Introduction to Business

Ch. 1 Understanding Economic Systems and Business

Learning Outcomes

1. How do businesses and not-for-profit organizations help create our standard of living?
2. What are the sectors of the business environment, and how do changes in them influence business decisions?
3. What are the primary features of the world’s economic systems, and how are the three sectors of the U.S. economy linked?
4. How do economic growth, full employment, price stability, and inflation indicate a nation’s economic health?
5. How does the government use monetary policy and fiscal policy to achieve its macroeconomic goals?
6. What are the basic microeconomic concepts of demand and supply, and how do they establish prices?
7. What are the four types of market structure?
8. Which trends are reshaping the business, microeconomic, and macroeconomic environments and competitive arena?

How do businesses and not-for-profit organizations help create our standard of living?

1. A business is an organization that strives for a profit by providing goods and services desired by its customers
2. Goods vs. Services
3. The standard of living of any country is measured by the output of goods and services people can buy with the money they have.

How do businesses and not-for-profit organizations help create our standard of living?

1. Quality of life refers to the general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time.
2. Business:
1. Risk
2. Revenue
3. Costs
4. profit

4 + 1 Factors of production

1. natural resources
1. Commodities (mineral, farmland, etc)
2. labor (human resources)
• the economic contributions of people working with their minds and muscles. 
3. Capital
• The tools, machinery, equipment, and buildings used to produce goods and services and get them to the consumer
4. Entrepreneurship
• people who combine the inputs of natural resources, labor, and capital to produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal.
5. Knowledge
• the combined talents and skills of the workforce and has become a primary driver of economic growth.
• doubled over the last 30 years, with an estimated 2 million knowledge job openings annually.

2. What are the sectors of the business environment, and how do changes in them influence business decisions

Exhibit 1.4 The Dynamic Business Environment

https://oec.world/en/profile/country/usa

https://www.businessinsider.com/brands-that-announced-plans-to-change-review-racist-mascots-logos-2020-6

3. What are the primary features of the world’s economic systems, and how are the three sectors of the U.S. economy linked?

• A nation’s economic system is the combination of policies, laws, and choices made by its government to establish the systems that determine what goods and services are produced and how they are allocated. 
• Economics is the study of how a society uses scarce resources to produce and distribute goods and services.

Table 1.1 The Basic Economic Systems of the World

Table 1.1, The Basic Economic Systems of the World - Continued

4. How do economic growth, full employment, price stability, and inflation indicate a nation’s economic health?

• the gross domestic product (GDP) is the total market value of all final goods and services produced within a nation’s borders each year.
1. The rate of growth in real GDP (GDP adjusted for inflation) is also important.
• Unemployment rate is percentage of the total labor force that is not working but is actively looking for work.
• It excludes “discouraged workers,” those not seeking jobs because they think no one will hire them.
• Frictional unemployment is short-term unemployment that is not related to the business cycle. (ex: people who are unemployed while waiting for a new job)
• Structural unemployment is also unrelated to the business cycle but is involuntary. (ex: if the birthrate declines, fewer teachers will be needed.)
• Cyclical unemployment occurs when a downturn in the business cycle reduces the demand for labor throughout the economy. (ex: recession, etc)

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5. How does the government use monetary policy and fiscal policy to achieve its macroeconomic goals?

• Monetary policy refers to a government’s programs for controlling the amount of money circulating in the economy and interest rates.
• The Federal Reserve System (the Fed), the central banking system of the United States, prints money and controls how much of it will be in circulation.
• https://www.cnbc.com/2020/08/05/the-ballooning-money-supply-may-be-the-key-to-unlocking-inflation-in-the-us.html

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Exhibit 1.9 Revenues and Expenses for the Federal Budget

Exhibit 1.11 Demand Curve for Jackets for Snowboarders

Exhibit 1.12 Supply Curve for Jackets for Snowboarders

Exhibit 1.13 Equilibrium Price and Quantity for Jackets for Snowboarders

Exhibit 1.14 Shifts in Demand for Jackets for Snowboarders

Table 1.3 4 types of Market Structures

• The number of suppliers in a market defines the market structure.

Table 1-3, Comparison of Market Structures - continued

8. Which trends are reshaping the business, microeconomic, and macroeconomic environments and competitive arena?

1. Changing workforce demographics
• https://www.aarp.org/work/working-at-50-plus/info-2020/coronavirus-early-retirement.html

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