Chapter One – Exploring the World of Business and Economics • Learning objectives
o Discuss your future in the world of business.
o Define business and identify potential risks and rewards.
o Define economics and describe two types of economic systems: capitalism and command economy.
o Identify the ways to measure economic performance.
o Outline the four types of competition.
o Summarize the factors that affect the business environment and the challenges that American businesses will encounter in the future.
• Why Study Business?
o For help in choosing a career
o To be a successful employee
o To start your own business
o The become a better informed consumer and investor
• Your future in the changing world of business
o Free enterprise
▪ Individuals are free to decide what to produce, how to produce it, and at what price to sell it
o What does it take to succeed in business?
▪ Have a dream—know what you want
▪ Adapt to changes in the environment—work hard to turn your dreams into reality
o Why study business?
▪ For help in choosing a career
▪ To be a successful employee
▪ To start your own business
▪ To become a better informed consumer and investor
• Business: a definition - The organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs
• Combining resources
▪ Human resources
• Qualified and trained workers who are treated well
o This will provide highest possible production
▪ Material resources
• Work space, machines
▪ Financial resources
• Outside investors or loans
▪ Informational resources
• Getting the best price, hiring industry, industry trends, competitors, ads/promotions
• Classifications of business
o Manufacturing businesses
▪ Process various materials
o Service businesses
▪ Produce services (e.g., haircuts, legal advice, tax preparation)
o Marketing intermediaries
▪ Buy products from manufacturers and resell
o Service industries are going up while marketing is going down (technology and outsourcing)
• Satisfying needs
o People buy goods and services not just to own them, but to satisfy particular needs
o Businesses that understand customer needs, and work to satisfy those needs, are usually successful
o The relationship between sales revenue and profit
▪ Profit is what remains after all business expenses have been deducted from sales revenue. A loss (negative profit) results when a firm’s expenses are greater than its revenues.
• To reward business owners for producing goods and services consumers want
• As payment for business owners assuming the risks of ownership
• Not being paid (employees, suppliers, and lenders)
• Losing whatever was invested in the business
▪ All of the different people or groups or people who are affected by the policies and decisions made by an organization
• Economic systems
▪ The study of how wealth (anything of value) is created and distributed
▪ The study of the decisions made by individuals and businesses
▪ The study of the national economy and the global economy
▪ The system through which a society creates and distributes wealth
o Factors of Production
▪ Land and natural resources
▪ A person who risks time, effort, and money to start and operate a business
o Differences in economic systems
▪ How they answer the four basic economic questions
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