©2007 Prentice Hall 1-1 The Fundamentals of Business and Economics Chapter 1

©2007 Prentice Hall1-1

The Fundamentals of Business and Economics

Chapter 1

Chapter 1 Objectives

After studying this chapter, you will be able to:• Define what a business is and identify four vital

social and economic contributions that businesses make.

• Differentiate between goods-producing and service businesses, and list five factors contributing to the increase in the number of service businesses.

• Differentiate between a free-market system and a planned system.

©2007 Prentice Hall1-2

Chapter 1 Objectives, cont.

• Explain how supply and demand interact to affect price.

• Discuss the four major economic roles of the U.S. government.

• Explain how a free-market system monitors its economic performance.

• Identify five challenges you will face as a business professional in the coming years.

©2007 Prentice Hall1-3

How this Course Will Help Your Career

• Understand what it takes to be an entrepreneur

• Learn the lingo

• Develop soft skills

• Learn about career opportunities

• Understand the role business plays in society

• See the business world through the eyes of a business rather than a consumer

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What is Business?

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For-ProfitFor-Profit Non-ProfitNon-Profit

Money MotiveMoney Motive Social ServiceSocial Service

Ethical ConductEthical Conduct

Social ResponsibilitySocial Responsibility

EfficiencyEfficiency EffectivenessEffectiveness

Web 2.0

• Definition

• Activities: Blogging Podcasting Wikis Newsfeeds Tagging Virtual Worlds

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Types of Business

Goods Producing Business

Service Business

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Capital Intensive Labor Intensive

Why is the Service Sector Growing?

• More disposable income.

• Changing demographic patterns and lifestyle trends.

• Support complex goods and new technology.

• Professional advice.

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Economics

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Factors of Production

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Economic System

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Goods Services

HumanResources

NaturalResources

Capital KnowledgeEntrepreneurs

Factors of Production

ScarceResources

Types of Economic Systems

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CapitalismMixed

CapitalismSocialism Communism

Privatization

Free-MarketSystem

PlannedSystem

Supply and Demand

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10 15 20 25 30

Pairs of blue jeans (quantity)

Pri

ce$35

$30

$25

$20

$15

$10

Not enough demandD

Right pricemakes supply & demand equal

E

Not enough supply

S

Free-Market Competition

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Competitive Advantage

• Price

• Speed

• Quality

• Service

• Innovation

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Role of the Government

• Foster competition

• Regulate and Deregulate industries

• Protect Stakeholder and Stockholder’s rights

• Contribute to economic stability

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Economic Indicators

• Interest Rates

• Unemployment Rates

• Housing Data

• Industrial Productivity

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Inflation vs. Deflation

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InflationInflation DeflationDeflation

Consumer Price Consumer Price Index (CPI)Index (CPI)

Purchasing PowerPurchasing Power

Producer Price Index (PPI)

• Gross Domestic Product (GDP)

• Gross National Product (GNP)

• Globalization

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Challenges of Globalization

• Products and Services

• Managing Small Business (Entrepreneurship)

• Globalization and Workforce Diversity

• Ethics and Social Responsibility

• Technology and Electronic Commerce

©2007 Prentice Hall1-20