Professional Documents
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Chapter 01
Chapter 01
Chapter 01
What is Business?
McGraw-Hill/Irwin
Introduction to Business
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Definitions of Business
Business has three dimensions of a meaning
- A commerce
- An occupation
- An organization
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Definitions of Business
Business as a commerce is the process that people
produce, exchange and trade goods and services
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Definitions of Business
Business as an occupation is the acquired set of
specialized skills and abilities that allows people to
create valuable goods and services
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Definitions of Business
Business as an organization is the system of task and
authority relationship that coordinates and controls the
interactions between people so that they work toward
a common goal
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Definitions of Business
Business as a system is a combination of business
commerce, occupations, and organizations that
produces and distributes the goods and services that
create value for people in a society
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Factors of Production
Regardless of meaning there are four crucial
ingredients or productive factors or resources of land,
labor, capital and enterprise that are needed to profit
from business
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Factors of Production
These four productive factors or resources of land,
labor, capital and enterprise that are needed to profit
from business and are limited in supply (scarcity)
A company must use them efficiently and effectively
to produce goods and services
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The companys business model not only outlines the
plan for these resources but creates a competitive
advantage in the value of its product and generates
profitable sales revenue
By reinvesting the profits the business increases its
capital and contributes to the wealth of the owners
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Supply and Demand
The forces of supply and demand determine a
products market price
In turn, supply and demand are the result of peoples
subjective judgment of the value or utility they will
receive from supplying or consuming a particular
product
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Law of Demand
Reflects the usefulness or utility from that product
Given the price of a product or service, we generally
demand less quantity of it as the price increases and
demand more of it as the prices decreases
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Law of Supply
Sellers are more willing to supply a product as the
price increases and less willing to supply as the price
decreases
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Through this invisible hand of the market, the
interaction of business commerce and occupation
determines the standard of living, wealth, and
prosperity of people, groups, and society
It also determines how profit will be shared between
people and groups in a society
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