Your SlideShare is downloading. ×
0
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Chapter 2 Fall 2008 Bom Economics
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Chapter 2 Fall 2008 Bom Economics

788

Published on

Published in: Technology, Economy & Finance
0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
788
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
9
Comments
0
Likes
1
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Chapter 2 How Economic Issues Affect Business
  • 2. Economic Links to Business
    • Economic concepts are the basis for most major business decisions.
    • Both the global economy and the Canadian economy have an effect on Canadian business.
    • Economics is “ the study of how society chooses to employ resources to produce its goods and services and distribute them for consumption among various competing groups and individuals”.
  • 3. Economic Theory of Wealth Creation: Adam Smith
    • The Wealth of Nations in 1776 defined Capitalism as a system of rights and freedoms:
      • Right to Make a Profit
      • Right to Private Property
      • Right to Buy or Sell
      • Freedom to Compete
      • Freedom from Government Interference
  • 4. Three Economic Systems Communism Socialism Capitalism (Highly Controlled by Government ) (Little Control by Government ) Mixed
  • 5. Economic Systems
    • Capitalism - individuals seeking profits produce goods and services.
      • Goods and services are sold in a free market to those who can pay for them.
    • Communism - the government decides what will be produced and who will consume that production.
    • Socialism - some free market and some government allocation.
    • Most countries have a Mixed Economy
  • 6. The Foundations of Capitalism
    • How a free market works - many buyers and sellers trading freely determine prices at which they will exchange goods and services
    • How prices are determined - the constant interplay between supply and demand determines an equilibrium price at which a transaction will occur
  • 7. Benefits and Limitations of Free-Markets
    • Inequality of wealth - causes national and world tension.
    • Greed may compromise ethics.
    • There is a potential for environmental damage.
    • Limitations push country towards Socialism = government regulation.
  • 8. Free-Market Competition Monopolistic Competition Oligopoly One Sellers Many Monopoly Perfect Competition
  • 9. COMMUNISM
    • All citizens are supposed to be equal
    • Government controls all business practices and decides how money is distributed
    • Karl Marx was the father of communism. He wrote the famous book “The Communist Manifesto”
  • 10. Supply Curve Quantity(S) High High Low Price(P) S
  • 11. Demand Curve Price(P) Quantity(D) High High Low D
  • 12. Quantity High High Low Price Equilibrium Point Market Equilibrium S D Surplus Shortage
  • 13. Progress Assessment
    • How do business people know what to produce and in what quantity?
    • How are prices determined?
    • Describe the four degrees of competition.
    • What are some of the limitations of free markets?
    • What are some limitations of free markets?
  • 14. Recent Economic Trends
    • Canada - we have a mixed economy, as the government has always played a major role in the economy
    • Communist countries - they have moved to capitalist forms of economies to improve their standards of living
    • Socialist countries - they have reduced government’s role in their economies
  • 15. Canadian Economy
    • Key Economic Indicators:
      • The gross domestic product (GDP) and the importance of productivity
      • The unemployment rate: frictional, structural cyclical and seasonal
      • The price indexes: inflation, disinflation, deflation, consumer price index (CPI), industrial product price index (IPPI), and raw materials price index (RMPI)
  • 16. Economics and Business
    • Strong Economy - Business prospers
    • Weak Economy - Business declines
    • Gross Domestic Product (GDP) - this is the total of goods and services produced by the economy. This is how we measure how well the economy is doing!
  • 17. Distribution of GDP
    • Employees get their share of GDP via wages
    • Employers get their share of GDP via profits
    • Governments get their share of GDP via taxes
    • What is a fair “share of the pie” is a source for constant debate - it depends on one’s perspective
  • 18. Inflation & the Components of the CPI Consumer Price Index (CPI) is the index economists use to measure the effects of inflation Food 18.5% Housing 38.0% Clothing 5.0% Transportation 21.5% Medical Care 6.5% Entertainment 5.0% Other Goods and Personal Services 5.5%
  • 19. Government Intervention
    • In 1929 the stock market crashed
    • The crash led to a severe, prolonged Depression
    • The hardship forced governments to abandon Adam Smith’s “laissez faire” approach to economics
    • Governments looked for ways to intervene in the economy to alleviate the suffering
  • 20. The National Debt
    • Governments adopted Keynesian economics and deficit spending
    • Governments forgot the second part of Keynesian economics -- they did not pay down the debt in good times
    • By the 1990s many governments had accumulated large national debts
    • Canada is currently $600 billion in debt
    • (pop. 37 million = citizen share of debt is approx. $16 000)
    • The US is currently $9.6 trillion in debt (pop. 300 million = citizen share of debt is between $31 000-$32 000)
  • 21. Who Pays the Least Taxes? France Germany Italy Canada Britain Japan U.S. 0 25 30 35 40 45 50 Total Receipts All levels of government
  • 22. Business Cycles
      • Recession
      • Depression
      • Recovery
      • Boom

×