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Chapter 3

Chapter 3. Economic Challenges Facing Global and Domestic Business. Economics. Economics —social science that analyzes the choices made by people and governments in allocating scarce resources. Microeconomics —study of small economic units, such as individuals, families, and businesses.

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Chapter 3

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  1. Chapter 3 Economic Challenges Facing Global and Domestic Business

  2. Economics • Economics—social science that analyzes the choices made by people and governments in allocating scarce resources. • Microeconomics—study of small economic units, such as individuals, families, and businesses. • Macroeconomics—study of a nation’s overall economic issues, such as how an economy maintains and allocates resources and how government policies affect the standards of living of its citizens.

  3. Microeconomics:The Forces of Demand and Supply • Demand—willingness and ability of buyers to purchase goods and services (at different prices) • Demand curve is typically downward sloping and to the right, meaning lower prices/larger purchases • Supply—willingness and ability of sellers to provide goods and services (at different prices) regardless of demand • Supply curve is typically upward sloping, meaning higher prices/higher supply

  4. Factors Affecting Demand for Automobiles: Consumer Preferences, Incomes and the Prices of Substitute Products

  5. Demand Curve for Gasoline

  6. Shift in the Demand Curve for Gasoline

  7. The Milk Industry Trying to Increase Overall Demand for its Products

  8. Supply Curve for Gasoline

  9. Factors Driving Supply • Central role in determining the overall supply of goods and services is played by factors of production • Natural resources • Human resources • Physical facilities • Entrepreneurship

  10. The intersection of the Supply and Demand Curves is the Equilibrium Price

  11. Macroeconomics: Issues for the Entire Economy • Capitalism: The Private Enterprise System economic system in which business success or failure depends on how well firms match and counter the offerings of competitors • Types of Competition • Pure competition • Monopolistic competition • Oligopoly • Monopoly

  12. Monopolistic Competition Relies on Differentiation of Products in a Market • Purina One Special Care

  13. Gulfstream • Airplanes: Oligopolistic Industrial Products

  14. Rawlings is the only supplier of baseballs for Major League Baseball and the NCAA

  15. Planned Economies: Communism and Socialism • Communism: planned economic system in which private property is eliminated, goods are owned in common, and factors of production and production decisions are controlled by the state • Socialism: planned economic system characterized by government ownership and operation of all major industries

  16. Mixed Market Economies • Economic system that combines characteristics of both planned and market economies in varying degrees, including the presence of both government ownership and private enterprise • Privatization

  17. Four Stages of the Business Cycle

  18. Productivity and the Nation’s Gross Domestic Product • Productivity—relationship between the goods and services produced in a nation each year and the inputs needed to produce them. • Gross domestic product—the sum of all goods and services produced within a nation’s boundaries each year.

  19. Price-Level Changes • Consumer Price Index (CPI)—measures the monthly average change in prices of goods and services • Inflation—rising prices caused by a combination of excess consumer demand and increases in the costs of raw materials, human resources, and other factors of production. • Deflation—falling prices economic situation characterized by soaring prices

  20. Four Types of Unemployment

  21. Managing the Economy’s Performance The government uses both Monetary and Fiscal Policy to control inflation, reduce unemployment, improve the general welfare of citizens, and encourage economic growth. • Monetary Policy— Handled by the Federal Reserve and involves increasing or decreasing the money supply • Fiscal Policy – Handled by the government through taxes and spending

  22. Fiscal Policy • Budget—organization’s plan for how it will raise and spend money during a given period of time. • Budget deficit—funding shortfall that results when the government spends more than the amount of money it raises through taxes and fees • National debt • Budget surplus • Balanced budget

  23. Where Federal Tax Revenues Come from

  24. What’s wrong with this picture?

  25. What’s wrong with this picture?

  26. What’s wrong with this picture? http://www.econoclass.com/whatswrongwithpicture.html

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