This document provides an introduction to business foundations and economics. It defines key terms like stockholder, stakeholder, and economic systems. It explains that an economic system is how a society organizes labor, capital and resources to produce and distribute goods and services. The main economic systems discussed are capitalism, socialism, and mixed economies. Planned, free market, and mixed economies are types that combine elements of public and private control. Advantages and disadvantages of each system are briefly outlined.

1. INTRODUCTION TO BUSINESS
Chapter: 1
Foundations of Business and Economics
Part II
Shafayet Ullah
SECTIONS: A7

2. Definitions
Stockholder Vs Stakeholder
Stockholder
Stockholder is an individual or company (including a
corporation) that legally owns one or more shares of stock
in a joint stock company. The shareholders are the owners
of a corporation.
Stakeholder
Stakeholders are those people who stand to gain or lose by
the policies and activities of an organization.
Example: Employees, Customers, Dealer, Suppliers,
Bankers, Government leaders

3. Organizational Stakeholders
3–3

4. Economic System
The accepted process by which
labor, capital and natural
resources are organized to
produce and distribute goods
and services in a society.

5. Economic System
Capitalism
An economic system in which all or most of the
sources of production and distribution are privately
owned and operated for profit. The founder of this
system is Adam Smith.
Example: USA, Europe, Japan, Canada.
Socialism
An economic system based on the premise that
businesses should be owned by the state so that
profits can be evenly distributed among the people.
The founder of this system is Karl Marx.
Example: Russia (former), China.

6. Economic System
There are three basic types of
Economies:
1. Planned Economies
2. Free Market Economies
3. Mixed Economies


7. Economic System
1. Planned Economics
Economic system in which the
government largely decides what goods
and services will be produced, who will
get then and how that economy will
grow.
The government owns the productive
resources, financial enterprises, retail
stores and banks.
Example: Soviet Union, Cuba, North

8. Economic System
2. Free Market Economics
Economic system in which decision about
what to produce and in what quantities are
decided by the market. That is by buyers
and sellers negotiating prices for goods and
services.
Example: USA

9. Economic System
3. Mixed Economics
Economic system in which some allocation
of resources are made by the market and
some are made by the government.
This contains elements of both market and
planned economic system. There are private
enterprises and also is the government
intervention. Both the government and the
business enterprises produce and distribute
goods and services.
Example: Bangladesh, UK, India, etc.

10. Some Advantages and
Disadvantages
Type of Economy
The Planned Economy
Advantages
1. Necessities are produces
2. Essential goods/ services
eg. Education will be provided
for all the community
3. More equal distribution of
income and wealth
Disadvantages
1. Large Bureaucracy
2. Mistakes in amounts of
goods/ services produced.
3. Little consumer choice
4. No profit motive
5. Little variety of
goods/services
6. Loss of individual
freedom

11. Some Advantages and
Disadvantages
Type of Economy
Advantages
Disadvantages
The Free Economy
1. Consumer choice exists
2. No bureaucracy
3. Profit motive exists
4. Many small firms producing
a variety of goods
5. Less government
interference
1. Too many luxuries produced
for the rich/ wealthy.
2. Essential goods/ services,
eg. education may not be
produced
3. Ignores social costs
4. Monopolies may exist
5. Unemployment in declining
industries
The Mixed Economy
Combines the advantages of
other systems
Combines the disadvantages of
other systems