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
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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
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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
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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
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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