© Prentice Hall, 2007Excellence in Business, 3eChapter 1 - 1 In Pursuit of Prosperity: The...

© Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 1

In Pursuit of In Pursuit of Prosperity: The Prosperity: The

Fundamentals of Fundamentals of Business and Business and

EconomicsEconomics


This Course This Course Will Help Your CareerWill Help Your Career

• Learn what it takes to run a business

• Build a business vocabulary

• Develop workplace skills

• Learn about various occupations

• Appreciate business careers today


What is a Business?What is a Business?

• For-Profit

–Money motive

• Not-for-profit

–Social service


Categories of BusinessCategories of Business

• Goods-producing

• Services


What is Economics?What is Economics?

• Microeconomics

• Macroeconomics

• Economic system


Factors of ProductionFactors of Production

• Resources

• Capital

• Entrepreneurs

• Knowledge


Types of Economic Types of Economic SystemsSystems

• Free-market system

–Capitalism

–Mixed capitalism

• Planned system

–Socialism

–Communism


MicroeconomicsMicroeconomics

The Forces of Supply and Demand


How Does a Free-Market How Does a Free-Market System Work?System Work?

• Supply and demand

• Competition

• Government intervention


Understanding DemandUnderstanding Demand

• Consumer income

• Consumer preferences

• Price of substitute goods

• Price of complementary goods

• Advertising and promotion spending

• Expectations about future prices


Demand Curve for Airline Demand Curve for Airline TicketsTickets

• A demand curve is the relationship between

the amount of product that buyers will

purchase at various prices.

• Demand curves typically slope downward.

• When airlines reduce ticket prices, demand

for airline tickets rises.


Expected Shifts in Demand CurveExpected Shifts in Demand Curve

Consumer Income

Consumer Preferences

Price of Substitutes

Price of Complementary Goods

Advertising-Promotion

Consumer Expectations

Number of Buyers

Variable Shifts Right When:

Increases

More Favorable

Increases

Decreases

Increases

Optimistic

Increases

Shifts Left When:

Decreases

Less Favorable

Decreases

Increases

Decreases

Pessimistic

Decreases


Understanding SupplyUnderstanding Supply

• Goods and services

• Supply

• Price


Supply Curve for Airline Supply Curve for Airline TicketsTickets

• A supply curve is the relationship between

prices and quantities sellers are willing to

offer for sale, regardless of demand.

• Supply curves typically slope upward.

• When ticket prices rise, quantity supplied

also increases.


Expected Shifts in Supply CurveExpected Shifts in Supply Curve

Costs of Inputs

Number of Competitors

New Technology

Suppliers Expect ThatFuture Sales Prices

Variable Shifts Right When:

Decreases

Decreases

Decreases Production Costs

Will Decline

Shifts Left When:

Increases

Increases

Increases Production Costs

Will Increase


How Demand and Supply How Demand and Supply InteractInteract

• High price reduces demand

• Low price reduces supply

• Right price balances supply and

demand


MacroeconomicsMacroeconomics

Issues for the Entire Economy


Free-Market CompetitionFree-Market Competition

• Pure competition

• Monopoly

• Oligopoly

• Monopolistic competition


Competitive AdvantageCompetitive Advantage

• Price

• Speed

• Quality

• Service

• Innovation


The Role of GovernmentThe Role of Government

• Promotes competition

• Regulates industries

• Deregulates industries

• Protects rights of stakeholders

• Contributes to economic stability


Fostering CompetitionFostering Competition

• Antitrust legislation

• Mergers and acquisitions


Regulating and Regulating and Deregulating IndustriesDeregulating Industries

• Fair competition

• Business ethics

• Working conditions

• Public safety


Protecting StakeholdersProtecting Stakeholders

• Consumer Product Safety Commission (CPSC)

• Environmental Protection Agency (EPA)

• Equal Opportunity Employment Commission

(EEOC)

• Federal Communications Commission (FCC)

• Federal Aviation Administration (FAA)

• Federal Energy Regulation Commission (FERC)


Protecting StakeholdersProtecting Stakeholders

• Federal Highway Administration (FHA)

• Federal Trade Commission (FTC)

• Food and Drug Administration (FDA)

• Interstate Commerce Commission (ICC)

• Occupational Safety and Health Administration

(OSHA)

• Securities and Exchange Commission (SEC)


Contributing to Economic Contributing to Economic StabilityStability

• Business cycle

–Economic expansion

–Economic contraction

• Fiscal policy

–Revenue and spending

• Monetary policy

– Interest rates


Monitoring Major Monitoring Major Economic IndicatorsEconomic Indicators

• Interest rates

• Housing starts

• Unemployment statistics

• Durable-goods orders


Measuring Price ChangesMeasuring Price Changes

• Purchasing power

– Inflation

–Deflation

• Consumer Price Index (CPI)

• Producer Price Index (PPI)


Measuring National Measuring National OutputOutput

Gross NationalGross NationalProduct (GNP)Product (GNP)

Gross DomesticGross DomesticProduct (GDP)Product (GDP)Dollar ValueDollar Value

YesYesYesYesFinal Goods Final Goods and Servicesand Services

YesYesYesYesDomestic BusinessesDomestic Businesses

NoNoYesYesForeign-Owned Foreign-Owned BusinessesBusinesses

YesYesNoNoOverseas OperationsOverseas Operations


Ten Economic Ten Economic Performance IndicatorsPerformance Indicators• Prime interest rate• Housing starts• Unemployment

rate• Durable-goods

orders• Labor productivity

rate

• Balance of trade• Inflation rate• Consumer price

index• Gross domestic

product• Producer price

index


History of U.S. Economic History of U.S. Economic GrowthGrowth

• Age of Industrialization (1900-1944)

• Postwar Golden Era (1945-1969)

• Turbulent Years (1970-1979)

• Rise of Global Competition (1980-1989)

• New Economy and Beyond (1990 to Today)


Challenges of Challenges of GlobalizationGlobalization

• Products and servicesProducts and services

• Managing a small businessManaging a small business

• Globalization and workforce diversityGlobalization and workforce diversity

• Ethics and social responsibilityEthics and social responsibility

• Technology and electronic commerceTechnology and electronic commerce

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© Prentice Hall, 2007Excellence in Business, 3eChapter 1 - 1 In Pursuit of Prosperity: The...

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