Business in a Changing World: CHAP 1.

What is a business?

Organizations that try to earn a profit by providing products that satisfy a need

Goods

Tangible products

EX: Computers, food, clothing, cars, etc.

Services

Intangible products

EX: Haircut, healthcare, education, etc.

Success in a business

The strategy of finding a need and filling it

Risk

The chance of losing time and money on a business that may not prove profitable

Profit

Difference between what it costs to make and sell a product and what a customer pays for it

Nonprofit organizations

Provide goods and services

Do not share the purpose of earning profits

Engage in management, marketing, and finance to reach goals

Social Entrepreneurs

People who start nonprofits

Stakeholders

Groups that have a stake in the success and outcome of a business

To maintain profit

Quality products

Efficient

Socially responsible

Economics

The study of how resources are distributed for the production of goods and services within a social system

Microeconomics

The behavior of decision-takers within the economy, such as individuals, households, and firms

How it affects individuals and business

Macroeconomics

Businesses as a whole and how the government plays a role

Natural resources

Land, forests, minerals, water, and other things that are not made by people

Human resources

The physical and mental abilities that people use to produce goods and services

Financial resources

The funds used to acquire the natural and human resources needed to provide products

Economic resources

A description of how a particular society distributes its resources to produce goods and services

Communism

First described by Karl Marx as a society in which the people without regard to class, own all the nation’s resources

Socialism

The government owns and operates basic industries but individuals own most businesses

Capitalism

Individuals own and operate the majority of businesses that provides goods and services

Free-market system

Pure capitalism, in which all economic decisions are made without government intervention

Mixed economics

Economies made up of elements from more than one economic system

Demand

The number of goods and services that consumers are willing to buy at different prices at a specific time

Supply

The number of products-goods and services-that businesses are willing to sell at different prices at a specific time

Equilibrium price

The price when the number of products the a business is willing to supply equals the amount of products that consumers are willing to buy at a specific time

Elasticity

Demand refers to the change in demand when there is a change in another economic factor, such as price or income

Pure competition

There are many small businesses selling one product

Monopolistic competition

There are fewer businesses than in pure-competition environment and the differences among the goods they sell are small

Oligopoly

Very few businesses selling a product

Monopoloy

Only one business selling a product

Inflation

Condition characterized by a continuing rise in prices

GDP

The sum of all goods and services produced by a country in a year

Recession

A decline in production,employment, and income

Depression

Unemployment is very high, and business output is sharply reduced

Frictional unemployment

Voluntary employment transitions within an economy

Structural unemployment

Long lasting unemployment caused by a shift in the economy

Cyclical unemployment

Businesses not having enough demand for labor to employ all those who are looking for work at that point within the business cycle

Seasonal unemployment

Arises due to fluctuations in the demand for labor throughout the year.

Deflation

The general decline in the price level of goods and services

Disinflation

A temporary slowing of the pace of price inflation

Thomas Malthus

Economist - late 1700s - early 1800s

Believed if the rich had most of the wealth and the poor had most of the population, resources would run out.

Too many people

Radical birth control

Adam Smith

Father of capitalism, modern economics

Creating more resources to make everyone better off

People will work hard if they’re rewarded

Capitalism is the “invisible hand”.

4 Basic rights of capitalism

Right to own property

Right to prprofits right to fair competition

Right to freedom of choice

How do you count unemployment rate in the U.S.

You MUST be 16 years old

Discouraged workers

People that do NOT want to work, but have given up

Demand-pull inflation

Created by excess demand

Cost-push inflation

Created by increases in the costs of the factors of production

Hyperinflation

Period marked by rapidly increasing prices

Producer Price Index (PPI)

Measures prices from sellers perspective

Finished goods

Goods that will not be changed anymore before being sold

Intermediate goods

Goods that require further processing such as food

Crude goods

Raw materials