Transcript Chapter 3
Chapter 3
Economic
Challenges Facing
Global and
Domestic
Business
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Economics
Economics—social science that analyzes
the choices made by people and
governments in allocating scarce resources.
Microeconomics—study of small economic units,
such as individuals, 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.
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Microeconomics:
The Forces of Demand and Supply
Demand—willingness and ability of buyers to
purchase goods and services (at different
prices)
Demand curve is typically downward sloping and to
the right, meaning lower prices/larger purchases
Supply—willingness and ability of sellers to
provide goods and services (at different prices)
regardless of demand
Supply curve is typically upward sloping, meaning
higher prices/higher supply
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Factors Affecting
Demand for
Automobiles:
Consumer
Preferences,
Incomes and the
Prices of
Substitute
Products
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Demand Curve for Gasoline
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Shift in the Demand Curve for Gasoline
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The Milk Industry
Trying to
Increase Overall
Demand for its
Products
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Supply Curve for Gasoline
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Factors Driving Supply
Central role in determining the overall supply
of goods and services is played by factors of
production
Natural resources
Human resources
Physical facilities
Entrepreneurship
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The intersection of the Supply and
Demand Curves is the Equilibrium Price
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Macroeconomics: Issues for the Entire Economy
Capitalism: The Private Enterprise System
economic system in which business success or
failure depends on how well firms match and counter
the offerings of competitors
• Types of Competition
Pure competition
Monopolistic competition
Oligopoly
Monopoly
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Monopolistic
Competition
Relies on
Differentiation of
Products in a
Market
Purina One
Special Care
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Gulfstream
Airplanes:
Oligopolistic
Industrial
Products
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Rawlings is the
only supplier of
baseballs for
Major League
Baseball and the
NCAA
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Planned Economies:
Communism and Socialism
Communism: planned economic system in
which private property is eliminated, goods
are owned in common, and factors of
production and production decisions are
controlled by the state
Socialism: planned economic system
characterized by government ownership and
operation of all major industries
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Mixed Market Economies
Economic system that combines
characteristics of both planned and market
economies in varying degrees, including the
presence of both government ownership and
private enterprise
Privatization
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Four Stages of the Business Cycle
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Productivity and the Nation’s Gross
Domestic Product
Productivity—relationship between the
goods and services produced in a nation
each year and the inputs needed to produce
them.
Gross domestic product—the sum of all
goods and services produced within a
nation’s boundaries each year.
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Price-Level Changes
Consumer Price Index (CPI)—measures the
monthly average change in prices of goods
and services
Inflation—rising prices caused by a
combination of excess consumer demand
and increases in the costs of raw materials,
human resources, and other factors of
production.
Deflation—falling prices economic
situation characterized by soaring prices
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Four Types of Unemployment
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Managing the Economy’s Performance
The government uses both Monetary and Fiscal
Policy to control inflation, reduce unemployment,
improve the general welfare of citizens, and
encourage economic growth.
Monetary Policy— Handled
by the Federal Reserve and
involves increasing or
decreasing the money supply
Fiscal Policy – Handled by
the government through taxes
and spending
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Fiscal Policy
Budget—organization’s plan for how it will
raise and spend money during a given period
of time.
Budget deficit—funding shortfall that results
when the government spends more than the
amount of money it raises through taxes and
fees
National debt
Budget surplus
Balanced budget
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Where Federal Tax Revenues Come from
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What’s wrong with this picture?
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What’s wrong with this picture?
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What’s wrong with this picture?
http://www.econoclass.com/whatswrongwithpicture.html
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