Economic Environment of Business

1. CHAPTER8 Economic Environment of Business 8.1 Economic Wants 8.2 Economic Systems 8.3 Fundamentals of Capitalism 8.4 Managing the Economy

2. 8.1 Economic Wants GOALS • Describe economic concepts that apply to satisfying economic wants. • Explain the role of capital formation in an economy. CHAPTER 8

3. Wants • Economic wants—desire for scarce material goods and services • Noneconomic wants—desire for nonmaterial things that are not scarce, such as air, sunshine, friendship, and happiness CHAPTER 8

4. Satisfying Our Economic Wants • Utility • Form utility • Place utility • Possession utility • Time utility • Factors of production • Natural resources • Labor • Capital goods • Entrepreneurship CHAPTER 8

5. Capital Formation • Capital formation—the production of capital goods CHAPTER 8

6. 8.2 Economic Systems GOALS • Discuss three economic systems and three political-economy systems. • Explain why a business considers the political-economy system of a country. CHAPTER 8

7. Types of Economic Systems • Market economy • Command economy • Mixed economy CHAPTER 8

8. Types of Political-Economy Systems • Capitalism • Socialism • Communism CHAPTER 8

9. Comparison of Political-Economy Systems CHAPTER 8

10. 8.3 Fundamentals of Capitalism GOALS • Describe why private property is important to capitalism. • Describe how prices are set in a capitalistic system. CHAPTER 8

11. Private Property • Right to private property • Profit CHAPTER 8

12. Price Setting • Demand • Supply • Competition • Income distribution CHAPTER 8

13. 8.4 Managing the Economy GOALS • Explain how economic growth can be promoted and measured. • List basic economic problems that exist and state what government can do to correct the problems. CHAPTER 8

14. Promoting Economic Growth • Increase the number of people in the workforce • Increase the productivity of the workforce • Increase the supply of capital goods • Improve technology by inventing new and better machines and better methods for producing goods and services • Redesign work processes in factories and offices to improve efficiency • Increase the sale of goods and services to foreign countries • Decrease the purchase of goods and services from foreign countries CHAPTER 8

15. Measuring Economic Growth • Gross domestic product • Consumer price index CHAPTER 8

16. Identifying Economic Problems • Recession • Inflation • Correcting economic problems • Business cycles • Depression CHAPTER 8

17. Business Cycle Phases CHAPTER 8