We begin our study of business in this chapter by examining the fundamentals of business and economics. First, we introduce the nature of business, including its goals, activities, and participants. Next, we describe the basics of economics and apply them to the United States economy. Finally, we establish a framework for studying business in this text.
Chapter One The Dynamics of Business and Economics © 2003 McGrawHill Ryerson Limited Business Vs. Nonprofit Organization $ Business 1-1 An individual or organization that tries to earn a profit by providing products that satisfy people’s needs, ex. IBM Nonprofit Organization Provides products, especially services, for some purpose other than profits, ex. The Salvation Army © 2003 McGrawHill Ryerson Limited The People and Activities of Business 1-2 People: Owners Employees Customers Activities: Management Marketing Finance â2003McGrawưHillRyersonLimited WhyStudyBusiness? Itprovidesemploymentformostpeople Itprovidesthemajorityofproductsneeded tosurviveandenjoylife • It will help prepare you for your future career • It will help you become a better informed consumer and member of society 1-3 © 2003 McGrawHill Ryerson Limited Types of Resources Used by Business 1-4 Natural Human Financial © 2003 McGrawHill Ryerson Limited land, forests, etc. (not made by people) physical/mental abilities used by people to produce goods and services funds needed to acquire needed natural and human resources Basic Questions to Be Asked of Economic Systems What goods and services and what quantity will satisfy the needs of the consumer? How will the goods and services be produced? Who will produce them and with what resources? How are the goods and services to be distributed to the consumer? 1-5 © 2003 McGrawHill Ryerson Limited Comparison of Communism, Socialism, and Capitalism 1-6a Communism Socialism Capitalism Business Ownership Most businesses are owned and operated by the government The government owns and operates major industries; individuals own small businesses Individuals own and operate all businesses Competition None. The government owns and operates everything Restricted in major industries; encouraged in small business Encouraged by market forces and government regulations Profits Excess income goes to the government Profits earned by small businesses may be reinvested in the business; profits from government owned industries go to the government Individuals are free to keep profits and use them as they wish © 2003 McGrawHill Ryerson Limited Comparison of Communism, Socialism, and Capitalism 1-6b Communism Socialism Capitalism Product availability and price Consumers have a limited choice of goods and services; prices are usually high Consumers have some choice of goods and services; prices are determined by supply and demand Consumers have a wide choice of goods and services; prices are determined by supply and demand Employment options Little choice in choosing a career; most people work for government owned industries or farms Some choice of careers; many people work in government jobs Unlimited choice of careers © 2003 McGrawHill Ryerson Limited Economic Systems and Where They Occur 1-7 Communism: China North Korea Cuba Socialism: Sweden India France Israel Capitalism: Canada United States Australia Japan © 2003 McGrawHill Ryerson Limited Equilibrium Price of Soft Drinks 1.00 1-8 Equilibrium Price 1.35 Prices of 1.00 Soft Drinks 0.70 $ Supply Curve 0.40 Demand Curve Cans of Soft Drinks © 2003 McGrawHill Ryerson Limited Do You Speak Business? (current workplace language) 1-18 People Churner Bottom Fisher Boomerang Worker Toxic Employee © 2003 McGrawHill Ryerson Limited A boss who drives away talented people Person willing to dive into seemingly hopeless situations Retiree returning to former employer Worker with antiemployer reputation or attitude Source: “The List: Do You Speak Business?,” Business Week, November 16, 1998, p. 6 Solve the Dilemma 1-19 Explain and demonstrate the relationship between supply and demand for Mrs. Acres Homemade Pies. © 2003 McGrawHill Ryerson Limited Explore Your Career Options What are some of the changes in the work environment that contribute to the transformation of the traditional career track? 1-20 © 2003 McGrawHill Ryerson Limited Wrong Place, Wrong Time (“Not So Hot” Jobs) Projected Decrease in Search Demand Job Title 1. VicePresident for Retail Operations 2. VicePresident for Government Sales 81% 3. Oil Executives 4. President/CEO of Managed Care 5. VicePresident for Computer Hardware Sales 6. Wall Street Real Estate Financing Execs 7. Traditional VicePresident for Environment, Health, and Safety 8. Russian Specialist Investment Banker 9. Owner, “Storefront” Travel Agency 10. Traditional Publishing Executive 1-21 © 2003 McGrawHill Ryerson Limited 94% 62% 56% 53% 49% 41% 38% 33% 30% Source: Robert McNatt, “Up Front”, Business Week, March 8, 1999, p. 6 Additional Discussion Questions and Exercises 1-22 Which economic system provides for central government planning to determine what goods and services will satisfy needs of citizens? How did the Industrial Revolution affect the agricultural economy in Canada? What characteristics of modern entrepreneurs are similar to those of early entrepreneurs? © 2003 McGrawHill Ryerson Limited Chapter 1 Quiz 1-23a The activities designed to provide goods and services that satisfy customers are know as a management b marketing c finance d gross national product Which of the following best describes inflation? a a continuing decrease in product prices b a moderate decrease in demand c a continuing increase in unemployment d a continuing increase in prices © 2003 McGrawHill Ryerson Limited Chapter 1 Quiz 1-23b The airline business in the Canada is an example of what form of competition? a. pure competition b monopolistic competition c oligopoly d monopoly The quantity of products and services that consumers are willing to buy at different prices at a specific time is a supply b demand c competition d gross national product © 2003 McGrawHill Ryerson Limited Video Case Question 1 124 What different roles and tasks does the owner Brad Miller, face in his vocation as entrepreneur? â2003McGrawưHillRyersonLimited BradMillerRoles Roles: 1ư25 – – Chief Executive Officer Chief Financial Officer Production Supervisor Marketing Manger Controller © 2003 McGrawHill Ryerson Limited Brad Miller Tasks 126 • Tasks – – – – – Financialplanning OperationsManagement Marketresearch Sales Supervisionofemployees â2003McGrawưHillRyersonLimited VideoCaseQuestion2 Whatroledoestheaccountantplayfor BradMillerandhisfinanciers? 1ư27 â2003McGrawưHillRyersonLimited THEACCOUNTANTS ROLE 1ư28 ForBrad – Financial planner – Statement preparer – Accounting services For the Financiers Provision of assurance on accuracy of financial statements © 2003 McGrawHill Ryerson Limited Video Case Question 3 • At the stage the video leaves us in the progress of the Classic Cheesecake Company, what major functions has Brad been focusing on and what roles are needed to be addressed if his family will see the promising future he is planning for them 129 © 2003 McGrawHill Ryerson Limited Brad’s Current Focus 130 Production Marketing Expansion © 2003 McGrawHill Ryerson Limited Roles To Be Addressed 131 Planning financial production human resources Brad will have to be a “Manager” learning to delegate some areas of control © 2003 McGrawHill Ryerson Limited ... Comparison of Communism, Socialism, and Capitalism 1- 6a Communism Socialism Capitalism Business Ownership Most businesses are owned and operated by the government The government owns and operates major industries;... funds needed to acquire needed natural and human resources Basic Questions to Be Asked of Economic Systems What goods and services and what quantity will satisfy the needs of the consumer? How will the goods and services be ... North Korea Cuba Socialism: Sweden India France Israel Capitalism: Canada United States Australia Japan © 2003 McGrawHill Ryerson Limited Equilibrium Price of Soft Drinks 1.00 1-8 Equilibrium