Chapter 1 the role of business in economic setting
the role of business in our economic
Ms. Ghazala Danish
• “An organization that provides goods and
services to earn or maximize a profit.”
• “An organization engaged in producing and
selling, at a profit, goods and services that
consumer’s needs and wants.”
Key points about business
• Produce goods and services
• Seek profit
• Try to satisfy consumer’s needs and wants
Produce goods and services
• A commodity, or a physical, tangible item that satisfies
human want or need. Such as credit
card, beverages, ice creams.
• An activities that benefits consumers or other
businesses. It is an intangible products such as
accounting, banking, consultancy, education, insuranc
e, expertise, medical treatment or transportation.
Types of business
• Require the same functions or activities to be
performed to operate the business.
• Use the same inputs to produce the final goods
Activities of business
Creates a product or service
Market the product or service to the consumer
Account for the financial transaction
Hire, train and evaluate employees
Management functions of business
Plan what it wants to accomplish
Organize its resources
Acquire the people to operate the business
Guide the people to operate the business
Factor of production
• Input or resources used to produce goods and
• The four resources are;
• Land is the natural resources that can be used to
produce goods and services.
• Labor is the total human resources required to
turn raw materials into goods and services.
• Capital is the total of tools, equipment, machinery
and buildings used to produce goods and services.
• Entrepreneur is an individual who takes initiatives
to bundle resources in innovative ways and is
willing to bear the risk and/or uncertainty to act.
• Profit is the amount of money remaining from a
firm’s sales revenues after it deduct its total
• It is the reward to the business.
• Profit is the ultimate goal of business.
• It is the method a society uses to allocate its
resources and meet its needs for goods and
• Types of Economic system
• It is an economic system in which both the
factors of production and the businesses are
owned by private individuals.
• It not concern by the government.
• Private enterprise system, an economic system
in which businesses or enterprises are privately
Principles or rights of the private
Right to private ownership of property
Right to freedom of choice
Right to compete
Rights to profits
Types of capitalism
• Two types of capitalism
• Pure capitalism
• Mixed capitalism
• It is also known as market economy.
• It is an economic system in which economic
decisions are made freely according to the
market forces of supply and demand.
• Government does not interfere in the economic
system is called laissez-faire or hands off
Producing goods and services
• A household, in economic terms, is any person
or group of people living under the same roof
and functioning as an economic unit.
• 5 triggers a series of action.
• An economic system based on a market economy
with limited government involvement.
• Two primary tool:
• Power of tax
• Power of spend
• Government own entities
• Government agencies that regulate the activities
of some businesses
• Government involves employer employee
• In which the government controls the factor of
• Central government planner make all the
decision about production and resource
• Supply, demand and competition have no
influence in this system.
• It is an economic system in which the
government controls the operation and direction
of basic industries but private ownership also
• Government take a decisions.
• The industries normally under control of the
Mixed economic system
• In this economic system, in which there is both
private and government ownership and
production of goods and services.
• There is more than one economic system at work
in the country.
• Economic system are not static.
The performance of economic system
• Gross National Product (GNP):
• The GNP accounts for all goods and services a
country produces, no matter where they were
• Gross domestic Product (GDP):
• The total market value of all goods and services
that a country produces in a year with in its
Standard of living
• The degree of material wealth in a country.
• It shows that how well an individual is doing to
satisfy his or her needs for goods and services.
• A final measure of economic performance is
• It is the amount of outcome for a given amount
Business today and tomorrow
International business competition
Family and work
Why study business
• The impact of business
• Career choice
• Business ownership