Economic Challenges facing Contemporary Business

1. 3 Chapter Economic Challenges facingContemporary Business Course: BUS 101 Lecturer: AunimaNazmunNahar (NNA)

2. Demand Supply Types of competition Economic system Evaluating economic performance Overview

3. Economics:social science that analyzes the choices people and governments make in allocating scarce resources Microeconomics: study of small economic units, such as individual, consumers, families and businesses Macroeconomics: study of a nation’s overall economic issues such as how an economy maintains and allocates resources and how a government’s policies affect the standards of its citizens

4. Demand: Willingness and ability of buyers to purchase goods and services • Supply: willingness and ability of sellers to provide goods and services

5. A demand curve graph of the amount of a product that buyers will purchase at different prices. Example: Green Chilli demand in Ramadan Demand Curve

6. Shift in Demand Curve

7. Factors affecting Demand & the demand curve shift

8. Supply curve graph that shows the relationship between different prices and the quantities that sellers will offer for sale, regardless of demand Supply Curve

9. Supply Curve Shift

10. Factors affecting Supply & the supply curve shift

11. Equilibrium price: the prevailing market price at which one can buy an item How demand and supply interact price Quantity

12. 1. Pure competition: market structure in which large numbers of buyers and sellers exchange homogeneous products and no single participant has a significant influence on price. Ex: Grocery and Fruit Bazar 2. Monopolistic competition: market structure, like that for retailing, in which large numbers of buyers and sellers exchange relatively well-differentiated (heterogeneous) products, so each participant has some control over price. Ex: Soap, Toothpaste, Shampoo industry Types of Competition

13. 3. oligopoly:market situation in which relatively few sellers compete and high startup costs form barriers to keep out new competitors. Ex: Mobile Network industry (GP, Robi, BL, Airtel, Teletalk) 4. Monopoly: Market situationin which a single seller dominates trade in a good or service for which buyers can find no close substitutes • Pure monopoly • Regulated monopoly

14. A pure monopoly occurs when a firm possesses unique characteristics so important to competition in its industry that they serve as barriers to prevent entry by would-be competitors. Ex: Microsoft • In regulated monopolies, a local, state, or federal government grants exclusive rights in a certain market to a single firm. Ex: BD Railway

16. Capitalism • Planned economy • Communism • Socialism • Mixed economy Economic Systems

17. Economic system that rewards businesses for their ability to perceive and serve the needs and demands of customers. • Competition—battle among businesses for consumer acceptance Capitalism

18. In a planned economy, government controls determine business ownership, profits, and resource allocation to accomplish government goals rather than those set by individual businesses. • Mainly two forms of planned economies are: • Communism • Socialism • Blending these two together generates another planned economy called • Mixed market economy Planned Economies: Communism, Socialism and Mixed market economy

19. Communism: Economic system in which all property would be shared equally by the people of a community under the direction of a strong central government. • North Korea • Socialism:Economic system which is characterized by government ownership and operation of major industries such as healthcare and communications • Denmark, Sweden and Finland has some socialism features

20. 3. Mixed market economies: economicsystems that draw from both types of economies, to different degrees. • France • Privatization: Conversion of government owned and operated companies into privately held businesses • Air Canada, Pubali Bank • Comparison of Alternative Economic systems • Follow book table 3.4 page 84

21. Flattening the Business Cycle: A nation’s economy tends to flow through various stages of a business cycle: prosperity, recession, depression, and recovery. Evaluating Economic Performance by Business Cycle

22. 1. In periods of economic prosperity;unemployment remains low, consumer confidence about the future leads to more purchases, and businesses expand by hiring more employees and by investing in new technology. 2. Recession lasts for six months or longer; During a recession consumers frequently postpone major purchases and shift buying patterns toward basic, functional products carrying low prices.

23. 3. If an economic slowdown continues in a downward spiral over an extended period of time, the economy falls into depression when foods and other necessities become scarce and jobs become rare and precious. 4. In the recovery stage of the business cycle, the economy emerges from recession and consumer spending picks up steam, unemployment begins to decline as business activity accelerates. Gradually, the concerns of recession begin to disappear, and consumers start eating out at restaurants, booking vacations, and purchasing new cars.

24. Inflation: rising prices caused by a combination of excess consumer demand and increases in the costs of raw materials, component parts, human resources, and other factors of production. Deflation: occurs when prices continue to fall. In Japan, where deflation has been a reality for several years, shoppers pay less for a variety of products ranging from foods to apartments. While this situation may sound ideal to consumers, it can weaken the economy. Price-Level Changes

25. Frictional unemployment applies to members of the workforce who are temporarily not working but are looking for jobs. • Ex: New graduates, people who have left jobs for any reason and are looking for other employment, and former workers who have decided to return to the labor force. • Seasonal unemployment is the joblessness of workers in a seasonal industry. • Ex: Farm laborers, fishery workers, and landscape employees Types of Unemployement

26. 3. Cyclical unemployment includes people who are out of work because of a cyclical contraction in the economy. • Ex: As a recession begins, unemployment levels commonly rise. At such times, even workers with good job skills may face temporary unemployment. Ex: Current condition in BD 4. Structural unemploymentapplies to people who remain unemployed for long periods of time, often with little hope of finding new jobs like their old ones. • This situation may arise because these workers lack the necessary skills for available jobs or because the skills they have are no longer in demand. Ex: Postman, Typist