New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

MIE 201, Chapter 2 Book Notes

by: Jenna Loehrer

MIE 201, Chapter 2 Book Notes MIE 201

Marketplace > North Carolina State University > Management > MIE 201 > MIE 201 Chapter 2 Book Notes
Jenna Loehrer
GPA 3.9

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

These notes and vocabulary from Chapter 2 will be on exam 1.
Intro to Management
M.K. Ward
Class Notes
25 ?




Popular in Intro to Management

Popular in Management

This 8 page Class Notes was uploaded by Jenna Loehrer on Wednesday September 21, 2016. The Class Notes belongs to MIE 201 at North Carolina State University taught by M.K. Ward in Fall 2016. Since its upload, it has received 3 views. For similar materials see Intro to Management in Management at North Carolina State University.


Reviews for MIE 201, Chapter 2 Book Notes


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 09/21/16
    Understanding Basic Economics: Chapter 2 Notes  Learning Objectives  1. Define economics, and explain why scarcity is central to economic decision making.  a. Economics:​ study of how individuals, companies, and governments use scarce resources to  produce the goods and services that meet a society’s needs.   b. Scarcity is a crucial concept in economics because it creates competition for resources and  forces everyone to make trade­offs.   c. Key terms:​ economy, economics, microeconomics, macroeconomics, natural resources,  human resources, capital, entrepreneurship, knowledge, scarcity, opportunity cost  2. Differentiate among the major types of economic systems.  a. Two basic types of economic systems:  i. Free­market systems:​ individuals and companies are largely free to make economic  decisions  ii. Planned systems:​ government administrators make all major decisions  b. Capitalism and Private Enterprise are often used to describe free­market systems   c. Communism­ most extreme type of planned system; Socialism­ lies in the middle between  capitalism and communism and generally refers to government ownership of fundamental  services  d. US Economy (like almost all others) blends elements of free­market capitalism and  government control  3. Explain the interaction between supply and demand.  a. Demand:​ amount of a good or service that customers will buy at a given time at various  prices; can be shown on a ​demand curve  i. Can shift as market condition change  b. Supply:​ amount of a good or service that producers will provide on a particular date at  various prices; can be shown on a ​supply curve  i. Can also shift in response to market forces   c. Demand and supply affect price by:   i. When price goes up, quantity demanded goes down  ii. When price goes down, quantity demanded goes up  d. Equilibrium Point:​ point at which quantity supplied equals quantity demanded  4. Identify four macroeconomic issues that are essential to understanding the behavior and to  understanding the behavior of the economy.  a. Competition in a free­market system occurs on a spectrum from pure competition to  monopolies  i. Most competition in a free­market system is monopolistic competition  1. Number of sellers is large enough that none can dominate the market and  products can be distinguished in some way  b. Business cycles­ Economy expands and contracts  i. Do not follow a regular cyclical pattern  c. Unemployment is important because it affects families, individuals, and economies as a  whole      Understanding Basic Economics: Chapter 2 Notes  i. Frictional Unemployment: normal inflow and outflow of workers as people change  jobs  ii. Structural Unemployment: skills workers possess not aligning with skills  employers need  iii. Cyclical Unemployment: reduced labor needs during economic contraction  iv. Seasonal Unemployment: change in flow of labor demand in certain industries over  course of the year  d. Inflation affects every aspect of economic activity because of the effects it has on prices of  goods, services, and labor  5. Outline the debate over deregulation, and identify four key roles that government play in the  economy.  a. Increased regulation is useful because companies can’t always be counted on to protect the  stakeholder’s interests and the market can’t be relied on to prevent/ punish abuses or  failures  b. Four key roles government plays in economy:  i. Protecting stakeholders  ii. Fostering competition  iii. Encouraging innovation and economic development  iv. Stabilizing and stimulating the economy  6. Identify the major ways of measuring economic activity.    What is This Thing Called Economy?  Economy:​ sum total of all of the economic activity within a given region  ● Constantly in motion  Economics:​ study of how a society uses its scarce resources to produce and distribute goods  ● Microeconomics:​ study of how consumers, businesses, and industries collectively determine the  quantity of goods and services demanded and supplied at different prices  ● Macroeconomics:​ study of “big­picture” issues in an economy, including competitive behavior  among firms, the effect of government policies, and overall resource allocation issues    Factors of Production  ● Each society must choose how to use its economic resources (or factors of production)  ○ Natural Resources: ​land, forests, minerals, water, and other tangible assets usable in their  natural state  ○ Human Resources:​ all the people who work in an organization or on its behalf  ○ Capital:​ the funds that finance the operations of a business as well as the physical,  human­made elements used to produces good and services, such as factories and  computers  ○ Entrepreneurship:​ combination of innovation, initiative, and willingness to take the risks  required to create and operate new businesses   ○ Knowledge:​ expertise gained through experience or association      Understanding Basic Economics: Chapter 2 Notes  ● Traditionally, a business or country was considered to have advantage if location had Natural  Resources, Human Resources, Capital, and Entrepreneurship  ● Today, intellectual assets (knowledge) is much more valuable    Economic Impact of Scarcity  Scarcity:​ a condition of any productive resource that has a finite supply  ● Two effects of Scarcity:  ○ Creates competition for resources   ■ Every level of economy competes for resources they require  ○ Forces trade­offs on the part of every participant in the economy  ■ Means companies, governments, and consumers have to give up one thing for  something else  ● Opportunity Cost:​ value of the most appealing alternative not chosen  ○ Way to measure the value of what you have up when you pursued a different opportunity    Economic Systems  Economic Systems:​ policies that define a society’s particular economic structure; the rules by which a  society allocates economic resources  ● Categorized as:  ○ Free Market System:​ economic system in which decisions about what to produce and in  what quantities are decided by the market’s buyers and sellers  ■ Have the chance to succeed or fail by their own efforts  ​ ○ Capitalism (p ​ rivate enterprise):​ economic system based on economic freedom and  competition  ■ Private parties (individuals, partnerships, or corporations) own and operate majority  of businesses and where competition, supply, and demand determine which goods  and services are produced  ● Communism:   ○ State ownership of all major productive resources  ○ Absence of economic classes  ○ Few opportunities for entrepreneurship  ● Socialism:   ○ State ownership of certain productive resources  ○ Managed efforts to minimize dramatic differences between economic classes  ○ Opportunities for entrepreneurship, with varying degrees of restrictions  ● Capitalism:  ○ Private ownership of most productive resources  ○ Few efforts to minimize differences between economic classes  ○ Government policies actively support entrepreneurship  ■ USA is mixed economy/ mixed capitalism        Planned Systems  ● Planned System:​ economic system in which the government controls most of the factors of  production and regulations their allocation  ● Socialism: e​conomic system characterized by public ownership and operation of key industries  combined with private ownership and operation of less­vital industries  ○ Government ownership focused on industries considered vital to common welfare  ○ Private ownership is permitted in other industries    Nationalization and Privatization  ● Nationalizing:​ government’s takeover of selected companies or industries  ○ Towards Socialism  ● Privatizing:​ turning over services once performed by the government to private business  ○ Towards Capitalism    Forces of Demand and Supply  ● Demand:​ buyer’s willingness and ability to purchase products at various price points  ○ Refers to the behavior of buyers  ● Supply:​ specific quantity of a product that a seller is able and willing to provide at various prices  ○ Refers to the behavior of sellers  ● Supply and demand are dynamic and are affected by a variety of internal and external factors    Understanding Demand  ● Demand Curve:​ graph of quantities of a product that buyers will purchase at various prices  ● Effects of major factors that can cause overall demand to increase/ decrease (airline example  used):   ○ Customer income  ○ Customer preferences towards product (fear of airline safety)  ​ ○ Price of ​substitute products (products that can be purchases instead of air travel, such as  train tickets, driving a car, web conferencing)  ​ ○ Price of c ○ Marketing expenditures (advertising and other promotional efforts)  ○ Customer expectations about future prices and their own financial well­being  ● Example: If economy is down, businesses and customers will have less money to spend and  overall demand for air travel will decrease    Understanding Supply  ● Supply Curve:​ graph of the quantities of a product that sellers will offer for sale, regardless of  demand, at various prices  ● Movement traditionally slopes upward  ● Effects of major factors that can cause overall supply to increase/ decrease:        Understanding How Demand and Supply Interact  ● Equilibrium Point:​ point at which quantity supplied equals quantity demanded    The Macro View: Understanding How an Economy Operates    Competition in a Free­Market System  Competition:​ rivalry among businesses for the same customers  ● Varies widely by industry, product category, and geography  Monopoly:​ situation in which one company dominates a market to the degree that it can control prices    Pure Competition:​ situation in which so many buyers and sellers exist that no single buyer or seller can  individually influence market prices  ● Characteristics:   ● Price Competition:   ● Buyer’s choices: Extensive  Monopolistic Competition:   ● Characteristics:  ● Price Competition:  ● Buyers’ choices: Extensive  Oligopoly:   ● Characteristics:  ​ ● Price Competition:      Understanding Basic Economics: Chapter 2 Notes  ● Buyers’ choices: Limited  Pure Monopoly:  ● Characteristics:  ○ Only one supplier in a given market  ○ Monopoly achieved without government intervention, by innovation, specialization,  exclusive contracts, or a simple lack of competitors  ○ Products are unique, with no direct replacements available  ○ Barriers to entry are extremely high, making entering market difficult or impossible  ● Price Competition:   ○ Suppliers can charge as much as they want, at least until people stop buying  ● Buyers’ choices: None  Regulated Monopoly:   ● Characteristics:  ○ One one supplier in a given market  ○ Monopoly granted by government mandate, such as license to provide cable TV and  internet service  ○ No product competition allowed  ● Price Competition:  ○  Prices are set by government mandate  ● Buyers’ choices: None    Business Cycles:​ ​fluctuations in the rate of growth that an economy experiences over a period of several  years  Recession:​ period during which national income, unemployment, and production all fall; defined as at  least six months of decline in GDP  Unemployment Rate:​ portion of the labor force (everyone over 16 who has or is looking for a job)  currently without a job  Inflation:​ economic condition in which prices rise steadily throughout the economy  Deflation:​ economic condition in which prices fall steadily throughout the economy    Types of Unemployment  ● Frictional Unemployment:   ○ “Natural” flow of workers  ■ Ex: someone leaves job without lining up another job  ○ Always some level of frictional unemployment in economy  ● Structural Unemployment  ○ Mismatch between workers’ skills and current employers needs  ○ Workers can’t find jobs that match their qualifications and vice versa  ● Cyclical Unemployment:   ○ Caused by economic fluctuations      Understanding Basic Economics: Chapter 2 Notes  ○ Occurs when demand for goods and services drops, businesses reduce production, which  then requires less workers  ○ Increasing number of people who want to work can’t find jobs  ○ During catastrophic depressions, can run as high as 20­25%  ● Seasonal Unemployment  ○ Predictable increases and decreases in the need for workers in industries with seasonal  fluctuations in customer demand  ○ Common in agriculture, leisure and entertainment, retailing and accounting services    Stabilizing and Stimulating Economy:  ● Monetary Policy:​ government policy and actions taken by the Federal Reserve Board to regulation  the nation’s money supply  ○ Adjusting the amount of “spendable money” in economy by increasing or decreasing  interest rates  ● Fiscal Policy:​ use of government revenue collection and spending to influence the business cycle  ○ On revenue side­ governments can adjust revenue they bring in by changes taxes rates  ■ When government decreases income tax rate, goal is that businesses and consumers  will spend and invest money they save  ○ On expenditures side­ government can increase their purchases to possibly create new  products or programs with goal of expanding employment opportunities and increasing  demand for goods and services    Economic Measures and Monitors  ● Economic Indicators:​ statistics that measure the performance of an economy  ○ Leading indicators: suggest changes that may happen in the future  ○ Lagging indicators: provide confirmation that something has occurred in the past  ● Example: Housing starts show increases through                              ​


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Anthony Lee UC Santa Barbara

"I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Steve Martinelli UC Los Angeles

"There's no way I would have passed my Organic Chemistry class this semester without the notes and study guides I got from StudySoup."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.