chapter 01-foundation of business and economics

7/28/2019 Chapter 01-Foundation of Business and Economics

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I believe throughlearning andapplication of what you learn, you can

solve any problem, overcome anyobstacle and achieve any goal that

you can set for yourself.

Abraham Lincoln


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Chapter One:

Foundation of Businessand Economics


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Business Defined

A profit seeking activity that

provides goods and services thatsatisfy consumers needs


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Five Social & Economic

Roles of Business Provide society with necessities

Provide people with jobs Pay taxes

Reinvest profits into the economy

Success as a business helps theeconomy


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Profit vs. Not-For Profit

Profitwhat remains after all expenseshave been deducted from businessrevenue.

Not-For Profitprofit is not the motivefor being. However the business muststill run efficiently and effectively. The

purpose of the revenue is key.


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I. Why We Study Business ?

A. Increasing Dependence on OthersI) Over the years, people have become

more and more dependent on each others

II) Mutual dependenceIII) Use business system effectively

IV) Be a part of business

Bus iness :The exchange of goods, serv ices or

money for mutual benef it or prof i t

Barter:The exchange of goods w i thou t us ing

money


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I. Why We Study Business

B. International Opportunities

I) Being educated in business, people canavail exciting opportunities in the 21stcentury

II) Multinational companies,

C. Standard of Living

A measure of how well a person or family is

doing in terms of satisfying needs and wantswith goods and services

I) Minimal amount of government interference&

II) A free market business system


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Free Enterprise A sys tem in wh ichpr ivate businesses are able to start anddo business compet it ive ly to earn

pro f i ts , w ith a m inimal degree of

government regu lat ion.

D. Cop ing w ith the Change: -

- Price change.- New Product Development.

- Need Change

- Unexpected events occurs.


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II. People Form The Core Of Business

A. Owners B. ManagersC. Employees D. Customers

A. OwnersPeople who own a business, as well asthose who invest money in one and

have right on the business property, doso because they expect to earn profit


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B. Managers

The person responsible for operatingthe business may be the owner (anowner-manager also called anentrepreneur) or a professionalmanager employed by the owner

I) The owner-manager sets his orher own objectives

II) A professional manager attempts

to achieve objectives set by others.They are accountable to theowners of the business


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II. People Form The Core Of Business

C. Employees

Employees supply the skills and abilities

needed to provide a product or service and to

earn a profit

D. Consumers

A person who purchases a good or service for

personal use


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III. Business Objectives

A. Profit

Business ProfitThe difference betweenbusiness income (revenue) and business

expenses (costs): selling price

all costs ofmaking and selling a product including taxes

By conducting a number of activities, businessenterprise earns profit. These are-

Risk-taking

Evaluation of demand

Effic ient management


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Economic profit what remains afterexpenses and opportunity costs aresubtracted from income

Opportunity cost the cost of

choosing to use resources for apurpose, which results in sacrificingthe next best alternative for the use

of those resources


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B. Survival

C. Growth

D. Social responsibility


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Economics

Scarce Resources

Natural resources

Human resources

Capital

Entrepreneurs

Knowledge

Economics:The study of howa society uses itsscarce resourcesto produce anddistribute goods

and services

N t l R R id d i


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Natural Resources

Resources provided inlimited amounts by nature, such as oil, coal,water and timber etc.

Capital Resources

Goods produced for the

purpose of making other types of goods and

services current assets having a short life and

are used up in the production process - rawmaterials, paper etc. fixed capital (long term in

nature) used repeatedly in the production

process factory buildings, PCs, machineryetc.


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Labor Resources

The human talent,skills and competence, available in a

nation doctors, operators, teachers

and so on.


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IV. Economics: The Foundation

of Business

B. Goods and ServicesA nations resources areused to produce goods and services that will meetpeoples needs and wants.

Needs Goods and services people must have simplyto exist food, clothing, shelter, medical care etc.

Wants Things people would like to have but do not

absolutely need for survival fashionable clothes,luxury vacations etc.

C. Allocation The process of choosing how resources

will be used to meet a societys needs and wants


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V. ECONOMIC SYSTEMSAn economic system is an acceptedway of organizing production,

establishing the r ights and freedom

of ownership, using productiveresources and governing business

transactions in a society.

There are 3 basic types of systems


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Economic Systems

Capitalism or

Free-Market System

Right to ownership

Entitled to all profits

Right to choose job

Decide what toproduce

How to produce

Whom to sell to

Mixed

Freedom to start a

business

Both state andprivate ownedindustries

Profits mostly inprivate sector

Communism

Planned system

State ownsindustries

Profits notrecognized

State decidesoccupation


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A. Communism/ Planned Economy

Aneconomy in which the government owns the

productive resources, financial enterprises,

retail stores and banks

B. Capitalism/ Free Market Private enterprise

can produce almost everything

V. ECONOMIC SYSTEMS ..


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C. Mixed Economy both private and

government produce and distribute

goods and services

**Government usually plays a role insupplying defense, roads, education,

pensions and some medical care

In mixed economy, markets are

generally free and competitive


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CapitalismType of economic system

characterized by private ownership of capitaland by competition among businesses seekingprofit.

Consumers have freedom of choice inpurchasing goods and services in selecting anoccupation or a school etc

V. ECONOMIC SYSTEMS ..


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Freedom of enterprise means,businesses and individuals with thecapital may enter essentially any

legal business venture they wish

Competition refers to the rivalry

among businesses for consumermoney


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Business Challenges For The

1990s An Aging Population

The Changing Family

Jobs

The Global Boom

The Environment

chapter 01-foundation of business and economics

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