Economics, Business Structures, and Ethics: Key Concepts and Policies

Economics

Study of how society uses resources.

Macroeconomics

Nation's economy as a whole.

Microeconomics

Individual/organization markets.

Capitalism

Private ownership, profit-driven.

Supply & Demand

Supply = willingness to sell, Demand = willingness to buy → meet at Equilibrium Price.

Socialism

Gov't owns key industries, high taxes, equality focus.

Communism

Gov't makes nearly all economic decisions.

Mixed Economy

Blend of market + gov't allocation (e.g., U.S.).

GDP

Total value of goods/services in a country.

Unemployment Rate

% of civilians jobless but seeking work.

Business Cycle

Boom → Recession → Depression → Recovery.

Fiscal Policy

Gov't taxes + spending to stabilize economy.

Monetary Policy

Federal Reserve manages money supply + interest rates.

Adam Smith

Freedom & self-interest drive wealth (Invisible Hand).

Capitalism's Four Rights

Property, profits, competition, choice.

Socialism Pros

Equality, free healthcare/education.

Socialism Cons

Brain drain, less innovation.

Communism Issues

Shortages, inefficiency, often depression.

Trends

Socialist countries moving toward capitalism, capitalists adding social programs.

U.S. System Today

Mixed economy, tech-driven productivity, growing national debt (~$37T).

Ethics

Standards of right vs. wrong in society.

Ponzi Scheme

Fraudulent investment, using new investor money to pay old investors (e.g., Madoff).

Whistleblower

Insider who exposes illegal/unethical behavior.

Corporate Social Responsibility (CSR)

Business concern for society's welfare.

Insider Trading

Using private company info for personal gain.

Social Audit

Evaluation of CSR progress.

Ethics vs. Legality

Something can be legal but unethical.

Restoring Trust

Punish violators, transparency, consider ethics.

Ethical Values

Integrity, honesty, respect, courage.

Unethical Actions

Cheating, cowardice, cruelty.

Management Role

Ethics starts at the top, must be modeled and enforced.

Codes of Ethics

Compliance-based (prevent unlawful acts) vs. integrity-based (guiding values).

CSR Responsibilities

To investors (avoid insider trading), to employees (wages, benefits, fairness), to community & environment.

Measuring CSR

Social audits ask: 'Do actions match words?'

Sole Proprietorship

One owner.

Partnership

Two+ owners. (General vs. Limited partnerships).

Corporation

Legal entity separate from owners.

Unlimited Liability

Owner fully responsible for debts.

Limited Liability

Owners/shareholders' risk limited to their investment.

S Corporation

Corporation taxed like partnership.

LLC (Limited Liability Company)

Flexible version of S corp, no eligibility restrictions.

Merger

Two firms join into one.

Acquisition

One company buys another.

Types of Mergers

Vertical, Horizontal, Conglomerate.

Franchise

Right to operate a business under an established brand.

Sole Proprietorship Pros

Easy, own boss, profits, no special taxes.

Sole Proprietorship Cons

Unlimited liability, limited growth, time-consuming.

Partnership Pros

More resources, shared skills, no special taxes.

Partnership Cons

Unlimited liability, disagreements, profit division.

Corporation Pros

Limited liability, raise capital, perpetual life.

Corporation Cons

Costly, double taxation, paperwork.

Franchise Pros

Support, brand recognition, lower failure.

Franchise Cons

Costs, shared profits, rules/restrictions.

M&A Examples

Facebook/Instagram (acquisition), T-Mobile/Sprint (merger).

Business

Activity providing goods/services at a profit.

Goods

Tangible products (computers, food, clothing, cars, appliances).

Services

Intangible products (education, health care, insurance, movies, travel, etc.).

Entrepreneur

Risks time & money to start/manage a business.

Revenue

Total money from selling goods/services.

Profit

Earnings above expenses.

Loss

Expenses greater than revenues.

Risk

Chance of losing time & money if business fails.

Standard of Living

Amount of goods/services people can buy with their money.

Quality of Life

Well-being (freedom, environment, education, health care, safety, leisure).

Stakeholders

People affected by a business's actions (students, employees, banks, community).

Outsourcing

Hiring other firms (often overseas) for functions (production, accounting).

Onshoring/Insourcing

Foreign firms opening operations in the U.S. (Hyundai, BMW, Toyota, Honda).

Nonprofit Organization

Doesn't aim for profit; uses gains to meet social/educational goals.

Well-known nonprofits

United Way, American Red Cross, Salvation Army, American Cancer Society.

Five Factors of Production

Land (natural resources), Labor (workers), Capital, Entrepreneurship, Knowledge (most important — Peter Drucker).

Business Environment

Factors helping/hindering business growth.

Economic/Legal Environment

Private ownership, free trade, enforceable contracts, stable currency, low corruption.

Technological Environment

Phones, computers, software for efficiency/productivity.

Effectiveness

Desired result.

Efficiency

Least resources used.

Productivity

Output ÷ Input.

E-Commerce

Online buying/selling: B2C, B2B, C2C.

Cloud Storage

Data stored in logical pools across multiple servers.

Database

Electronic storage file for information.

Identity Theft

Stealing personal info for illegal use.

Social Environment

Demographics (population size, age, race, gender, income, religion, occupation).

Technology & Agriculture

Robotics/AI boost productivity & efficiency.

U.S. Business Evolution

Services = 80%+ of U.S. economy.

Job Growth

Since 1980s, service industries = most job growth (esp. high-paying).

Employability

To stay employable: be smarter & more resourceful than robots.