Chapter One - Chapter One What is Business The term...

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Chapter One What is Business? The term business is a broad, all-inclusive term that can be applied to many kinds of enterprises o Businesses provide the bulk of employment opportunities, as well as the products that people enjoy Businesses produce both tangible goods and services o Business provides the means through which its citizens’ standard of living improves o At the heart of every business endeavor is an exchange between a buyer and a seller. A buyer recognizes a need for a good or service and trades money with a seller to obtain that product. Profits represent rewards for businesspeople that take the risks involved in blending people, technology, and information to create and market want- satisfying goods and services. Profits serve as incentives for people to start companies, expand them, and provide consistently high-quality competitive goods and services. o The quest for profits is a central focus of business because without profits, a company could not survive. To succeed in the long run, companies must deal responsibly with employees, customers, suppliers, competitors, government, and the general public Not for profit organizations Not for profit organizations are businesslike establishments that have primary objectives other than returning profits to their owners These organizations play an important part in society by placing public service above profits These organizations operate in both private and public sectors o Private sectors include museums, libraries, trade associations, and charitable religious organizations o Public sector not for profit organizations include government agencies, political parties, and labor unions Without funding, the managers of not for profit organizations cannot do research, obtain raw material, or provide services Some not for profits sell merchandise or set up profit generating arms to provide good sand services for which people are willing and able to pay Factors of production Economists use the term factors of production to refer to four basic inputs: natural resources, capital, human resources, and entrepreneurship o Rent out natural resources o Gain interest on capital o Human resources earn wages o Entrepreneurs gain profit
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Natural resources include all production inputs that are useful in their natural states, including agricultural land, building sites, forests, and mineral deposits Capital includes technology, tools, information, and physical facilities. Technology plays an important role in the success of many businesses. Technology can result in a new product, improve a product, or can help a company operate more smoothly. To remain competitive, a firm’s capital needs to be continually acquired, maintained, and upgraded, so businesses need money for that purpose o A company’s funds may come from investments by its owners, profits plowed back into the business, or loans extended to others Human resources include anyone who works, from the CEO of a huge corporation to a self-employed auto mechanic. This category encompasses both the physical
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