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Chapter 1

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22 views

Chapter 1

Uploaded by

fahimtahmid2090
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Chapter One:

Foundation of Business
and Economics
Business Defined

A profit seeking activity that


provides goods and services that
satisfy consumers’ needs
Five Social & Economic
Roles of Business

• Provide society with necessities


• Provide people with jobs
• Pay taxes
• Reinvest profits into the economy
• Success as a business helps the
economy
Profit vs. Not-For Profit

• Profit…what remains after all expenses


have been deducted from business
revenue.

• Not-For Profit…profit is not the motive


for being. However the business must
still run efficiently and effectively. The
purpose of the revenue is key.
I. Why We Study Business ?

A. Increasing Dependence on Others


I) Over the years, people have become
more and more dependent on each others
II) Mutual dependence
III) Use business system effectively
IV) Be a part of business
Business: The exchange of goods, services or
money for mutual benefit or profit
Barter: The exchange of goods without using
money
I. Why We Study Business ……
B. International Opportunities
I) Being educated in business, people can
avail exciting opportunities in the 21st
century
II) Multinational companies, joint ventures

C. Standard of Living
A measure of how well a person or family is
doing in terms of satisfying needs and wants
with goods and services
I) Minimal amount of government
interference &
II) A free market business system
Free Enterprise – A system in which
private businesses are able to start and
do business competitively to earn
profits, with a minimal degree of
government regulation
II. People Form The Core Of Business
A. Owners
People who own a business, as well as those who
invest money in one and have right on the business
property, do so because they expect to earn profit

B. Managers
The person responsible for operating the business
may be the owner (an owner-manager also called an
entrepreneur) or a professional manager employed by
the owner
I) The owner-manager sets his or her own
objectives
II) A professional manager attempts to achieve
objectives set by others. They are accountable to
II. People Form The Core Of Business

C. Employees
Employees supply the skills and abilities
needed to provide a product or service and to
earn a profit

D. Consumers

A person who purchases a good or service for


personal use
III. Business Objectives

A. Profit

Business Profit – The difference between


business income (revenue) and business
expenses (costs): selling price – all costs of
making and selling a product including taxes

By conducting a number of activities, business


enterprise earns profit. These are-
Risk-taking
Evaluation of demand
Efficient management
Economic profit – what remains after
expenses and opportunity costs are
subtracted from income

Opportunity cost – the cost of


choosing to use resources for a
purpose, which results in sacrificing
the next best alternative for the use
of those resources
A.Survival
B.Growth
C. Social responsibility
Economics

Economics: Scarce Resources


The study of how –
Natural resources
a society uses its
scarce resources – Human resources
to produce and – Capital
distribute goods
and services – Entrepreneurs
– Knowledge
Natural Resources – Resources provided in
limited amounts by nature, such as oil, coal,
water and timber etc.
Capital Resources – Goods produced for the
purpose of making other types of goods and
services current assets having a short life and
are used up in the production process - raw
materials, paper etc. fixed capital (long term in
nature) used repeatedly in the production
process – factory buildings, PCs, machinery
etc.
Labor Resources – The human talent, skills
and competence, available in a nation –
doctors, operators, teachers and so on.
IV. Economics: The Foundation
of Business
B. Goods and Services– A nation’s resources are
used to produce goods and services that will meet
people’s needs and wants

Needs– Goods and services people must have simply


to exist – food, clothing, shelter, medical care etc.
Wants– Things people would like to have but do not
absolutely need for survival – fashionable clothes,
luxury vacations etc.

C. Allocation– The process of choosing how resources


will be used to meet a society’s needs and wants
V. ECONOMIC SYSTEMS

An economic system is an accepted


way of organizing production,
establishing the rights and freedom
of ownership, using productive
resources and governing business
transactions in a society.

There are 3 basic types of systems –


Economic Systems

Capitalism
Capitalismor
or Socialism
Socialism Communism
Communism
Free-Market
Free-MarketSystem
System
 Right
Righttotoownership
ownership  Planned
Plannedsystem
system  Planned
Plannedsystem
system
 Entitled
Entitledto
toall
allprofits
profits  State
Stateowns
ownsbasic
basic  State
Stateowns
owns
industries
industries industries
industries
 Right
Rightto
tochoose
choosejob
job
 Some
Someprivate
private  Profits
Profitsnot
not
 Decide
Decidewhat
whatto
to industries
industries recognized
recognized
produce
produce
 Profits
Profitsonly
onlyin
in  State
Statedecides
decides
 How
Howtotoproduce
produce private
privatesector
sector occupation
occupation
 Whom
Whomto
tosell
sellto
to  State
Stateinfluences
influences
job
jobchoice
choice
V. ECONOMIC SYSTEMS ………..
A. Communism/ Planned Economy– An economy in
which the government owns the productive resources,
financial enterprises, retail stores and banks

B. Capitalism/ Free Market– Private enterprise can


produce almost everything
C. Socialism/ Mixed Economy– both private and
government produce and distribute goods and
services
Government usually plays a role in supplying defense,
roads, education, pensions and some medical care
In mixed economy, markets are generally free and
competitive
V. ECONOMIC SYSTEMS ………..
· Capitalism– Type of economic system
characterized by private ownership of capital
and by competition among businesses seeking
profit.

Consumers have freedom of choice in purchasing


goods and services in selecting an occupation or a
school etc

Freedom of enterprise means, businesses and


individuals with the capital may enter essentially
any legal business venture they wish

Competition refers to the rivalry among businesses


for consumer money

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