1. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 1 Chapter 1: Exploring the World of Business and Economics

2. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 2 Learning Objectives 1. Discuss what you must do to be successful in the world of business. 2. Define business and identify potential risks and rewards. 3. Define economics and describe the two types of economic systems: capitalism and command economy. 4. Identify the ways to measure economic performance. 5. Examine the four different phases in the typical business cycle. 6. Outline the four types of competition. 7. Summarize the factors that affect the business environment and the challenges American businesses will encounter in the future.

3. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 3 Tips for Studying Business 1. Prepare before you go to class. 2. Read the chapter. 3. Underline or highlight important concepts. 4. Take notes. 5. Apply the concepts. 6. Practice critical thinking. 7. Prepare for exams. These study outlines will help.

4. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 4 Key Terms and Ideas  Define free enterprise.  Know the definition of business. Understand why studying business is important.  What are the four resources that businesses combine in order to be successful?  Know the difference between manufacturing businesses and service businesses.

5. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 5 Satisfying Needs  Why do people buy goods and services?  What must businesses understand about customer needs to help them be successful?

6. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 6 Sales Revenue and Profit  What is profit? How is it calculated?  Know the purposes of profit.  Who/What are stakeholders? Know the difference between primary and secondary stakeholders.

7. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 7 Types of Economic Systems  Be able to define and explain: Economics Microeconomics Macroeconomics Economy Factors of production Entrepreneur

8. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 8 Differences in Economic Systems  List and define principle characteristics of the major economic systems.  How do these systems differ?  What are the four basic economic questions that economic systems seek to address?

9. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 9 Capitalism  How is capitalism defined?  What does Adam Smith’s laissez-faire capitalism have to do with modern capitalism?  What are the basic assumptions and principal tenets of Smith’s laissez-faire capitalism?

10. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 10 Capitalism (cont.)  What are distinguishing characteristics of capitalism in the United States?  What role do the following groups play in a U.S.-style capitalist system? Households Businesses Governments

11. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 11 Types of Economic Systems  Define command economy. What are the two major command economies? What are their key characteristics? How do the two command economies differ?

12. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 12 Measuring Economic Performance  Define productivity.  What are major economic indicators of productivity? How are they calculated? What do they tell us about the economy?

13. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 13 Economic Performance: Key Terms  Be able to define and explain the significance of: Gross domestic product (GDP) Inflation Deflation Unemployment rate Consumer price index (CPI) Producer price index (PPI)

14. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 14 Evaluating a Nation’s Economic Health  Why is it important to occasionally evaluate a nation’s economic health?  Be able to define the following terms and explain what they tell us about economic health: Balance of trade Bank credit Corporate profits Inflation rate National income New housing starts Prime interest rate

15. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 15 The Business Cycle  What is the business cycle?  Define recession and depression.  What are monetary policies? What role does the Federal Reserve play in the United States’ monetary policies?  Be able to define: Fiscal policy Federal deficit National debt

16. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 16 Types of Competition  What is competition? Know the different types of competition.  Be able to define: Perfect (or pure) competition – Supply – Demand – Equilibrium (market) price – Where does the equilibrium price occur on the supply and demand curves? Monopolistic competition – What can firms do to gain a competitive advantage in a monopolistic competition situation?

17. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 17 Types of Competition (cont.)  Define and identify key characteristics of the following types of competition: Oligopoly Monopoly  Know the difference between: Natural monopoly and Legal (limited) monopoly

18. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 18 American Business Today  What is a standard of living? How is it measured?  Know the basic stages of business development in the United States.  Explain the differences between the four stages of early business development: Barter system Domestic system Factory system Specialization

19. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 19 American Business Today (cont.)  Know the key characteristics of business development in the 1900s. How did industries change? Major economic events that shaped business development and economic policy. Changes in the late 20 th century and early 21 st century that altered standards of living and consumption patterns. What is e-business and how has it changed businesses?

20. © 2013 South-Western, a part of Cengage Learning. All rights reserved. Chapter 1 | Slide 20 American Business Today (cont.)  What are the defining issues and innovations of the 21 st century so far? The role played by technology Service businesses  Why are many pessimistic about the U.S.’s future economic prosperity?  Be able to discuss the current business environment.