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Unformatted text preview: AEM1200, Introduction to Business Management. Wednesday 10/13 Economics Markets and capitalism Supply, demand and competition The government and economics Economics
The study of how scarce resources are used to produce outputs – goods and services – to be distributed among people What goods and services should be produced to meet consumers’ needs? How should goods and services be produced? Who should receive the goods and services produced? Types of Economies
Capitalism An economic system in which all or most of the factors of production and distribution are privately owned and operated for profit; A global system of social organization based on common ownership, democratic control, production for use and free access; An economic and political system in which the state makes all economic decisions and owns all the major forms of production; Economic systems in which some allocation of resources is made by the market and some is made by the government. Socialism Communism Mixed economies Three (crazy?) Adam Smith ideas
Self-interested efforts result in collective benefit; Uncoordinated markets result in optimal utilization of resources; Private property is a more powerful incentive than public coercion. Foundations of Capitalism
Right to private property; Right to own a business and to keep all of that business’ profits; Right to freedom of competition; Right to freedom of choice; Right to obtain interest. Supply and Demand Types of Competition
Perfect competition Markets in which many consumers buy standardized products from numerous small businesses; Market in which many sellers supply differentiated products; Market in which a few sellers supply a large portion of all the products sold in the marketplace; Market in which there is only one seller supplying products. Monopolistic competition Oligopoly Monopoly Key Economic Indicators
Gross Domestic Product (GDP) Unemployment Rate Price Indexes Consumer Price Index(CPI) Producer Price Index(PPI) The Business Cycle Unemployment
Formal unemployment Frictional Structural Cyclical Seasonal Outsourcing Flexible employment Jobs: Less, and More Unequal Government’s Role in Economics
Enforces Rules/Regulations Provides Public Goods Transfers Payments Fosters Competition Contributes to Economic Stability U.S. Government Economic Tools
Monetary Policy- management of money supply Fiscal Policy- management of taxes and government expenditures National Debt Role of the Federal Reserve President Obama's $3.8 trillion budget proposal for fiscal year 2011 includes billions to put people back to work and imposes new fees on some of the nation's largest banks. Take-aways
The liberal democratic mixed economy is the most powerful engine of economic growth devised by humankind; Supply and demand determine the long-term prices of goods, services and ideas, therefore determining the incentive to produce more or less of any one; Governments play a major role in ensuring the viability of an economy and in “safeguarding” it. ...
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