chapter 1 understanding the us business system 1 reference: ebert & griffin (2007)....
TRANSCRIPT
Chapter 1Understanding the US Business System
1Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Economic Systems around the World
• Different countries run their businesses in different ways. This is because the economic systems ( االقتصادية in countries are (النظمdifferent.
• A country’s economic system decides how the country’s resources(الموارد) are divided among its citizens (people).
1–2Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Factors of Production Factors of Production Resources a country use to produce goods & services
1–3
There are 5 basic Resources:
1.Labor: The people who work in businesses also called human resources (الموارد).
2.Capital: The money needed to start and operate a business.
3.Entrepreneurs: People who start new businesses.4.Physical Resources: These are the tangible
things businesses need to operate (the (ملموس)things we can see and touch).
5.Information Resources: Information and data used by businesses.
How Are Factors of Production Allocated
Economic systems: how the country’sresources are divided among its citizens
how the factors of production / (المواطنون)( اإلنتاج .are managed(عوامل
There are three types: 1. Planned economies (sometimes called
command economies)2. Market economies3. Mixed economies
1–4Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
PLANNED ECONOMIES
1. Planned Economies (sometimes called Command Economies) – these are controlled by the government of the country – the government makes all or most decisions on what goods to produce and where they will be sold (North Korea, Cuba, North Vietnam)
Communism and socialism are the two basic forms of planned economies`
• (4th Page 7; 5th Page 8)
1–5Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
PLANNED ECONOMIES SOCIALISM / COMMUNISM
In the socialist or communist economic systems, the government of the country owns and operates ( تمتلكالصناعات ) some major industries (وتدير and private individuals own and operate other (الرئيسيةless important industries
The government may own and operate banking, communication, and transportation while individuals own and operate clothing stores, restaurants, garages, etc.
The main idea of socialism/communism is to have an equal distribution of wealth (الثروة)in society – a decent lifestyle for all citizens
1–6Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
MARKET ECONOMIES
2. Market Economies – a way for buyers and sellers to exchange goods or services in which both have freedom of choice ( حرية(االختيار
The buyer has freedom to pay the amount of money he or she wishes
The seller has freedom to charge the amount of money he or she wishes for a product or service
1–7Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
MARKET ECONOMIES - CAPITALISM
A free-market economy is called capitalismCapitalism allows private ownership ( الملكيةof the factors of production (الخاصة
Capitalism encourages entrepreneurs ( وتشجعاالعمال to start small businesses (منظمى
Capitalism follows the rules of “supply and demand” of products and services
In capitalist economics, there is inequality ( عدم of wealth in society – there are both (المساواةvery rich and very poor people.
1–8Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
3 - MIXED MARKET ECONOMIES The economies of many countries have some of the features
of a planned economy and some of the features of a market economy
Individuals may own and operate businesses
The government owns and operates “essential services” such as health care, the electricity (األساسية)company, and the postal service – as it is in Bahrain
1–9Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
PRIVATIZATION
In some countries, “essential services” such as the electricity company have gone through a process called “privatization”
Privatization allows a government service to be purchased and operated by a private company (e.g. Telecommunications in Bahrain)
1–10Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Economic SystemsPlanned Economies Market Economies
*government controlled economies.
communism Socialism Mixed Market Economies.
Capitalism Input &output Market
Privatization
*Free market Economies.
*Individuals have access or ownership of factors of production.
*Government control all or most factors of production.
The process of selling essential government
enterprises to the private sector.
*Free market economyfollows the rules of supply and demand.*Government control is limited, most enterprises are private.
•Businesses and consumersConnected in circular flow.
*Not “Pure” plannedor “pure” market economies.*Government own and operates essential services.*most countries have this kind of economy.
*Government own and Operate some major industries.*Private Individuals own and operate otherless important industries.
*Only government owned and Operated enterprises.
**Factors of production:1-Labour.2-Capital.3-Entrepreneurs.4-Physical resources.5-Information resources. 1–11
Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Supply and Demand Drive the U.S. Economic System
• Supply (يزود): – The willingness and ability
of producers to offer a good or service for sale
• Law of Supply:– Producers will supply
(offer) more of a product for sale as its price rises and less as its price drops. (price = supply)
1–12Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Supply and Demand Drive the U.S. Economic System (cont’d)
• Demand (الطلب):– The willingness and ability of
buyers to purchase a good or service
• Law of Demand:– Buyers will demand (purchase)
more of a product as its price drops and less as its price increases.
( Price = Demand)
1–13Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Example: Demand and Supply SchedulesExample: Demand and Supply Schedules
1–14
Quantity of Quantity ofPrice Pizzas Demanded Pizzas Supplied
$2 2000 100$4 1900 400$6 1600 600$8 1200 800
$10$10 10001000 10001000$12 800 1200$14 600 1300$16 400 1600$18 200 1800$20 100 2000
Evaluation of the relationships between level of demand and supply at different price levels.
Demand Demand andand
Supply (1)Supply (1)
1–15
200
-
400
-
600
-
800
-
1000
-
1200
-
1400
-
1600
-
1800
-
2000
-
$20 -
18 -
16 -
14 -
12 -
10 -
8 -
6 -
4 -
2 -
Quantity of Pizzas Demanded
Pri
ce o
f P
izza
s
Demand Curve
Demand Curve
Demand curve: is graph that shows how many units of a product would be demanded (bought) at different prices.
Demand Demand and Supply and Supply
(2(2))
1–16
Quantity of Pizzas Supplied
200
-
400
-
600
-
800
-
1000
-
1200
-
1400
-
1600
-
1800
-
2000
-
$20 -
18 -
16 -
14 -
12 -
10 -
8 -
6 -
4 -
2 -
Pri
ce o
f P
izza
sSupply CurveSupply Curve
Supply curve: is graph that shows how many units of a product would be supplied (offered for sale) at different prices.
Demandand
Supply
1–17
Quantity of Pizzas per Week
200
-
400
-
600
-
800
-
1000
-
1200
-
1400
-
1600
-
1800
-
2000
-
$20 -
18 -
16 -
14 -
12 -
10 -
8 -
6 -
4 -
2 -
Pri
ce o
f P
izza
s Demand Curve
Demand Curve
Supply Curve
Supply Curve
Equilibrium PriceEquilibrium Price
Market Price (Equilibrium price) :Profit maximizing price at which the quantity of goods demanded and the quantity of goods supplied are equal.
Supply = Demand
Surplus and Shortage• Surplus (الفائض): When quantity supplied is
greater than quantity demanded.
Supply >Demand• Shortage (النقص): When quantity demanded
is greater than quantity supplied.
Supply < Demand
1–18Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
The U.S. Economy is a Private Enterprise System
To succeed (النجاح) private enterprise needs four element:
Four Key Elements:• Private Property Rights.• Freedom of Choice.• Profits.• Competition.
Private enterprise-Individuals are free to pursue their own interests without too much (متابعة)government restriction.
1–19Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Four element of private enterpriseo Private Property Rights ( الخاصة الملكية :(حقوق
• Access or ownership of the factors of production must be in the hands of individuals.
• Individuals must have the right to buy and sell goods and properties when they wish.
o Freedom of choice ( االختيار :(حرية• An Individual has the right to work for any employer they
choose and to select the products they want to buy.• A producer of goods or service can choose what to
produce and whom to hire (توظيف)as employees
1–20Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Four element of private enterpriseo Profits (األرباح):
• Individuals has the chance make more money working for their company than they would make working for someone else.
• Individuals can choose to earn a set salary working for others, or start their own business to try make more money.
o Competition (المنافسة):• Many companies offer same or similar products, the
customer can choose to buy from any company based on the quality and price of the product.
1–21Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Types of Competition• Even in a free enterprise system, not all
industries are equally competitive. There are four degrees of competition:1. Perfect Competition.2. Monopolistic Competition.3. Oligopoly.4. Monopoly.
1–22Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Perfect competition1. This is when all firms in the industry are small .2. The number of firms in the industry is large.
Therefore, no firm is powerful enough to determine price, as price is set by demand and supply.
Example: Vegetables market: Products offered are same or similar. Buyers and sellers know the price. Easy to enter or leave the market Prices are set by supply and demand.
1–23Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Monopolistic Competition
1–24
• A fewer seller of products but still many buyers.
• Sellers try to make their product different.
Example: fast food restaurants, soft drinks.
Oligopoly• A small number of sellers offer products.
• They are large companies they can influence the price.
• The price of similar products offered by different companies are generally the same.
• Example: Airplanes manufacturers.Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Monopoly
• A Monopoly exists when there is only one producer in a market or industry.
• A single supplier or producer has complete control over the prices it charges.
• The customers want the product, they must pay the price asked.Example: Electricity supplier.
1–25Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall
Degrees of CompetitionCharacteristic : Perfect
Competition Monopolistic Competition
Oligopoly Monopoly
Example: Fruit & veg. shop Cold Store Airlines Electricity Provider
No. of Competitors:
Many Many, but fewer than pure competition
Few None
Ease of entry into the industry:
Relatively easy Fairly easy Difficult Regulated by Government
Similarity of goods being provided:
Identical Similar Can be similar or different
Neither
Level of controls of price by individual firms:
None Some Some Considerable
1–26Reference: Ebert & Griffin (2007). "Business Essentials" Pearson, Prentice Hall