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1. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 1
Fundamentals of Business
and Economics

2. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 2
Why Study Business?
Learn what it takes to run a business
Build your business vocabulary
Develop your workplace skills
Learn about a various occupations
Appreciate today’s business careers

3. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 3
What is a Business?
Knowledge
Entrepreneurs
For-Profit
• Goods
• Services
• Job creation
• Tax-base
• Investments
Non-Profit
• Education
• Libraries
• Museums
• Social services
• Charities
Resources
Capital

4. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 4
Categories of Business
Providing Services
Producing Goods
Capital Intensive Labor Intensive

5. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 5
Service Sector Growth
• More disposable income
• Lifestyle and demographic changes
• Complex goods and technologies
• Need for professional advice
• Low barriers to entry

6. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 6
What is Economics?
Microeconomics
Macroeconomics
Economic System

7. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 7
Factors of Production
Resources
Capital
Entrepreneurs
Knowledge

8. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 8
Economic Systems
Capitalism
Mixed
Capitalism
Socialism Communism
Privatization
Free-Market
System
Planned
System

9. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 9
Microeconomics
The Forces of Supply and
Demand

10. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 10
Advertising and
Promotion Spending
Consumer Income Consumer Preferences
Price of
Substitute Products
Price of
Complementary Goods
Expectations About
Future Prices
Price
Higher
Lower
Demand
Lower
Higher
Understanding Demand

11. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 11
Demand Curve for Airline Tickets

12. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 12
Expected Shifts in Demand Curve
Consumer Income
Consumer Preferences
Price of Substitutes
Price of Complementary Goods
Advertising-Promotion
Consumer Expectations
Number of Buyers
Variable Shifts Right When:
Increases
More Favorable
Increases
Decreases
Increases
Optimistic
Increases
Shifts Left When:
Decreases
Less Favorable
Decreases
Increases
Decreases
Pessimistic
Decreases

13. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 13
Demand Curve for Airline Tickets

14. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 14
Understanding Supply
Goods and
Services
Supply
Price
Variables Variables
Higher
More
Less
Lower

15. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 15
Supply Curve for Airline Tickets

16. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 16
Expected Shifts in Supply Curve
Costs of Inputs
Number of Competitors
New Technology
Suppliers Expect That
Future Sales Prices
Variable Shifts Right When:
Decreases
Decreases
Decreases
Production Costs
Will Decline
Shifts Left When:
Increases
Increases
Increases
Production Costs
Will Increase

17. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 17
Supply Curve for Airline Tickets

18. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 18
How Demand and Supply Interact
click above title for web link

19. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 19
Macroeconomics
Issues for the Entire Economy

20. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 20
Pure
Competition
Monopolistic
Competition
Oligopoly
Monopoly
Free-Market Competition

21. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 21
• Price
• Speed
• Quality
• Service
• Innovation
Competitive Advantage

22. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 22
The Role of Government
• Fostering competition
• Regulating industries
• Deregulating industries
• Protecting stakeholders’ rights
• Contributing to economic stability

23. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 23
Fostering Competition
Antitrust
Legislation
Mergers and
Acquisitions

24. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 24
Regulating and
Deregulating Industries
Government
Regulation
Free
Competition
Fair Competition
Business Ethics
Working Conditions
Public Safety

25. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 25
Protecting Stakeholders
Agency or Commission Areas of Responsibility
Consumer Product Safety Commission (CPSC)
Environmental Protection Agency (EPA)
Equal Employment
Opportunity Commission (EEOC)
Federal Communications Commission (FCC)
Federal Energy Regulatory Commission (FERC)
•Safety of consumer products
•Environmental protection
•Employment discrimination
• Telephone, telegraph, radio, television
•Commercial airline industry
•Electric power and natural gas
Federal Aviation Administration (FAA)

26. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 26
Protecting Stakeholders
Agency or Commission Areas of Responsibility
Federal Highway Administration (FHA)
Federal Trade Commission (FTC)
Food and Drug Administration (FDA)
Interstate Commerce Commission (ICC)
Securities and Exchange Commission (SEC)
•Vehicle safety requirements
•Business practices and advertising
•Foods, drugs, medical devices, cosmetics
• Interstate transportation
•Safety and health of workers
•Investors and securities markets
Occupational Safety
and Health Administration (OSHA)

27. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 27
Contributing to
Economic Stability
Economic
Expansion
Economic
Contraction
Recovery
Recession
Business
Cycle
Business
Cycle
Monetary
Policy
Fiscal
Policy
Interest
Rates
Revenue and
Spending

28. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 28
Major Economic Indicators
Housing Starts
Durable-Goods
Orders
Interest Rates
Unemployment
Statistics

29. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 29
Measuring Price Changes
Inflation Deflation
Consumer Price
Index (CPI)
Purchasing Power

30. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 30
Measuring National Output
Gross National
Product (GNP)
Gross Domestic
Product (GDP)
Dollar Value
Yes
Yes
Final Goods
and Services
Yes
Yes
Domestic Businesses
No
Yes
Foreign-Owned
Businesses
Yes
No
Overseas Operations

31. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 31
Ten Economic
Performance Indicators
Prime Interest Rate
Housing Starts
Labor Productivity Rate
Rate of Inflation
Consumer Price Index
Unemployment Rate
Durable-Goods Orders
Balance of Trade
Producer Price Index
Gross Domestic Product

32. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 32
U.S. Economic Growth
• Age of Industrialization (1900-1944)
• Postwar Golden Era (1945-1969)
• Turbulent Years (1970-1979)
• Rise of Global Competition (1980-1989)
• New Economy and Beyond (1990 to Today)

33. © Prentice Hall, 2007 Excellence in Business, 3e Chapter 1 - 33
Challenges of Globalization
• Quality products and services
• Changing needs of customers
• Managing a small business
• Globalization and workforce diversity
• Ethics and social responsibility
• Technology and electronic commerce