BCOR 1010 Notes

BCOR 1010 Notes - Business Notes Part One The Context of...

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Unformatted text preview: Business Notes Part One: The Context of Modern Business Role of Profit • What's a business? • Sell goods to earn a profit • Profit: amount of money leftover • Freedom • Adam Smith: father of free trade and capitalism • Resources go to best and most efficient uses • Competition Invisible hand guiding market No government necessary; self-regulation Factors of Production: • Resources used to produce goods and services • Land • Labor • Capital • Entrepreneurship • Knowledge/information Compare Japan and Russia JAPAN RUSSIA Small, efficient Large, inefficient Labor, densely populatedPopulated, spread out Technology exports World Economic Systems • Communism • All businesses owned and operated by government • Government/central planning • No competition • Ex: Cuba, N. Korea • Som • Basic industries/services owned by government • High taxation • Individuals own small businesses • Ex. Sweden, Israel, India • Capitalism • Private ownership of businesses • Competition and profit • Freedom "Free Market" Capitalism • Competition produces optimal quantity and variety of goods • Laws of supply and demand determine prices Demand • Quantity demanded increases as price decreases Supply • Combine supply and demand--> find equilibrium price Competitiveness of Markets • Pure/perfect competition • Monopolistic competition • Oligopoly (autos, airlines, steel, cable) • Monopoly (electric, gas, water, utilities) Elasticity • Elasticity of demand is the responsiveness of demand to price changes • No alternative--pay any price--inelastic • Lots of alternatives--varying prices--elastic Economic Indicators • Gross domestic product (GDP) • Productivity (amount of output per person, per hour) • Unemployment rate (16 years and up, actively looking for job) • Types: frictional (common), cyclical, structural (bad form, mismatch between skills and jobs) Inflation • Widespread increase in price • Too much money chasing same amount of goods • Measure by the consumer price index (CPI) • Basket of 400 goods/services • Tracked money • Fed works to control inflation The Role of Government • What does our government do? • Agriculture, commerce, education, energy, health and human services, homeland security, housing and urban development, labor, state, transportation, treasury, etc. Uncompetitive Markets • The free market produces uncompetitive markets • Why? • Stop anti-competitive prices, equality, market gives us inefficient outcomes in the case of products/services with externalities or public goods/ services --> to channel or shape markets along competitive lines Channeling of Markets along Competitive Lines: • Anti-t rust activities • Investigate and prosecute price accusations • Review merges and accusations • Regulates natural monopolies Equality vs. Efficiency (don't like outcomes) • The basic "trade-off" • Birth control pills • Insulin • What constitutes "fairness"?What constitutes "fairness"?...
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BCOR 1010 Notes - Business Notes Part One The Context of...

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