Us Business System Leonardo Matarrese

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Us Business System Leonardo Matarrese

  1. 1. Chapter 1 Understanding the U.S. Business System Leonardo Matarrese @MyPlick
  2. 2. Outline <ul><li>The Concept of Business and the Concept of Profit </li></ul><ul><li>Economic Systems Around the World </li></ul><ul><li>The U.S. Economic System </li></ul><ul><li>Evaluating Economic Systems </li></ul>Leonardo Matarrese @MyPlick
  3. 3. The Concept of Business and the Concept of Profit <ul><li>Business </li></ul><ul><ul><li>An organization that provides goods or services to earn profits </li></ul></ul><ul><li>Profits </li></ul><ul><ul><li>The difference between a business’s revenues and its expenses </li></ul></ul>Leonardo Matarrese @MyPlick
  4. 4. Economic Systems Around the World <ul><li>Economic System </li></ul><ul><ul><li>A nation’s system for allocating its resources among its citizens </li></ul></ul>Leonardo Matarrese @MyPlick
  5. 5. Factors of Production <ul><li>Resources used in the production of goods and services </li></ul><ul><li>Four traditional factors of production: </li></ul><ul><li>Natural Resources </li></ul><ul><li>Labor </li></ul><ul><li>Capital </li></ul><ul><li>Entrepreneurs </li></ul><ul><li>Newer perspectives include: </li></ul><ul><li>Physical Resources </li></ul><ul><li>Information Resources </li></ul>Leonardo Matarrese @MyPlick
  6. 6. Factors of Production <ul><li>Natural Resources </li></ul><ul><ul><li>Materials supplied by nature (such as land, water, mineral deposits, and trees) </li></ul></ul><ul><li>Labor (or Human Resources) </li></ul><ul><ul><li>Physical and mental capabilities of people as they contribute to economic production </li></ul></ul><ul><li>Capital </li></ul><ul><ul><li>Funds needed to create and operate a business enterprise </li></ul></ul>Leonardo Matarrese @MyPlick
  7. 7. Factors of Production <ul><li>Entrepreneur </li></ul><ul><ul><li>Person who starts a new business or makes the decisions that expand a small business </li></ul></ul><ul><li>Physical Resources   </li></ul><ul><ul><li>Tangible things organizations use in the conduct of their business </li></ul></ul><ul><li>Information Resources </li></ul><ul><ul><li>Data and other information used by a business </li></ul></ul>Leonardo Matarrese @MyPlick
  8. 8. Types of Economic Systems <ul><li>Planned Economy </li></ul><ul><ul><li>Centralized government controls all or most factors of production and makes all or most production and allocation decisions </li></ul></ul><ul><li>Market Economy </li></ul><ul><ul><li>Individuals control production and allocation decisions through supply and demand </li></ul></ul>Leonardo Matarrese @MyPlick
  9. 9. Planned Economies <ul><li>Communism </li></ul><ul><ul><li>Planned economic system in which the government owns and operates all major sources of production </li></ul></ul><ul><li>Socialism </li></ul><ul><ul><li>Planned economic system in which the government owns and operates selected major sources of production </li></ul></ul>Leonardo Matarrese @MyPlick
  10. 10. Market Economies <ul><li>Market  </li></ul><ul><ul><li>Mechanism for exchange between buyers and sellers of a particular good or service </li></ul></ul><ul><li>Input Market   </li></ul><ul><ul><li>Firms buy resources from supplier households </li></ul></ul><ul><li>Output Market   </li></ul><ul><ul><li>Firms supply goods and services in response to demand on the part of households </li></ul></ul><ul><li>Capitalism </li></ul><ul><ul><li>Market economy that provides for private ownership of production and encourages entrepreneurship by offering profits as an incentive </li></ul></ul>Leonardo Matarrese @MyPlick
  11. 11. “ Pure Market Economy” 1- Leonardo Matarrese @MyPlick OUTPUT MARKETS Goods Services INPUT MARKETS Labor Capital Entrepreneurs Physical Resources Information Resources HOUSEHOLDS <ul><li>Demand products in output markets </li></ul><ul><li>Supply resources in input markets </li></ul>FIRMS <ul><li>Supply products in output markets </li></ul><ul><li>Demand resources in input markets </li></ul>DEMAND DEMAND SUPPLY SUPPLY
  12. 12. Mixed Market Economies <ul><li>Privatization </li></ul><ul><ul><li>Process of converting government enterprises into privately owned companies </li></ul></ul><ul><li>Socialism </li></ul><ul><ul><li>Planned economic system in which the government owns and operates only selected major sources of product io n </li></ul></ul>Economic system featuring characteristics of both planned and market economies Leonariodo Matarrese @MyPlick
  13. 13. The U.S. Economic System <ul><li>Understanding the complex nature of the U.S. economic system is essential to understanding the environment in which U.S. businesses operate. </li></ul>Leonardo Matarrese @MyPlick
  14. 14. Markets, Demand, & Supply <ul><li>Demand </li></ul><ul><ul><li>The willingness and ability of buyers to purchase a good or service </li></ul></ul><ul><li>Supply </li></ul><ul><ul><li>The willingness and ability of producers to offer a good or service for sale </li></ul></ul>Leonardo Matarrese @MyPlick
  15. 15. The Laws of Demand & Supply <ul><li>Law of Demand </li></ul><ul><ul><li>Principle that buyers will purchase (demand) more of a product as its price drops and less as its price increases </li></ul></ul><ul><ul><li>Law of Supply </li></ul></ul><ul><ul><li>Principle that producers will offer (supply) more of a product for sale as its price rises and less as its price drops </li></ul></ul>Leonardo Matarrese @MyPlick
  16. 16. The Laws of Demand & Supply <ul><li>Demand and Supply Schedule </li></ul><ul><ul><li>Assessment of the relationships between different levels of demand and supply at different price levels </li></ul></ul><ul><li>Demand Curve </li></ul><ul><ul><li>Graph showing how many units of a product will be demanded (bought) at different prices </li></ul></ul><ul><li>Supply Curve </li></ul><ul><ul><li>Graph showing how many units of a product will be supplied (offered for sale) at different prices </li></ul></ul>Leonardo Matarrese @MyPlick
  17. 17. The Laws of Demand & Supply <ul><li>Market Price (or Equilibrium Price) </li></ul><ul><ul><li>Profit-maximizing price at which the quantity of goods demanded and the quantity of goods supplied are equal </li></ul></ul><ul><li>Surplus </li></ul><ul><ul><li>Situation in which quantity supplied exceeds quantity demanded </li></ul></ul><ul><li>Shortage </li></ul><ul><ul><li>Situation in which quantity demanded exceeds quantity supplied </li></ul></ul>Leonardo Matarrese @MyPlick
  18. 18. Demand & Supply 1- 1- Leonardo Matarrese @MyPlick Demand and Supply Schedules Quantity of Quantity of Price Pizzas Demanded Pizzas Supplied $2 2000 100 $4 1900 400 $6 1600 600 $8 1200 800 $10 1000 1000 $12 800 1200 $14 600 1300 $16 400 1600 $18 200 1800 $20 100 2000
  19. 19. Demand & Supply Quantity of Pizzas Demanded Price of Pizzas Demand Curve   1- 1- Leonardo Matarrese @MyPlick 200 - 400 - 600 - 800 - 1000 - 1200 - 1400 - 1600 - 1800 - 2000 - $20 - 18 - 16 - 14 - 12 - 10 - 8 - 6 - 4 - 2 -
  20. 20. Demand & Supply Quantity of Pizzas Supplied Supply Curve   1- 1- Leonardo Matarrese @MyPlick 200 - 400 - 600 - 800 - 1000 - 1200 - 1400 - 1600 - 1800 - 2000 - $20 - 18 - 16 - 14 - 12 - 10 - 8 - 6 - 4 - 2 - Price of Pizzas
  21. 21. Demand & Supply Quantity of Pizzas per Week Demand Curve Supply Curve Equilibrium Price  1- 1- Leonardo Matarrese @MyPlick 200 - 400 - 600 - 800 - 1000 - 1200 - 1400 - 1600 - 1800 - 2000 - $20 - 18 - 16 - 14 - 12 - 10 - 8 - 6 - 4 - 2 - Price of Pizzas
  22. 22. Private Enterprise Economic system that allows individuals to pursue their own interests without undue governmental restriction <ul><li>Four elements of private enterprise: </li></ul><ul><li>Private Property Rights </li></ul><ul><li>Freedom of Choice </li></ul><ul><li>Profits </li></ul><ul><li>Competition </li></ul>Leonardo Matarrese @MyPlick
  23. 23. Private Enterprise <ul><li>Private Property Rights </li></ul><ul><ul><li>The right to buy, own, use, and sell almost any form of property </li></ul></ul><ul><li>Freedom of Choice </li></ul><ul><ul><li>The right to sell your labor to the employer you choose, purchase products you want to buy, choose what to produce or who to hire, etc. </li></ul></ul><ul><li>Profits </li></ul><ul><ul><li>Anticipated profits play a large part in individuals’ choices of what goods or services to produce </li></ul></ul><ul><li>Competition </li></ul><ul><ul><li>Vying among businesses for the same resources or customers </li></ul></ul>Leonardo Matarrese @MyPlick
  24. 24. Degrees of Competition <ul><li>Pure Competition </li></ul><ul><ul><li>Market or industry characterized by numerous small firms producing an identical product </li></ul></ul><ul><li>Monopolistic Competition </li></ul><ul><ul><li>Market or industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors </li></ul></ul><ul><li>Oligopoly  </li></ul><ul><ul><li>Market or industry characterized by a handful of (generally large) sellers with the power to influence the prices of their products </li></ul></ul>Leonardo Matarrese @MyPlick
  25. 25. Degrees of Competition <ul><li>Monopoly </li></ul><ul><ul><li>Market or industry in which there is only one producer, which can therefore set the prices of its products </li></ul></ul><ul><li>Natural Monopoly </li></ul><ul><ul><li>Industry in which one company can most efficiently supply all needed goods or services </li></ul></ul>Leonardo Matarrese @MyPlick
  26. 26. Evaluating Economic Systems <ul><li>Nearly every economic system has three broad goals: </li></ul><ul><ul><li>Stability </li></ul></ul><ul><ul><li>Full Employment </li></ul></ul><ul><ul><li>Growth </li></ul></ul>Leonardo Matarrese @MyPlick
  27. 27. Economic Goals <ul><li>Stability </li></ul><ul><ul><li>Condition in which the balance between the money available in an economy and the goods produced in it are growing at about the same rate </li></ul></ul><ul><li>Inflation </li></ul><ul><ul><li>Phenomenon of widespread price increases throughout an economic system </li></ul></ul><ul><li>Recession </li></ul><ul><ul><li>Period characterized by decreases in employment, income, and production </li></ul></ul><ul><li>Depression </li></ul><ul><ul><li>Particularly severe and long-lasting recession </li></ul></ul>Leonardo Matarrese @MyPlick
  28. 28. Economic Goals <ul><li>Full Employment </li></ul><ul><ul><li>Everyone who wants to work has an opportunity to do so </li></ul></ul><ul><li>Unemployment </li></ul><ul><ul><li>Level of joblessness among people actively seeking work </li></ul></ul><ul><li>Knowledge Workers </li></ul><ul><ul><li>Skilled employees in high-tech industries </li></ul></ul><ul><li>Growth </li></ul><ul><ul><li>Increase in the amount of goods and services produced by a nation’s resources </li></ul></ul>Leonardo Matarrese @MyPlick
  29. 29. Assessing Economic Performance <ul><li>Gross National Product (GNP) </li></ul><ul><ul><li>The value of all goods and services produced by an economic system in a year regardless of where the factors of production are located </li></ul></ul><ul><li>Real Gross National Product (real GNP) </li></ul><ul><ul><li>Gross national product adjusted for inflation and changes in the value of a country’s currency </li></ul></ul><ul><li>Gross Domestic Product (GDP) </li></ul><ul><ul><li>The value of all goods and services produced in a year by a nation’s economy through domestic factors of production </li></ul></ul>Leonardo Matarrese @MyPlick
  30. 30. Assessing Economic Performance <ul><li>Productivity </li></ul><ul><ul><li>Measure of economic growth that compares how much a system produces with the resources needed to produce it </li></ul></ul><ul><li>Balance of Trade </li></ul><ul><ul><li>The difference between a country’s exports to and imports from other counties </li></ul></ul><ul><li>Budget Deficit </li></ul><ul><ul><li>Situation in which a government body spends more money than it takes in </li></ul></ul><ul><li>National Debt </li></ul><ul><ul><li>Total amount that a nation owes its creditors </li></ul></ul>Leonardo Matarrese @MyPlick
  31. 31. Managing the U.S. Economy <ul><li>Fiscal Policies </li></ul><ul><ul><li>Government economic policies that determine how the government collects and spends its revenues </li></ul></ul><ul><li>Monetary Policies </li></ul><ul><ul><li>Government economic policies that determine the size of a nation’s money supply </li></ul></ul>Leonardo Matarrese @MyPlick
  32. 32. The Global Economy in the 21st Century <ul><li>The United States was riding the crest of a long-term economic boom. Growth has been strong, and unemployment and inflation remain low. Now are we in a recession? </li></ul>What forces will drive the economy for the next decade? Leonardo Matarrese @MyPlick
  33. 33. Three Major Forces <ul><li>The information revolution will continue to enhance productivity across all sectors of the economy, but most notably in such information-dependent industries as finance, media, and wholesale and retail trade. </li></ul><ul><li>New technological breakthroughs in such areas as biotechnology will create entirely new industries. </li></ul><ul><li>Increasing globalization will create much larger markets while also fostering tougher competition among global businesses; as a result, companies will need to focus even more on innovation and cost cutting. </li></ul>Leonardo Matarrese @MyPlick
  34. 34. Projected Trends & Patterns <ul><li>The economy will maintain strong and consistent growth rates, perhaps exceeding 3 percent per year. New technological breakthroughs in such areas as biotechnology will create entirely new industries. </li></ul><ul><li>Inflationary surges and large budget deficits will become less likely. </li></ul><ul><li>Countries that encourage free trade, innovation, and open financial systems will prosper. </li></ul><ul><li>The most successful businesses will be those that are able most effectively to master new technologies and keep abreast of their competitors. </li></ul>Leonardo Matarrese @MyPlick

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