increase in government spending on social policies (such as welfare We also discuss several other topics like What do you call the behaviors that are instinctively known?
and unemployment payments).
∙ Increasing productivity means that a firm’s existing resources are producing more, which generates more income and more profitability.
2-5 Describe the four stages of the business cycle, and explain how the government uses both fiscal policy and monetary policy to control swings in the business cycle.
∙ The four stages of the business cycle are the peak, recession, trough, and expansion or recovery.
∙ The government’s fiscal policy determines the appropriate level of taxes and government spending. An increase in taxes translates into lower consumer spending and helps contain an economy that is growing too quickly. Lowering taxes will stimulate spending and help boost a sluggish economy.
∙ Monetary policy is the means by which the Federal Reserve manages to control inflation by changing interest rates, buying and selling government securities, or trading in foreign exchange markets.
∙ The Federal Reserve System is responsible for the monetary policy of the United States. The Fed keeps the economy from experiencing severe negative or positive swings by controlling the money supply through open market operations and by making changes in banks’ reserve requirements and changes in the discount rate.If you want to learn more check out What damage does huntington's disease cause?
Chapter 3: Ethics and Business
3-1 Describe ethics and the systems of ethical conduct, and illustrate how someone can create a personal code of ethics.
∙ Ethics are the moral choices people make.
∙ Ethical systems include the following:
Moral relativism, a perspective that holds that there is no universal moral truth but instead only individuals’ beliefs, perspectives, and values
Situational ethics, which encourages people to make ethical decisions based on the circumstances of a particular situation, not on fixed laws
Systems defined by religious traditions, such as Judeo-Christian ethics, which refers to the common set of basic values shared across both Jewish and Christian religious traditions
3-2 Explain how personal ethics might play a role in the workplace and what resources one may use to evaluate a company’s ethical code.
∙ Having a strong ethical foundation can help you achieve success in business and greater happiness in life.
∙ In the modern workplace, there is less distinction made between how you conduct yourself inside and outside the office. Telecommuting is one instance when a person’s employer may influence how an employee behaves at home. Conduct on social media sites can also influence a person’s workplace, even though it happens outside of work.
∙ Conflicts can emerge when your personal ethics are different from those of your company.
3-3 Analyze the ways in which a company’s policies and decisions affect its achievement of corporate social responsibility, and discuss the challenges it
may face in balancing the demands of social responsibility with successful business practices.
∙ Some companies may have a written code of ethics, or a statement of their commitment to certain ethical practices.
∙ Many companies have a public mission statement that defines the core purpose of the organization and often describes its values, goals, and aspirations.
∙ Corporate social responsibility (CSR) consists of five major areas: employment standards, ethical sourcing, marketing issues, environmental concerns, and community policies.
∙ A strong CSR plan allows a company to serve its local and global communities well. It also benefits a corporation in direct and indirect ways.
∙ Companies must balance their moral and ethical obligations to consumers with their need to respond to investors and produce a profit.
∙ It’s also important for companies to show a strong commitment to their employees (by ensuring workplace safety), the local community (by responding to community needs), and all the countries in which they operate (by upholding human rights policies). At times, it can be difficult to balance these commitments with the need to ensure that the business remains financially successful.
3-4 Summarize how legal compliance affects ethical conduct, and describe some strategies a company can use to recover from ethical lapses.
∙ Legal compliance refers to conducting a business within the boundaries of all the legal regulations of that industry.
∙ Companies that establish and adhere to high ethical standards are more likely to maintain legal compliance.
∙ A company can work to find a leader who will set an example of the new ethical image of the company.
∙ A company can restructure its internal operations to empower all employees to consider the ethical implications of decisions and feel free to speak up when they have concerns.
∙ A company can redesign its internal rewards.
3-5 Identify ways in which companies can apply ethical standards to create new business opportunities.
∙ While some businesses are tackling ethical issues and offering consumers more ethical choices through their businesses, others are attempting to reduce the impact they have on the environment.
3-6 List some approaches that a company can use to develop and maintain an ethical environment.
∙ Managers can make sure a mission statement is in place and set clear examples for the standards of behavior expected at all levels of the organization.
∙ Companies can offer orientation programs to new employees to inform them of the ethical standards in place.
∙ Ethics training programs can boost the awareness of employees about ethics issues.