This chapter discusses the US business system and economy. It introduces key concepts like the circular flow of the economy, supply and demand, and how a market economy allocates resources. It describes how the US uses a mixed economy with elements of both capitalism and socialism. The chapter also covers measuring economic performance, the business cycle, and projections that technological innovation and globalization will continue driving future economic growth in the US while also presenting challenges.

1. Fourth Edition ESSENTIALS BUSINESS Ronald J. Ebert & Ricky W. Griffin Copyright ©2003 Prentice Hall, Inc. PART 1 . . . . . . . . . . . . . . . . . . . . . . . . Understanding the Contemporary Business Environment

2. Chapter 1 Understanding the U.S. Business System

3. “ In business you get what you want by giving other people what they want.” ~ Alice Foote MacDougall

6. Factors of Production Physical Resources Labor Capital Entrepreneurs Information Resources

14. Demand & Supply Copyright ©2003 Prentice Hall, Inc. 1 - 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

15. Demand & Supply Quantity of Pizzas Demanded Price of Pizzas Demand Curve   Copyright ©2003 Prentice Hall, Inc. 1 - 200 - 400 - 600 - 800 - 1000 - 1200 - 1400 - 1600 - 1800 - 2000 - $20 - 18 - 16 - 14 - 12 - 10 - 8 - 6 - 4 - 2 -

16. Demand & Supply Quantity of Pizzas Supplied Supply Curve   Copyright ©2003 Prentice Hall, Inc. 1 - 200 - 400 - 600 - 800 - 1000 - 1200 - 1400 - 1600 - 1800 - 2000 - $20 - 18 - 16 - 14 - 12 - 10 - 8 - 6 - 4 - 2 - Price of Pizzas

17. Demand & Supply Quantity of Pizzas per Week Demand Curve Supply Curve Equilibrium Price  Copyright ©2003 Prentice Hall, Inc. 1 - 200 - 400 - 600 - 800 - 1000 - 1200 - 1400 - 1600 - 1800 - 2000 - $20 - 18 - 16 - 14 - 12 - 10 - 8 - 6 - 4 - 2 - Price of Pizzas

20. Degrees of Competition Sample Local farmer Stationery store Steel industry Public utility Number of competitors Many Many, but fewer than in perfect competition Few None Ease of entry into industry Easy Fairly easy Difficult Regulated by government Similarity of goods or services offered by competing firms Identical Similar Can be similar or different No directly competing goods/services Level of control over price by individual firms None Some Some Considerable Copyright ©2003 Prentice Hall, Inc. 1 - Characteristic Perfect Competition Monopolistic Competition Oligopoly Monopoly

24. The CPI is a Tool to Measure Inflation Source: Westegg.com/inflation/infl.cgi House $250,000 $109,000 $25,696 Car $18,000 $7,871 $1,850 Hamburger & Fries $5.00 $2.19 $.51 Copyright ©2003 Prentice Hall, Inc. 1 - 2000 1980 1930