IPPTChap001 Teaching PDF

Learning Objectives LO 1-1 Define basic concepts such as business, product, and profit LO 1-2 Identify the main participants and activities of business and explain why studying business is important LO 1-3 Define economics and compare the four types of economic systems LO 1-4 De...

Learning Objectives LO 1-1 Define basic concepts such as business, product, and profit LO 1-2 Identify the main participants and activities of business and explain why studying business is important LO 1-3 Define economics and compare the four types of economic systems LO 1-4 Describe the role of supply, demand, and competition in a free enterprise system LO 1-5 Specify why and how the health of the economy is measured LO 1-6 Trace the evolution of the American economy and discuss the role of the entrepreneur in the economy LO 1-7 Evaluate a small-business owner’s situation and propose a course of action 1-1  The Nature of Business Business Individuals or organizations trying to earn a profit by providing products that satisfy people’s needs Products Goods or services with tangible and intangible characteristics that provide satisfaction and benefits 1-2  A Product Can Be… Ideas Tangible Goods Services Automobi Dry Profession cleaning als le Doctor’s Compute generate checkup r Basketball ideas for Phone game solving Coat Concert problems 1-3  The Goal of Business The goal of business is to earn a profit $ The difference between what it costs to make and sell a product and what a customer pays for it $10 sale – $8 to make = $2 profit $ Earning profits contributes to society by providing employment, which in turn provides money that is reinvested in the economy $ Profits must be earned in a responsible manner 1-4  Nonprofit Organizations Engage in Do not share the management, Provide goods purpose of marketing and and services earning profits finance to reach goals 1-5  Stakeholders ~ Groups that have a stake in the success and outcome of a business ~ Customers, employees, investors, government regulators, community, and society ~ To achieve and maintain profitability, businesses must produce quality products, operate efficiently, and be socially responsible and ethical in dealing with stakeholders 1-6 People and Activities of Business 1-7  Economic Foundations of Business Economics The study of how resources are distributed for the production of goods and services within a social system 1-8 Economic Foundations of Business Natural Resources Land, forests, mineral, water, and other things not made by people Human Resources – also called Labor The physical and mental abilities people use to produce goods and services Financial Resources – also called Capital The funds used to acquire the natural and human resources needed to provide products Intangible Resources Such as a good reputation for quality products or being socially responsible 1-9  Economic Systems Economic System A description of how a particular society distributes its resources to produce goods and services All economic systems must address these 3 important issues: 1. What goods and services, and how much of each, will satisfy consumers’ needs? 2. How will goods and services be produced, who will produce them, and with what resources will they be produced? 3. How are the goods and services to be distributed to consumers? 1-10  http://bit.ly/FerrellQR1-2  Economic Systems First described by Karl Marx as a society in which the people, without regard to class, own all the nation’s resources On paper it appears efficient, but in practice, these Communism economies suffer from: low standards of living critical shortages of consumer goods high prices corruption and little freedom N K C O C O H R U R I T B E N H A A A 1-12  Economic Systems Sociali An economic system in which the government owns and operates basic industries but individuals own most businesses Most socialist countries are democratic and recognize sm individual freedoms The socialist system may allow a higher standard of living and is more stable; but taxes and unemployment are generally higher in socialist countries S I I W S N E R D D A I E E A N L 1-13  Economic Systems Capitalis An economic system in which individuals own and operate the majority of businesses that provide goods and services Pure capitalism or free-market system happens when all m, or Free economic decisions are made without government intervention; also called laissez-faire capitalism Modified capitalism differs from pure capitalism as the Enterprise government intervenes and regulates business to some extent C J A U A N S P A A A D N A 1-14  Economic Systems No country practices pure capitalism, socialism, or communism Mixed Economies made up of elements from more than one economic Economi system No country practices a pure form of any economic system, although most es favor one system over others China and Russia have used state capitalism to advance the economy, integrating the powers of the state with the advantages of capitalism 1-15 Free-Enterprise System Many large economies are free- enterprise – including the U.S., Canada and Japan Many communist and socialist countries apply free-enterprise principles – including China and Russia Free enterprise allows a company to succeed or fail on the basis of market demand 1-16  Free-Enterprise System Basic individual and business rights which must exist in order to motivate companies to succeed ► Right to own property ► Right to earn profits and use them as one wishes ► Right to determine business operations ► Right to choose  Career to pursue  Where to live or where to locate a business  What goods/services to purchase and more 1-17 Economic Systems 1-18  http://www.viddler.com/embed/ 6a12c8cd/? f=1&autoplay=0&player=simple&se cret=42989995&loop=0&nologo=0& hd=0 Forces of Supply and Demand The number of products consumers are willing to buy at Supply different prices at a specific time The number of products businesses are Demand willing to sell at different prices at a specific time 1-20  Equilibrium Price Equilibrium price is the price at which the number of products supplied equals the amount of products consumers are willing to buy at a specific time 1-21  The Nature of Competition Competition is the rivalry among businesses for consumer’s dollars Pure Monopolistic Competition Competition Oligopoly Monopoly The market Fewer structure that businesses The market The market exists when than in a structure that structure that there are pure exists when exists when many small competition there are there is only businesses and the very few one business selling one differences businesses providing a standardized among the selling a product in a product goods they product given market sell are small 1-22 Consider Ethics and Social Responsibility Demand Eclipses Supply: Bluefin Tuna Bluefin tuna is very popular; however, its supply is being reduced through global overfishing and pollution U.S. placed it on its watch list Many fisherman currently fish more than the legal quota May require official protection if unable to police fishing and preserve habitats ?Why is the price of Bluefin tuna skyrocketing? ?What are the ethical issues involved in selling Bluefin tuna? ?Why might the U.S. be reluctant to place the Bluefin tuna on the endangered species list? What are some of the consequences of acting too slowly or too quickly in their assessment? 1-23 Economic Cycles and Productivity Economic contraction is a slowdown May lead to of the economy characterized by a inflation – a decline in spending and during continuing which businesses cut back on rise in prices production and lay off workers May lead to recession – Economic expansion occurs then an economy is a decline in growing and people are spending more money; production, their purchases stimulate the production of employment goods and services, which in turn stimulates employment and income 1-24  Economic Cycles and Productivity Recessions are often characterized by rising levels of Unemployment – the condition in which a percentage of the population wants to work but is unable to find jobs Deflation occurs when rising unemployment stifles demand, forcing prices down Severe recession may turn into a Depression – a condition of the economy in which unemployment is very high, consumer spending is low, and business output is sharply reduced 1-25 Annual Average Unemployment Rate, Civilian Labor Force 16 Years and Over 1-26  Economic Cycles and Productivity Here Here You can see what the U.S. government currently owes—down to the penny—by going to the website for the Bureau of the Public Debt, www.publicdebt.treas.gov/ 1-27  Measuring the Economy The sum of all goods and services produced in a country Gross Domestic during a year Product (GDP) Does not include profits from companies’ overseas operations The condition in which a nation spends more than it takes in from taxes Budget Deficit U.S. budget deficit has recently grown to record levels; remedies include raising taxes or reduce spending 1-28 Comparative Analysis 1-29  The Role of the Entrepreneur Entrepreneur An individual who risks his/her wealth, time and effort to develop for profit an innovative product or way of doing something. Entrepreneurship requires:  Risk  Innovation  Creativity  Reward 1-30  Solve the Dilemma Mrs. Acres Homemade Pies Shelly Acres used a family recipe to start a small business The business was very successful and Shelly expanded; now she has several options: 1. Maintain current production levels and raise prices 2. Expand facility and staff while maintaining current price 3. Contract production to a restaurant chain, earning Shelly a percentage of profits with minimal involvement ? Explain and demonstrate the relationship between supply and demand for Mrs. Acres Homemade Pies ? What challenges does Shelly face as she considers the three options? ? What would you do in Shelly’s position? 1-31  Enter the World of Business Apple Stores: The Future of Retail? Much of Apple’s success is due to their innovative products; yet they also leave a mark on the world of retailing Good store design along with a relaxed atmosphere and hands-on testing, contribute to the store’s success Two identified keys to their success is delight the customer and avoid selling but instead listen and assist Apple has been so successful in retail, other stores are adopting its retail strategies ? Why is Apple having such a profound impact on the retail store experience? ? How is Apple integrating its products into the retail store experience? ? Describe Apple’s approach to customer service 1-32