Chapter 1: Exploring the World of Business and Economics

1. Chapter 1: Exploring the World of Business and Economics

2. Learning Objectives • Discuss what you must do to be successful in the world of business. • Define business and identify potential risks and rewards. • Define economicsand describe the two types of economic systems: capitalism and command economy. • Identify the ways to measure economic performance. • Examine the four different phases in the typical business cycle. • Outline the four types of competition. • Summarize the factors that affect the business environment and the challenges American businesses will encounter in the future.

3. Tips for Studying Business • Prepare before you go to class. • Read the chapter. • Underline or highlight important concepts. • Take notes. • Apply the concepts. • Practice critical thinking. • Prepare for exams. • These study outlines will help.

4. Key Terms and Ideas • Definefree enterprise. • Know the definition of business. • Understand why studying business is important. • What are the four resources that businesses combine in order to be successful? • Know the difference between manufacturing businesses and service businesses.

5. Satisfying Needs • Why do people buy goods and services? • What must businesses understand about customer needs to help them be successful?

6. Sales Revenue and Profit • What is profit? • How is it calculated? • Know the purposes of profit. • Who/What are stakeholders? • Know the difference between primary and secondary stakeholders.

7. Types of Economic Systems • Be able to define and explain: • Economics • Microeconomics • Macroeconomics • Economy • Factors of production • Entrepreneur

8. Differences in Economic Systems • List and define principle characteristics of the major economic systems. • How do these systems differ? • What are the four basic economic questions that economic systems seek to address?

9. Capitalism • How is capitalism defined? • What does Adam Smith’s laissez-faire capitalism have to do with modern capitalism? • What are the basic assumptions and principal tenets of Smith’s laissez-faire capitalism?

10. Capitalism (cont.) • What are distinguishing characteristics of capitalism in the United States? • What role do the following groups play in a U.S.-style capitalist system? • Households • Businesses • Governments

11. Types of Economic Systems • Define command economy. • What are the two major command economies? • What are their key characteristics? • How do the two command economies differ?

12. Measuring Economic Performance • Define productivity. • What are major economic indicators of productivity? • How are they calculated? • What do they tell us about the economy?

13. Economic Performance: Key Terms • Be able to define and explain the significance of: • Gross domestic product (GDP) • Inflation • Deflation • Unemployment rate • Consumer price index (CPI) • Producer price index (PPI)

14. Evaluating a Nation’s Economic Health • Why is it important to occasionally evaluate a nation’s economic health? • Be able to define the following terms and explain what they tell us about economic health: • Balance of trade • Bank credit • Corporate profits • Inflation rate • National income • New housing starts • Prime interest rate

15. The Business Cycle • What is the business cycle? • Define recession and depression. • What are monetarypolicies? • What role does the Federal Reserve play in the United States’ monetary policies? • Be able to define: • Fiscal policy • Federal deficit • National debt

16. Types of Competition • What is competition? • Know the different types of competition. • Be able to define: • Perfect (or pure) competition • Supply • Demand • Equilibrium (market) price • Where does the equilibrium price occur on the supply and demand curves? • Monopolistic competition • What can firms do to gain a competitive advantage in a monopolistic competition situation?

17. Types of Competition (cont.) • Define and identify key characteristics of the following types of competition: • Oligopoly • Monopoly • Know the difference between: • Natural monopoly and • Legal (limited) monopoly

18. American Business Today • What is a standard of living? • How is it measured? • Know the basic stages of business development in the United States. • Explain the differences between the four stages ofearly business development: • Barter system • Domestic system • Factory system • Specialization

19. American Business Today (cont.) • Know the key characteristics of business development in the 1900s. • How did industries change? • Major economic events that shaped business development and economic policy. • Changes in the late 20th century and early 21st century that altered standards of living and consumption patterns. • What is e-business and how has it changed businesses?

20. American Business Today (cont.) • What are the defining issues and innovations of the 21st century so far? • The role played by technology • Service businesses • Why are many pessimistic about the U.S.’s future economic prosperity? • Be able to discuss the current business environment.