Transcript BPM Chap03
Chapter 3
1
Economic Environment
of Business
Chapter
3 Economic Environment
©2008 Thomson/South-Western
of Business
Lesson 3.1 Economic Wants
Goals
Describe economic concepts that apply to
satisfying economic wants.
Explain the role of capital formation in an
economy.
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Chapter 3 Economic Environment
of Business
Economics
Economics — body of knowledge that relates
to producing and using goods and services
that satisfy human wants
Economic wants — desire for scarce material
goods and services
Noneconomic wants — desire for nonmaterial
things that are not scarce, such as air,
sunshine, and friendship
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Chapter 3 Economic Environment
of Business
Economic Wants
Satisfying our economic wants
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Capital formation
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Utility — form, place, time, possession
Factors of production — natural resources, labor, capital
goods, entrepreneurship
Capital goods — goods needed to produce consumer
goods and services
Consumer goods and services — goods and services that
directly satisfy people’s economic wants
Chapter 3 Economic Environment
of Business
Lesson 3.2 Economic Systems
Goals
Discuss three economic systems and three
economic-political systems.
Explain why a business considers the
economic-political system of a country.
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Chapter 3 Economic Environment
of Business
Economic Systems
Economic system — organized way for a
country to decide how to use its productive
resources; that is, to decide what, how, and
for whom goods and services will be
produced
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Chapter 3 Economic Environment
of Business
Types of Economic Systems
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Market economy — individual buying decisions in
the marketplace determine what, how, and for whom
goods and services will be produced
Command economy — central planning authority,
under control of government, owns most of the
factors of production and determines what, how, and
for whom goods and services will be produced
Mixed economy — aspects of a market and a
command economy are used to make decisions
about what, how, and for whom goods and services
will be produced
Chapter 3 Economic Environment
of Business
Types of Economic-Political Systems
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Capitalism — private citizens are free to go
into business for themselves, produce
whatever they choose, and distribute what
they produce
Socialism — government controls the use of
the country’s factors of production
Communism — all or almost all of a nation’s
factors of production are owned by the
government
Chapter 3 Economic Environment
of Business
Lesson 3.3
Fundamentals of Capitalism
Goals
Describe why private property is important to
capitalism.
Describe how prices are set in a capitalistic
system.
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Chapter 3 Economic Environment
of Business
Fundamentals of Capitalism
Private property
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Price setting
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Profit
Demand
Supply
Competition
Income distribution
Chapter 3 Economic Environment
of Business
SUPPLY AND DEMAND
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Chapter 3 Economic Environment
of Business
Lesson 3.4 Managing the Economy
Goals
Explain how economic growth can be
promoted and measured.
List basic economic problems that exist and
state what government can do to correct the
problems.
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Chapter 3 Economic Environment
of Business
Managing the Economy
Measuring economic growth
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Gross domestic product (GDP)
Consumer Price Index (CPI)
Index of leading economic indicators
Employment
Retail sales
Personal income and consumption
Chapter 3 Economic Environment
of Business
Managing the Economy
Identifying economic problems
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Correcting economic problems
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Recession
Inflation
Business cycles: expansion, peak, contraction,
trough
Depression
Chapter 3 Economic Environment
of Business