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Transcript
Chapter 1
Understanding
the U.S. Business
System
PowerPoint Presentation by Charlie Cook
Copyright © 2005 Prentice Hall, Inc.
All rights reserved.
Key Topics
• Nature and goals of US business
• Global economic systems
• Supply and demand
• Private enterprise and competition
• Evaluating economic performance
• Status and outlook for the US economy
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–3
What Is “A Business”?
• An organization that
provides goods and
services to earn profits
Profits:
The positive difference
between revenues and
expenses
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–4
Functions of Business:
From society’s perspective
Choice
Opportunity
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
Quality
of Life
Enterprise
1–5
Goals of Business:
From a business perspective
Survival
Growth
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
Profit
Social
Responsibility
1–6
Factors of Production used by business
Physical
Resources
Information
Resources
The factors formerly
known as “Land”
Entrepreneurs
Capital
Labor
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–7
How Are Factors of Production
Allocated?
• Planned Economy:
 An economic system in which the
government owns and operates the
sources of production
 Slicing the pie evenly
• Market Economy:
 An economic system in which buyers
and sellers interact based on freedom
of choice
 “The Invisible Hand” of self interest
 Growing the pie
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–9
Economic Systems control scale
Socialistic
(Planned Economy)
Communism
Capitalistic
(Market Economy)
Pure
Capitalism
Question: Where do the people enjoy the highest standard
of living with the most equal distribution of wealth?
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–10
Socialism Toward Capitalism
• Socialism
 A planned economic system in which the government
owns and operates selected sources of production
• Worldwide trend
 Worldwide trend is toward more market elements.
• Privatization:
 The process of converting government enterprises
into privately owned companies
• Some notable exceptions are occurring:
 Venezuela’s President Hugo Chávez’s nationalization
of Venezuela’s oil production is one notable example.
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–11
Capitalism:
A Fundamentally Market-Based Economy
Individuals Choose:
• Where to work
• What to buy
• How much to pay
Producers Choose:
• Who to hire
• What to produce
• How much to charge
Government freedoms AND controls
support private ownership and encourage
entrepreneurship and choice
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–12
Key Topics
• Nature and goals of US business
• Global economic systems
• Supply and demand
• Private enterprise and competition
• Evaluating economic performance
• Status and outlook for the US economy
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–14
Supply and Demand Drive the
Capitalistic U.S. Economic System
• Supply:
 The willingness and ability
of producers to offer a good
or service for sale
• Law of Supply:
 Producers will supply (offer)
more of a product for sale
as its price rises and less as
• How much would it take
its price drops.
to entice YOU to make
cookies for the class?
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–15
Supply and Demand Drive the U.S.
Economic System (cont’d)
• Demand:
 The willingness and ability
of buyers to purchase a
good or service
• Law of Demand:
 Buyers will demand
(purchase) more of a
product as its price drops
and less as its price
increases.
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
• How much would you
PAY to buy cookies in
class?
1–16
Key Topics
• Nature and goals of US business
• Global economic systems
• Supply and demand
• Private enterprise and competition
• Evaluating economic performance
• Status and outlook for the US economy
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–24
The U.S. Economy is a Private
Enterprise System
Four Key Elements:
• Private Property
Rights
• Freedom of Choice
• Profits
• Competition
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
• Individuals are free
to pursue their own
interests without
government
restriction.
• Enough government
control is in place to
ensure enforcement
of individual and
business rights
1–25
Competition
• Competition motivates
businesses to produce their
products better and/or cheaper
 Making our product better
 Making ours cheaper
 Why does competition do this?
• Bonus: Competitive Strategies
 Growing the market
 Bicycles
 Vs. Cannibalistic competition
 Politics
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–26
Degrees of Competition (p16)
What kind of competitive landscape do I want if:
I amfirm
My
trying
exists
has
tobeen
start
in aaround
sea
a brand
of similar
a new
long company?
time
competitors?
and I am tired of
innovating?
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
Table 1–1
1–27
Understanding Economic Performance
Key Concept: The business Cycle
KEY CONCEPTS
• Business Cycle
• Aggregate Output
• Standard of Living
• Gross Domestic Product (GDP)
• Gross National Product (GNP)
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–28
U.S. GDP and GDP per Capita
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
Table 1–2
1–30
Economic Stability:
Balancing Growth
Two related factors threaten
stability:
INFLATION
UNEMPLOYMENT
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–33
Recessions and Depressions
• Recession:
 Aggregate output
declines,
unemployment
increases
• Depression:
 Severe and longlasting recession
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–37
Managing the US Economy
• Stabilization Policy:
 Government policy designed to smooth out
fluctuations in the economy
 Fiscal
Policies
 Monetary Policies
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–38
Evolution of American Business
• Agricultural
• Manufacturing
• Service Industries
• Future???
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–39
Looking to the Future
Four Major Forces:
• The information revolution
continues evolving.
• Technological breakthroughs
will create new industries.
• Increasing globalization will
create larger markets and
tougher competition.
• Increasing instability in energy
costs create danger and
opportunity
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–40
What’s next?
• Chapter 1 overview lecture
• Chapter 1 teamwork to solve the assigned
questions.
• Then we will complete a short case study
involving supply and demand that will require
some knowledge of chapter 1.
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–44
Chapter Review
• Describe the nature and goals of US business.
• Define the key global economic systems and
describe how they control the factors of production.
• Show how demand and supply affect the distribution
of resources in the US.
• Identify the elements of private enterprise and the
various degrees of competition.
• Explain how to evaluate an economic system.
• Describe the key projections for the US economy.
Copyright © 2005 Prentice Hall, Inc. All rights reserved.
1–45