Copyright © Cengage Learning. All rights reserved.1 | 1 Chapter One Exploring the World of Business and Economics

Copyright © Cengage Learning. All rights reserved. 1 | 1

Chapter One

Exploring the World of Business and Economics


Learning Objectives

1. Discuss your future in the world of business.2. Define business and identify potential risks and

rewards.3. Define economics and describe two types of

economic systems: capitalism and command economy.

4. Identify the ways to measure economic performance.

5. Outline the four types of competition.6. Summarize the factors that affect the business

environment and the challenges that American businesses will encounter in the future.

Chapter 1 Outline

– Your Future in the Changing World of Business

• Why Study Business?• Special Note to Students

– Business: A Definition• The Organized Effort of Individuals• Satisfying Needs• Business Profit

Chapter 1 Outline (cont’d)

– Types of Economic Systems• Capitalism• Capitalism in the United States• Command Economies

– Measuring Economic Performance• The Importance of Productivity in the Global

Marketplace• Important Economic Indicators that Measure a

Nation’s Economy• The Business Cycle

Chapter 1 Outline (cont’d)

– Types of Competition• Perfect (or Pure) Competition• Monopolistic Competition• Oligopoly• Monopoly

– American Business Today• Early Business Development• The Twentieth Century• A New Century: 2000 and Beyond• The Current Business Environment

– The Challenges Ahead


Your Future in the Changing World of Business

• Free enterprise

• What does it take to succeed in business?


Why Study Business?

• For help in choosing a career

• To be a successful employee

• To start your own business

• To become a better informed consumer and investor


Tips for Studying Business

1. Prepare before you go to class. 2. Read the chapter.3. Underline or highlight important

concepts.4. Take notes.5. Apply the concepts.6. Practice critical thinking.7. Prepare for exams.


Business: A Definition

• The organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs


Classification of Businesses

• Manufacturing businesses

• Service businesses

• Marketing intermediaries


Satisfying Needs

• People buy goods and services not just to own them, but to satisfy particular needs

• Businesses that understand customer needs, and work to satisfy those needs, are usually successful


The Relationship Between Sales Revenue and Profit

• Profit is what remains after all business expenses have been deducted from sales revenue. A loss (negative profit) results when a firm’s expenses are greater than its revenues.


Business Profit

• The purposes of profit

• Stakeholders


Economic Systems

• Economics

• Microeconomics

• Macroeconomics

• Economy


Economic Systems (cont’d)

• Factors of production

• Entrepreneur

• Differences in economic systems


Types of Economic Systems

• Capitalism

• Capitalism in the United States


Types of Economies (cont’d)

• Command economies

– Socialism

– Communism


Measuring Economic Performance

• Productivity

• Economic indicators– Gross domestic product (GDP)

– Inflation


Common Measures Used to Evaluate a Nation’s Economic Health

• Balance of trade

• Bank credit

• Corporate profits


Common Measures Used to Evaluate a Nation’s Economic Health (cont’d)

• Inflation rate

• National income

• New housing starts


Common Measures Used to Evaluate a Nation’s Economic Health (cont’d)

• Prime interest rate

• Productivity rate

• Unemployment rate


The Business Cycle

• The recurrence of periods of growth and recession in a nation’s economic activity– Recession

– Depression

– Monetary policies


The Business Cycle (cont’d)

• Fiscal policy

• Federal deficit

• National debt


Types of Competition

Perfect (or pure) competition• Supply:

• Demand:

• Market Price (Equilibrium):


Types of Competition (cont’d)

• Monopolistic competition

• Oligopoly

• Monopoly


American Business Today

• Standard of living

• Early business development

– Barter system

– Domestic system


American Business Today (cont’d)

• Early Business Development (cont’d)

– Factory system

– Specialization


American Business Today (cont’d)

• The Twentieth Century

• The Late Twentieth Century

• A New Century: 2000 and Beyond


The Challenges Ahead

• How can we encourage Iraq and Afghanistan to establish a democratic and free society and resolve possible conflict with North Korea and other countries throughout the world?

• How can we create a more stable economy and create new jobs?

• As a nation, how can we develop a disaster crisis management program that will help people in times of peril?

• How can we meet the challenges of managing culturally diverse work forces to address the needs of a culturally diverse marketplace?

• How can we make American manufacturers more productive and more competitive with foreign producers who have lower labor costs?


The Challenges Ahead (cont’d)

• How can we preserve the benefits of competition in our American economic system?

• How can we encourage economic growth and at the same time continue to conserve natural resources and protect our environment?

• How can we best market American-made products in foreign nations?

• How can we meet the needs of two-income families, single parents, older Americans, and the less fortunate?

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Copyright © Cengage Learning. All rights reserved.1 | 1 Chapter One Exploring the World of Business and Economics