When a business or entrepreneur successfully fills a market's need and has money after paying salaries and expenses is called what?

Business

Any activity that seeks to provide goods and services to others while operating at a profit.

  Entrepreneur

A person who risks time and money to start and manage a business.

            Nonprofit Organization 

An organization whose goals do not include making a personal profit for its owners or organizers.

Revenue

The total amount of money a business takes in during a given period by selling goods and services

Profit

The amount of money a business earns above and beyond what it spends for salaries and other expenses.

  What is a Loss?

Occurs when a business’s expenses are more than its revenues.

 Risk

 The chance an entrepreneur takes of losing time and money on a business that may not prove profitable.

True or False:

all businesses make the same amount of profit.

True or False:

Businesses take risks, but with great risks could come great profit or great loss.

HOW is TAX MONEY USED?

Taxes are used to provide:

•       Hospitals

•       Schools

•       Libraries

•       Playgrounds

•       Roads

•       Fire Protection

•       Police Protection

•       Environmental Programs

•       Support for People in Need

Standard of Living

The amount of goods and services people can buy with the money they have.

•        The U.S. has one of the highest standards of living in the world.

•        Workers in other countries may make more money, but prices for products are higher.

Quality of Life

The general well-being of a society in terms of its political freedom, natural environment, education, healthcare, safety, amount of leisure and rewards that add to personal satisfaction.

FIVE FACTORS of PRODUCTION

FIVE FACTORS of PRODUCTION

 Used to grow businesses and increase wealth:

·         Land

·         Labor

·         Capital

·         Entrepreneurship

·         Knowledge

STAKEHOLDERS

All the people who stand to gain or lose by the policies and activities of a business and whose concerns the businesses need to address

WHAT is the BUSINESS ENVIRONMENT?

·         The economic and legal environment

·         The technological environment

·         The social environment’

·         The competitive environment

·         The global business environment

GOVERNMENT’S ROLE in BUSINESS

How can a government promote business?

Government can promote business by:

•       Minimizing spending and keeping taxes and regulations to a minimum.

•       Allowing private ownership of businesses.

•       Minimizing interference with the free exchange of goods and services.

•       Passing laws that enable businesspeople to write enforceable contracts.

•       Establishing a currency that’s tradable in world markets.

•       Minimizing corruption.

Technology

Everything from phones to copiers and the various software programs that make businesses more effective, efficient and productive.

Effectiveness

Producing the desired result.

  Efficiency

Producing goods and services using the least amount of resources.

   Productivity

The amount of output you generate given the amount of input (example: hours you work).

What did Adam Smith believe?

Smith believed that:

•       Freedom was vital to any economy’s survival.

•       Freedom to own land or property and the right to keep the profits of a business is essential.

•       People will work hard if they believe they will be rewarded.

Contrary to Malthus, Why do

some economists believe a large population can be a resource?

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-       An educated population is highly valuable.

-       Business owners provide jobs and economic growth for their employees and communities as well as for themselves.

WHAT is DIVERSITY?

The U.S. Equal Employment Opportunity Commission prohibits laws discriminating against:

-             Age

-             Disability

-             Genetic information

-             National origin

-             Pregnancy

-             Race

-             Religion

-             Sex

 What are some IMPORTANT CHANGES to the GLOBAL ENVIRONMENT?

           Growth of global competition.

          Increase of free trade among nations.

             Development of efficient distribution systems.

                   Advances in communication systems.

Economics

The study of how society employs resources to produce goods and services for consumption among various groups and individuals.

Macroeconomics

Concentrates on the operation of a nation’s economy as a whole.

Microeconomics

Concentrates on the behavior of people and organizations in markets for particular products or services.

What did THOMAS MALTHUS believe?

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

Who called economics "DISMAL SCIENCE"?

and

 Who's beliefs led him to call economics this?

  Malthus led the writer Thomas Carlyle to call economics “The Dismal Science.”

True or False:

Neo-Malthusians believe there are too many people in the world and believe the answer is radical birth control.

Socialism

An economic system based on the premise that some basic businesses, like utilities, should be owned by the government in order to more evenly distribute profits among the people.

•        Entrepreneurs run smaller businesses.

•        Citizens are highly taxed.

•        Government is more involved in protecting the environment and the poor.

FREE MARKET BENEFITS and LIMITATIONS

Benefits:

Benefits:

•It allows for open competition among companies.

•Provides opportunities for poor people to work their way out of poverty.

Limitations:

•People may start to let greed drive them.

FOUR DEGREES of COMPETITION

       Perfect Competition

Monopolistic Competition

Oligopoly

Monopoly

The INVISIBLE HAND THEORY

 When self-directed gain leads to social and economic benefits for the whole community.

The INVISIBLE HAND THEORY APPLIED:

As people improve their own situation in life, they help the economy prosper through the production of goods, services and ideas.

Capitalism

 All or most of the land, factories and stores are owned by individuals, not the government, and operated for profit.

STATE CAPITALISM

 When the state, rather than private owners, run some businesses.

Two well-known countries practicing state capitalism:

-       China

-       Russia

CAPITALISM’S FOUR BASIC RIGHTS

1.  The right to own private property.
2.             The right to own a business and keep all that business’s profits.
3.        The right to freedom of competition.
4.                    The right to freedom of choice. 

ROOSEVELT’S FOUR ADDITIONAL RIGHTS

1.                Freedom of speech and expression.
2.        Freedom to worship in your own way
3. Freedom from want.
4.   Freedom from fear.

What are FREE MARKETS and what is the result?

 Decisions about what and how much to produce are made by the market.

Hence,

1.   Consumers send signals about what they like and how they like it.
2.     Price tells companies how much of a product they should produce.
3.  If something is wanted but hard to get, the price will rise until more products are available.

What do CIRCULAR FLOW MODEL PRICING show the seller?

CIRCULAR FLOW MODEL PRICING

•A seller may want to sell shirts for $50, but only a few people may buy them at that price.

•If the seller lowers the price to $30, more people buy the shirts.

•The seller establishes a price of $30 based on what consumers are willing to pay.

SUPPLY CURVES

•Supply -- The quantities of products businesses are willing to sell at different prices.

DEMAND CURVES

•Demand -- The quantities of products consumers are willing to buy at different prices.

EQUILIBRIUM

•Market Price (Equilibrium Point) -- Determined by supply and demand, this is the negotiated price

Supply

The quantities of products businesses are willing to sell at different prices.

Demand

The quantities of products consumers are willing to buy at different prices.

Market Price (Equilibrium Point) 

 Determined by supply and demand, this is the negotiated price

FISCAL POLICY

Four Phases of Long-Term Business Cycles:

1.                 Economic Boom
2.                 Recession – Two or more consecutive quarters of decline in the GDP.
3.               Depression – A severe recession.
4.                 Recovery – When the economy stabilizes and starts to grow. This leads to an Economic Boom.

BUSINESS CYCLES

 Periodic rises and falls that occur in economies over time.

PRODUCTIVITY in the SERVICE SECTOR

1. The higher the productivity, the lower the costs of producing goods and services. This helps lower prices.
2.    New technology adds to the quality of the services provided, but not to the worker’s output.
3.    A new form of measurement needs to be created to account for the quality as well as the quantity of output.

PRODUCTIVITY

 Productivity in the service sector grows more slowly because of fewer technologies.

Consumer Price Index

  Monthly statistics that measure the pace of inflation or deflation.

•        The government computes the costs of goods and services (housing, food, apparel, medical care, etc.) to see if they are going up or down.

•        The wages, rent/leases, tax brackets, government benefits and interest rates of some citizens are based upon the CPI.

BENEFITS of SOCIALISM

•Social equality

•Free education

•Free healthcare

•Free childcare

•Longer vacations

•Shorter work weeks

•Generous sick leave

NEGATIVES of SOCIALISM

NEGATIVES of SOCIALISM

•        Few incentives for business people to take risks.

•        Brain Drain: Some of a country’s best and brightest workers (i.e. doctors, lawyers and business owners) move to capitalistic countries.

•        Fewer inventions and innovations because the reward is not as great as in capitalistic countries.

Stagflation

Economy is slowing, but prices are going up.

Deflation

Prices are declining because too few dollars are chasing too many goods.

Disinflation 

When the price increases are slowing (inflation rate declining).

Inflation

 The general rise in the prices of goods and services over time.

What are the Four Types of Unemployment?

1.                   Frictional
2.                Structural
3.                 Cyclical
4.                 Seasonal 

Gross Output (GO)

 A measure of total sales volume at all stages of production.

GROSS DOMESTIC PRODUCT

 Total value of final goods and services produced in a country in a given year. As long as a company is within a country’s border, their numbers go into the country’s GDP (even if they are foreign-owned).

What type of economies are TRENDING TOWARD MIXED ECONOMIES?

1.                         Socialist governments are cutting back on social programs, lowering taxes and moving toward capitalism.
2.   Capitalist countries are increasing social programs and moving more toward socialism.

MIXED ECONOMIES

 Some allocation of resources is made by the market and some by the government.

•Neither free-market nor command economies have created sound economic conditions so countries use a mix of the two economic systems.

TWO MAJOR ECONOMIC SYSTEMS

1. Free-Market Economies -- The market largely determines what goods and services are produced, who gets them, and how the economy grows.
2. Command Economies -- The government largely determines what goods and services are produced, who gets them, and how the economy will grow.

What happens with COMMUNISM in an economy?

and

Define COMMUNISM. 

Communism -- An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production.

•        Prices don’t reflect demand which may lead to shortages of items, including food and clothing.

•        Most communist countries today suffer severe economic depression and citizens fear the government.

STRATEGIC ALLIANCES

•        They don’t typically share costs, risks, management or profits.

•        Strategic alliances provide broad access to markets, capital and technical expertise.

Define LICENSING

When a firm (licensor) provides the right to manufacture its product or use its trademark to a foreign company (licensee) for a fee (royalty).

How can Licensing can benefit a firm

-       Gaining revenues it wouldn’t have otherwise generated.

-       Spending little or no money to produce or market their products

What is a JOINT VENTURES?

 A partnership in which two or more companies join to undertake a major project.

What are some of the benefits of joint ventures?

-         Shared technology and risk.

-         Shared marketing and management expertise.

-         Entry into markets where foreign companies are often not allowed unless goods are produced locally.

Define: 

CONTRACT MANUFACTURING

 A foreign company produces private-label goods to which a domestic company then attaches its own brand name or trademark. A form of outsourcing.

Define

FRANCHISING

A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product/service in a given area.

FORCES AFFECTING GLOBAL TRADE

•Sociocultural

•Economic and Financial

•Legal and Regulatory

•Physical and Environmental

SOVEREIGN WEALTH FUNDS

 Funds controlled by governments holding investment stakes in foreign companies.

Why do the size of the SOVEREIGN WEALTH FUNDS and the fact that they are government-owned make some fear they might be used for?

-         Geopolitical objectives.

-         Gaining control of strategic natural resources.

-         Obtaining sensitive technologies.

-         Undermining the management of the companies in which they invest.

MULTINATIONAL CORPORATIONS

 A company that manufactures and markets products in many different countries and has multinational stock ownership and management.

Only firms that have manufacturing capacity or some other physical presence in different nations can truly be multinational.

FOREIGN DIRECT INVESTMENT

 The buying of permanent property and businesses in foreign nations.

Is there a global system of laws that govern how businesses is done? If there are, are these laws or regulations consistent? Do U.S. based businesses have to follow laws if they are over seas conducting business? 

LEGAL and REGULATORY FORCES

•There’s no global system of laws.

•Laws may be inconsistent.

•U.S. businesses must follow U.S. laws while conducting global business.

What is and causes an Embargo?

A complete ban on the import or export of a certain product or the stopping of all trade with a particular country.

•Political disagreements can lead to embargos, like the U.S. embargos against Cuba, Iran and North Korea.

Import Quota

Limits the number of products in certain categories a nation can import.

What are TARIFFS?

 Taxes on imports, making imported goods more expensive.

Ex: solar panels

How many kinds of tariffs are there?

There are 2 kinds of tariffs:

-               Protective – Raise the retail price of imports so domestic goods are competitively priced.

-               Revenue – Raise money for governments.

What is TRADE PROTECTIONISM?

 The use of government regulations to limit the import of goods and services.

What do TRADE PROTECTIONISM advocates believe it allows?

Advocates of protectionism believe it allows domestic producers to survive, grow and produce jobs.