understanding the contemporary business environment - summary

Business essentials -- part 1 -- summary

U.S. business and its main goals and functions.

A business to take the course of profits. The prospect of earning profits -- the difference between a businesses revenues and expenses-- encourages people to open and expand businesses. Businesses produce most of the goods and services that Americans consume an employ most working people. New forms of technology, service businesses, and international opportunities promise to keep production, consumption, and employment growing indefinitely.

Global economic systems according to the means by which they control the factors of production through input and output markets.

Economic systems differ in the ways in which they manage the five factors of production (1) labor, or human resources, (2) capital, (3) entrepreneurship, (4) physical resources, and (5) information resources. A planned economy relies on a centralized government to control factors of production and make decisions. Under communism, the government owns and operates all sources of production. In a market economy, individuals -- producers and consumers -- control production and allocation decisions through supply and demand. A market is a mechanism for exchange between the buyers and sellers of a particular product or service. Sellers can charge what they want, and consumers can buy what they choose.

In a market economy, businesses and households interact in two different relationships. In that input market, firms by resources from households, which are the suppliers. In the output market, firms supply goods and services in response to demand on the part of households. The political basis of market processes is capitalism, which fosters private ownership of the factors of production and encourages entrepreneurship by offering profits as an incentive. Most countries rely on some form of mixed market economy -- a system featuring characteristics of both planned and market economies.

Markets, demand, and supply affect resource distribution in the United States.

Decisions about what to buy and what to sell are determined by the forces of demand and supply. Demand is the willingness and ability of buyers to purchase a product or service. Supply is the willingness and ability of producers to offer a product or service for sale. A demand and supply schedule reveals the relationships among different levels of demand and supply at different price levels.

The elements of private enterprise and the various degrees of competition in the U.S. economic system.

Market economies reflect the operation of a private enterprise system -- a system that allows individuals to pursue their own interests without government restrictions. Private enterprise works according to four principles: (1) private property rights, (2) to see freedom of choice, (3) to see profits, and (4) competition. Economists have identified four degrees of competition and a private enterprise system: (1) perfect competition, (2) monopolistic competition, (3) oligopoly, and (4) monopoly.

The importance of economic environment to business and the factors used to evaluate the performance of an economic system.

the overall health of the economic environment -- the economic system in which they operate -- affects organizations. The two key goals of the U.S. system are economic growth and economic stability. Growth is assessed by aggregate output. Among the factors that can inhibit growth, two of the most important are balance of trade and the national debt. Economic stability means that the amount of money available and economic system in the quantity of goods and services produced in it are growing at about the same rate. There are two key threats to stability: inflation and unemployment. The government manages the economy through two sets of policies: fiscal policies (such as tax increases) and monetary policies that focus on controlling the size of the nation's money supply.