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1.01 How does an economic system affect the environment in which businesses function?

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Presentation on theme: "1.01 How does an economic system affect the environment in which businesses function?"— Presentation transcript:

1 1.01 How does an economic system affect the environment in which businesses function?

2  Demand Economies  Socialist Economies  Capitalist Economies  Free Market Economies 1.01 How does an economic system affect the environment in which businesses function?

3  What should we produce?  How should we produce it?  For whom are we producing? 1.01 How does an economic system affect the environment in which businesses function?

4  Availability of raw materials  Availability of means of production  Availability of human resources  Entrepreneurial resources  Imagination, creativity, and risk taking 1.01 How does an economic system affect the environment in which businesses function?

5  Government controls the factors of production  Government answers the 3 basic economic questions 1.01 How does an economic system affect the environment in which businesses function?

6  Government controls major portions of the economy making all the decisions ◦ Education ◦ Communication ◦ Transportation ◦ Healthcare  Allows some portions of the economy to be capitalist or free market 1.01 How does an economic system affect the environment in which businesses function?

7  Supply and demand controls product availability  Significant amounts of taxation and regulation 1.01 How does an economic system affect the environment in which businesses function?

8  Supply and demand controls product availability  Government does not involve itself in the marketplace ◦ Caveat emptor – Let the buyer beware ◦ Venditat emptor – Let the seller beware 1.01 How does an economic system affect the environment in which businesses function?

9  Adam Smith – The Wealth of Nations ◦ An “Invisible Hand” guides products into and out of the marketplace ◦ Because a consumer can vote with her wallet, inferior products will be voted off the island ◦ Innovation and competition occur protecting us from monopolies  Demand – The amount of goods or services consumers are willing and able to purchase at a given price.  Supply – The amount of goods or services providers are willing and able to sell at a given price.  Equilibrium – The point at which buyers and sellers agree on quantity and price. ◦ Happens every time money is exchanged How does an economic system affect the environment in which businesses function?


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