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Understanding How Economics Affects Business: Chapter Two
Understanding How Economics Affects Business: Chapter Two
Understanding How Economics Affects Business: Chapter Two
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Understanding
How
Economics
Affects
Business
McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
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MUHAMMAD YUNUS Profile
Grameen Bank
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• Offers microcredits
(very small loans) to
the poor to start their
own businesses.
2-2
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The MAJOR BRANCHES of What Is
Economics?
ECONOMICS
LG1
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• Economics -- The study of how society employs
resources to produce goods and services for
consumption among various groups and individuals.
• Macroeconomics -- Concentrates on the
operation of a nation’s economy as a whole.
• Microeconomics -- Concentrates on the behavior
of people and organizations in markets for particular
products or services.
2-3
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What Is
RESOURCE DEVELOPMENT Economics?
LG1
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• Resource Development -- The study of how to
increase resources and create conditions that will
make better use of them.
2-4
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EXAMPLES of WAYS to What Is
Economics?
INCREASE RESOURCES LG1
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• New energy sources
– Hydrogen fuel
2-7
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How Businesses
The INVISIBLE HAND THEORY Benefit the
Community
LG1
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2-8
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UNDERSTANDING the How Businesses
Benefit the
Community
INVISIBLE HAND THEORY LG1
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• A farmer earns money by
selling his crops.
• To earn more, the farmer hires
farmhands to produce more
crops.
• When the farmer produces
more, there is plenty of food
for the community.
• The farmer helped his
employees and his community
while helping himself.
2-9
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CORRUPTION DESTROYS
ECONOMIES
(Making Ethical Decisions) *
• In many countries, a businessperson must bribe
the government to gain permission to own land,
build and conduct business operations.
2-10
*Understanding
CAPITALISM Free-Market
Capitalism
LG2
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• Capitalism -- All or most of the land, factories and
stores are owned by individuals, not the
government, and operated for profit.
2-11
CAPITALISM’S
FOUR BASIC RIGHTS
1. The right to own private property.
2. The right to own a business and keep all that
business’ profits.
3. The right to freedom of competition.
4. The right to freedom of choice.
FREE MARKETS
• Free Market -- Decisions about what and how
much to produce are made by the market.
• Consumers send signals about what they like
and how they like it.