Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-1 Class 1 Review ●What is a business? ●Are profits bad? – Do not think emotionally – Think economically ●Who determines what products are offered? –How do people say what they want? (vote?)

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-2 Six Eras in the History of Business

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-3 ●Gross Domestic Product (GDP) The sum of all goods and services produced within a country’s boundaries. –Nations with the highest GDP

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-4 ●Top-10 trading partners with the U.S.

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-5 Productivity: Key to Global Competitiveness ●Productivity describes the relationship between the number of units produced and the number of human and other production inputs necessary to produce them. Total Output (goods or services produced) Productivity Input (human/natural resources, capital) Total Output (goods or services produced) Productivity Input (human/natural resources, capital) =

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-6 ●The Changing Nature of Work –Outsourcing— Contracting with another business to perform tasks or functions previously handled by internal staff members –The military increases its backup from private companies ●What must you do to be competitive?

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-7 Chapter 3 – Part 1 Economic Challenges Facing Global and Domestic Business Microeconomics

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-8 Excellent Reading – Recommendations ●Free to Choose ●The World is Flat ●Freakonomics

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved. 1-9 Chapter Overview ●Economics—social science that analyzes the choices made by people and governments in allocating scarce resources.

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved Supply and Demand ●What is your pet worth?

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved Economics ●Microeconomics—study of small economic units, such as individual consumers, families, and businesses. ●Macroeconomics—study of a nation’s overall economic issues, such as how an economy maintains and allocates resources and how government policies affect the standards of living of its citizens.

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved Microeconomics: The Forces of Demand and Supply ●Demand—willingness and ability of buyers to purchase goods and services. ●Supply—willingness and ability of sellers to provide goods and services.

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved ●Factors Affecting Demand for Automobiles: Consumer Preferences, Incomes and the Prices of Substitute Products

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved ●Demand Curve for Gasoline –Graph amount of a product that buyers purchase at different prices –Demand curves typically slope downward and to the right; lower prices attract larger purchases

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved ●Shift in the Demand Curve for Gasoline

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved ●Expected Shifts in Demand Curves

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved Factors Affecting Supply ●Costs of goods ●Costs of labor ●Costs of technology ●Availability of suppliers ●Taxes

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved ●Supply Curve for Gasoline Shows the relationship between different prices and the quantities that sellers will offer for sale, regardless of demand

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved ●Expected Shifts in Supply Curves

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved ●Law of Supply and Demand Equilibrium price

Copyright © 2005 by South-Western, a division of Thomson Learning, Inc. All rights reserved Supply and Demand ●Consider the market for lemonade. What happens when: – There is a heat wave – The price of sugar goes up – The cost of a can of soda falls – There is a baseball game on the street