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Bus X100, Week 1 notes

by: Jessica

Bus X100, Week 1 notes BUS-X 100

GPA 3.6

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About this Document

These notes are over the first chapter of the book
Robert Grimm
Class Notes
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This 17 page Class Notes was uploaded by Jessica on Friday August 5, 2016. The Class Notes belongs to BUS-X 100 at Indiana University Purdue University - Indianapolis taught by Robert Grimm in Fall 2016. Since its upload, it has received 3 views.


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Date Created: 08/05/16
X100 Introduction to Business Free Enterprise and Economic Systems Professor Robert L Grimm X100ofessor Kenneth E©2016 KEAW L1 Business: a Definition v  The organized effort of individuals & organizations v  To produce & sell…. for a profit v  Goods and services to customers v  That satisfy a society’s needs X100 Free Enterprise & Economic SyL1-2s Fundamental Business Resources Business Human Informational Resources Resources Material Financial Resources Resources Goods & Services Business must effectively combine all four resources to be successful X100 Free Enterprise & Economic SystL1-3 Economic Systems Society’s rules - for allocating its resources to produce & distribute goods & services for consumption v  Impacts economic growth and development v  Different societies use different approaches U.S. economy is a ‘Modified Capitalistic’ or ‘Free Enterprise’ system X100 Free Enterprise & Economic L1-4ems Types of Economic Systems Capitalism Socialism Communism Adam Smith – Professed aims – Karl Marx – ‘laissez faire’ economy equitable distribution of ‘classless society’, where where society’s interest best income, elimination of individuals contribute based served when individuals in poverty, distribution of sociaon their capabilities and that society are allowed to services based on need, receive benefits based on pursue own best interest’. eliminate economic waste. their needs. Individuals - Government – Government – own and operate majority of owns & controls key owns almost all of the businesses that provide goods industries. Private ownership economic resources. Practice and services & have right to of smaller businesses may be a strictly controlled type of own & sell private property. permitted. socialism. Market Economy – Command Economy – Command Economy – businesses & individuals government decides what where emphasis is placed on decide what to produce & buy. will be produced, how it will production of goods that the Market determines the be produced, who gets what government needs rather quantity sold and prices. is produced and the price. than on products consumers might want. Mixed Economy – Visible Socialism – Communism – the US economy is a is present in many democratic has dwindled with breakup of ‘modified capitalist’ or governments, the most the Soviet Union & economic ‘free enterprise’ system notable with a high degree of reforms in China. North with some government socialism include Sweden, Korea & Cuba are the best participation. Finland and India. remaining examples. X100 Free Enterprise & Economic Systems L1-5 Key Features of the U.S. ‘Free Enterprise’ System System of business in which the individuals are free to decide what to produce, how to produce it and what to sell it for. v  Consumers’ freedom of choice – to allocate their own resources and spend their own money as they please v  Private ownership of land and real property – by individuals and businesses as governed by laws & covenants v  Competition – among businesses for the consumers’ dollars v  Supply & Demand – determined by consumer demand, availability, prices and market forces v  Circular Flow – of money for labor, resources & capital in exchange for goods & services v  Business Cycles – driven by economic growth & contraction $$ Profit Motive $$ For reinvestment & reward to investors X100 Free Enterprise & Economic Systems L1-6 Circular Flow of Resources in ‘Free Enterprise’ System Resources Resource Resources markets Labor & Labor & Capital s Capital n c Income e u Wages S o Rent & t e Interest o R G Households Taxes US & Local Taxes Consumers Governments Businesses Services Services n e t Consumer S c Sales Spending t d Revenue o r G P Goods & Goods & Services Product Services markets X100 Free Enterprise & Economic Systems L1-7 Forbes Tax Misery Index France 168 China Sweden Brazil Japan 115 USA - New York India Misery Index Mexico is based on Switzerland the Marginal Tax Rates United Kingdom Corp Income Germany Canada Personal Inc Ireland Employer SS USA - Texas 93 Employee SS South Africa Sales/VAT Hong Kong 42 0 20 40 60 80 100 120 140 160 180 Adapted from: X100 Free Enterprise & Economic Systems L1-8 Economic Trends in the US GDP (Gross Domestic Product) the impact of inflation, a general rise in the level of prices of goods and services Real GDP = The total ‘actual’ value of all goods and services produced by all people within the boundaries of a country during a one-year period Source: X100 Free Enterprise & Economic Systems L1-9 Economic Performance The US Balance of Trade US has a trade deficit in goods & overall balance of trade Overall ‘real’ trade deficit Trade Deficit = Imports > Exports Source: X100 Free Enterprise & Economic Systems L1-10 Economic Performance World Inflation Rates Inflation rates had been falling in almost every major region of the World – and are expected to remain low in the near future Inflation Rates 2014 Emerging market and 5.5%loping economies – World – 3.5% Advanced Economies – 1.5% Source: X100 Free Enterprise & Economic Systems L1-11 Types of Competition Competition - the rivalry among businesses for sales to potential customers vPerfect Competition – many buyers & many sellers Ø  Buyers and sellers must accept going price vMonopolistic Competition – many buyers & relatively large number of sellers Ø  Businesses compete with product differentiation vOligopoly – market or industry with few sellers Ø  Each seller has considerable price control vMonopoly – market or industry with only one seller Ø  Business with monopoly has complete control over price Ø  Natural monopoly – requiring huge capital investment Ø  Legal monopoly – with a patent, copyright or ™rademark X100 Free Enterprise & Economic SystemsL1-12 Supply & Demand Curves Assumes many buyers & sellers - with ‘market’ knowledge X100 Free Enterprise & Economic Systems L1-13 The Basis for International Business Global International Business – Business exchanges across national boundaries ÄVideo Some countries are better equipped than others to produce particular goods or services: v  Absolute advantage - the ability to produce a specific product more efficiently than any other nation v  Comparative advantage - the ability to produce a specific product more efficiently than any other product Goods and services are produced more efficiently when each country SPECIALIZES in the products for which it has a comparative advantage X100 Free Enterprise & Economic SystemsL1-14 Principle of a Nation’s ‘Comparative Advantage’ Nations engage in international trade – because they own resources that enable a nation to produce some goods better & more efficiently than other nations In the past, primary sources of comparative advantage were better access to: Ø  Lower cost Labor Markets Ø  Financial Markets Ø  Technology Ø  Natural Resources Ø  Geographic Areas With ‘Globalization’ - these sources of advantage are becoming less important X100 Free Enterprise & Economic SystL1-15 Diminishing ‘Comparative Advantage’ Why ?? v  Financial markets are now global v  With telecommunications & the internet, geographical location per se adds very little value v  Companies find it relatively wherever workers live employees, v  Natural resources can be imported from any location around the world X100 Free Enterprise & EconomiL1-16tems X100 Free Enterprise & Economic Systems L1-17


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