Transcript Introduction to Business Lesson III

Ass. Prof. Dr. Özgür KÖKALAN
İstanbul Sabahattin Zaim University
Chapter Objectives
1.
2.
3.
4.
Distinguish between microeconomics and
macroeconomics.
Explain the factors that drive demand and supply.
Explain major economic indicators of an economy
Discuss how monetary policy and fiscal policy are used to
manage an economy’s performance
3-2
Economics
 Economics—social science that analyzes the
choices made by people and governments in
allocating scarce resources.
3-3
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.
3-4
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.
3-5
 Demand Curve for Gasoline
3-6
Factors Driving Demand
 Each person must choose
 Between saving and spending
 How to allocate spending
3-7
 Shift in the Demand Curve for Gasoline
3-8
 Expected Shifts in Demand Curves
3-9
Factors Driving Supply
 Businesses must chose how to use their resources to
obtain the best profits
 Supply Curve
 Shows the relationship between different prices and the
quantities that sellers will offer for sale, regardless of
demand
3-10
 Supply Curve for Gasoline
3-11
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
3-12
 Expected Shifts in Supply Curves
3-13
 Law of Supply and Demand
3-14
Evaluating Economic Performance
 Flattening the Business Cycle
 Economies flow through various stages of a business
cycle
3-15
 Four Stages of the Business Cycle
3-16
Productivity and GDP & GNP
 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 in a year within a nation’s
boundaries
 GDP per capita; GDP is divided by the number of
people in the country
 Groos National Product – the sum of all goods
and services produced in one year by labour and
property supplied by the residents of a country
3-17
Price-Level Changes
 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.
 Hyperinflation—economic situation characterized by
soaring prices
3-18
Price-Level Changes
 Demand-pull inflation
Excess consumer demand
 Cost-push inflation
Generated by rises in costs of factors of production
 Deflation
Consumer pessimism about the future causes
individuals to stop purchasing
3-19
Measuring Price Level Changes
 Consumer Price Index (CPI)—measures the monthly
average change in prices of goods and services
 Market Basket—combination of the goods and services
most commonly purchased by urban consumers
 Producers Price Index (PPI)
 For Finished Goods
 For Intermediate Goods
3-20
 Contents of the CPI Market Basket
3-21
Employment Levels
 Unemployment rate— an
indicator of a nation’s
economic health
 Top Job Losses by Industry
in the Recent Recession
3-22
 Four Types of Unemployment
3-23
Managing the Economy’s
Performance
 Monetary Policy—
government actions to
increase or decrease the
money supply and change
banking requirements and
interest rates to influence
banker’s willingness to make
loans.
3-24
Managing the Economy’s
Performance
 Fiscal Policy—government
spending and taxation
decisions designed to control
inflations, reduce
unemployment, improve the
general welfare of citizens,
and encourage economic
growth.
3-25
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
3-26