Ch 2 - Business 150
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This 4 page Class Notes was uploaded by paigeehack on Tuesday September 22, 2015. The Class Notes belongs to BUS 150 at Pace University taught by Douglas Watson in Summer 2015. Since its upload, it has received 30 views. For similar materials see Introduction to Business in Business at Pace University.
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Date Created: 09/22/15
Business 150 Ch 2 Understanding Basic Economics Economy the sum total of all economic activity within a given region Economics The study of how a society uses its scarce resources to produce and distribute goods and services Microeconomics The study of how consumers businesses and industries collectively determine the quantity of goods and services demanded and supplied at different prices Macroeconomics the study of quotbigpicturequot issues in an economy including competitive behavior among rms the effect of government policies and overall resource allocation issues Factors of Production how a society uses its economic resources Natural Resources are things that are useful in their natural state land forests minerals water Human Resources people and their individual talents and capacities Capital money machines tools and buildings that a business needs in order to produce goods and services Entrepreneurship the combination of innovation initiative and willingness to take the risks involved in creating and operating business Knowledge the collective intelligence of an organization workers employees The Economic Impact of Scarcity Scarcity a given resource has a nite supply 0 2 powerful effects 1 Creates competition for resources 2 Forces tradeoffs on the part of every participant in the economy 0 Businesses and industries compete for the resources for materials employees and customers Consumers compete with other consumers o quotTradeoffsquot meaning they have to give up something to get something else Opportunity Cost the value of the most appealing alternative not chosen 0 0 It39s a way to measure the value of what you gave when you pursed a different opportunity Economic System the basic set of rules for allocating resources to satisfy its citizens39 needs free market system Free market system individuals and companies are largely free to decide what products to produce how to produce them whom to sell them to and at what price to sell them 0 Have the chance to succeed or fail by their own efforts Capitalism when private parties individuals partnerships or corporations own and operate the majority of business and where competition supply and demand determine which goods and services are produced No economy is truly free in the sense anyone can do whatever she or he wants to do local state national and even international governments intervene to accomplish goals that leaders deem socially or economically desirable Planned Systems economic system where governments largely control the allocation of resources and limit freedom of choice in order to accomplish government goals Socialism economic system with a fairly high degree of government planning and some government ownership of capital resources 0 Government ownership is focused on transportation healthcare communications 0 State ownership of certain productive resources 0 Managed efforts to minimize dramatic differences between economic classes 0 Opportunities for entrepreneurship with varying degrees of restrictions Communism 0 State ownership of all major resources 0 Absence of economic classes 0 Few opportunities for entrepreneurship Nationalization and Privatization Nationalizing a government39s takeover of selected companies or industries Privatizing turning over services once performed by the government to private businesses The Forces of Demand and Supply Demand the amount of a good or service that customers will buy at a given time at various prices 0 The buyers Supply the quantities of a good or service that producers will provide on a particular date at various prices 0 The sellers Understanding Demand Demand curve a graph that shows the relationship between the amount of product that buyers will purchase at various prices 0 Typically slopes downward lmplying the price drops more people are willing to buy 0 Major factors that can cause overall demand to increase or decrease Customer income Customer preferences toward the product ex air travel The price of substitute products ex instead of air travel rail road automobile travel Marketing expectations about future prices and their own nancial weelbeing Understanding Supply Supply curve a graph of the depiction of the relationship between prices and quantites that sellers will offer for sale regardless of its demand 0 Typically an upward slope As prices rise the quantity that sellers are willing to supply rises As prices drop the quantity that sellers are willing to supply decHnes The Macro View Understanding How an Economy Operates Competition in a Free Market System Competition rivalry among business for the same customers Pure competition a situation when so many buyers and sellers can individually in uence market prices 0 Many small suppliers 0 Identical products 0 No single rm can grow large enough to in uence prices across the market 0 Buyers39 choice extensive Monopoly a situation in which one company dominates a market to the degree that it can control prices Monopolistic competition a situation when many sellers differentiate their products from those of competitors in at least some small way Oligopoly a market situation in which a very small number of suppliers provide a particular good or service Business Cycles Recession a period of downward swing during which national income employment and production all fall de ned as at least 6 months of decline in GDP Business cycles Fluctuations in the rate of growth that an economy experiences over a period of several years Unemployment Unemployment rate the portion of the labor force currently without a job everyone over 16 who has or is looking for a job In ation a steady rise in the average prices of goods and services throughout the economy 0 Major concern for customers businesses and government leaders effect on purchase power the amount of a good or service you can buy for a given amount of money When prices go up purchase power goes down De ation is a sustained fall in average prices