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CHAPTER 1

CHAPTER 1. Understanding The Contemporary Business Environment. The Meaning of Business. Business : Organization that provides goods or services that are then sold to earn profits.

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CHAPTER 1

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  1. CHAPTER 1 • Understanding The Contemporary Business Environment

  2. The Meaning of Business • Business: Organization that provides goods or services that are then sold to earn profits. • Profits: The difference between a business's revenues and expenses – is what encourages people to open and expand businesses.

  3. The Evolution of Business • Industrial Revolution: in the middle of the eighteenth century - change in production characterized by a shift to the factory system, mass production, and the specialization of labor. - The factory system reduced duplication of equipment and allowed firms to buy raw materials at better prices by buying in large lots.

  4. The Evolution of Business • Entrepreneurial Era: Starting/Opening up of businesses due to improvements in transportation and the liberalization of markets. • Production Era: Period during the early 20th century in which business focused primarily on improving productivity and manufacturing efficiency. • Marketing Era: After World War II, idea that a business must focus on identifying and satisfying consumer wants in order to be profitable.

  5. The Evolution of Business • The Global Era: Continuation of technological advances in production, computer technology, information systems, and communications capabilities enable businesses to expand into foreign markets. • The Information Era: Characterized mostly by the internet – expanded rapidly after 2005.

  6. Factors of Production • Labor: Physical and mental capabilities of people as they contribute to economic production. • Capital: Funds needed to create and operate a business enterprise. • Entrepreneur: is an individual who accepts the risks and opportunities entailed in creating and operating a new business

  7. Factors of Production • Physical resources: Tangible items organizations use in the conduct of their businesses; include natural resources, raw materials offices, production facilities, computers etc. • Information Resources: Data and other information used by businesses.

  8. The Economics of a Market System • Market: Mechanism for exchange between buyers and sellers of a particular good or service. • Demand: The willingness and ability of buyers to purchase a good or a service. • Supply: The willingness and ability of producers to offer a good or a service for sale.

  9. The Economics of a Market System • Law of Demand: Principle that buyers will purchase (demand) more of a product as its price drops and less as its price increases. • Law of Supply: Principle that producers will offer (supply) more of product for sale as its price rises and less as its price drops. • Surplus: Situation in which quantity supplied exceeds quantity demanded. • Shortage: Situation in which quantity demanded exceeds quantity supplied.

  10. The Economics of a Market System • Private Enterprise system: one that allows individuals to pursue their own interests with minimal government restriction. • Competition: occurs when two or more businesses vie for the same resources or customers. • Perfect Competition: Market or Industry characterized by numerous small firms producing an identical product.

  11. The Economics of a Market System • Monopolistic Competition: Market or Industry characterized by numerous buyers and relatively numerous sellers trying to differentiate their products from those of competitors. • Oligopoly: Market or Industry characterized by a generally large sellers with the power to influence the prices of their products. • Monopoly: Market or Industry, in which there is only one producer, which can therefore set the prices of its products.

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