Chapter 01 The Dynamics of Business and Economics

Summary

Objectives:

 

Chapter Outline:

  1. Define Basic concepts such as business, product, and profit.
    1. Business refers to the individuals and organizations that seek a profit by providing products that satisfy people’s needs.
    2. Product refers to goods, services, or ideas with tangible and intangible attributes that provide satisfaction and benefits.
    3. The primary goal of business is to earn a profit.
      Non-profit organizations do not have the fundamental purpose of earning profits, although they may provide goods and services.

  2. Identify the main participants and activities of business and explain why studying business is important.
    1. The main participants of business are owners, employees, and customers
    2. Activities of businesses include primarily management, marketing, and finance.

  3. Define economics and compare the four types of economic systems
    1. Economics is the study of how resources used in the production of goods and services are distributed within a social system.
      1. Resources = natural resources, human resources, and financial resources.
    2. Types of economic systems
      1. Communism
      2. Socialism
      3. Capitalism (or free enterprise)
      4. Mixed economies

  4. Describe the role of supply, demand, and competition in a free-enterprise system
    1. Supply is the quantity of goods and services that businesses are willing to sell for different prices at a specific time
    2. Demand is the quantity of goods and services that consumers are willing to buy for different prices at a specific time.
    3. Equilibrium is the point at which supply and demand curves intersect, indicating that supply and demand are equal at that point in time.
    4. Competition is the rivalry among businesses for consumers’ dollars.
    5. Four types of competitive environments:
      1. Pure competition
      2. Monopolistic competition
      3. Oligopoly
      4. Monopoly

  5. Specify why and how the health of the economy is measured
    1. Economic cycles and productivity
      1. Economic expansion (may result in inflation)
      2. Economic contraction (may result in recession)
    2. Unemployment
    3. Gross domestic product (GDP)
    4. Budget deficits

  6. Trace the evolution of the American economy and discuss the role of the entrepreneur in the economy
    1. Early Economy
      1. Colonies were largely self-supporting
    2. Industrial Revolution
      1. Development of new technology and factories
    3. Manufacturing and Marketing Economies
      1. U.S. becomes and economy devoted to manufacturing goods and service.
      2. Business became more concerned with the needs of the consumer and entered the marketing economy
    4. Service and Internet-based Economy
      1. Increased standards of living
        1. U.S. moves to a service economy
      2. On-line business fastest growing segment
    5. Entrepreneur risks wealth, time and effort to develop for profit an innovative product or way of doing something.