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M02_BOVE9656_05_SE_C02_LOW_RES - 1:31 PM Page 25 CHAPTER 2...

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CHAPTER 2 Understanding Basic Economics After studying this chapter, you will be able to 1 Define economics and explain why scarcity is central to economic decision making 2 Differentiate among the major types of economic systems 3 Explain the interaction between demand and supply 4 Identify four macroeconomic issues that are essential to understanding the behavior of the economy 5 Outline the debate over deregulation and identify four key roles that governments play in the economy 6 Identify the major ways of measuring economic activity LEARNING OBJECTIVES M02_BOVE9656_05_SE_C02.QXD 11/30/09 1:31 PM Page 25
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26 Part 1 Setting the Stage: The Business of Business Introduction The experience of Suntech Power (profiled in the chapter-opening Behind the Scenes) is a clear reminder of how economic forces affect every aspect of business. This chapter offers a brief introduction to economics from a business professional’s perspective, starting with a high-level look at the study of economics and the all-important concept of scarcity. Understanding basic economic principles is essential to successful business management, and this knowledge can make you a more satisfied consumer and a more successful investor, too. What Is This Thing Called the Economy? The economy is the sum total of all the economic activity within a given region, from a single city to a whole country to the entire world. The economy can be a difficult thing to get your mind wrapped around because it is so complex, constantly in motion, and at economy The sum total of all the economic activity within a given region www.suntech-power.com Strike up a conversation about solar power, and it probably won’t take long for the discus- sion to turn to economics. Specifically, when will solar- generated electricity reach grid parity with coal, oil, nat- ural gas, and nuclear, which now generate most of the world’s electricity? Reaching grid parity means it would cost the same to generate elec- tricity using the sun as it does using the energy sources that currently power the “grid,” the electricity transmission net- work. In other words, when will solar become an economi- cally viable alternative to conventional sources, all of which have significant disadvantages? Shi Zhengrong’s answer to that question is soon— very soon. Shi is founder and CEO of the Chinese com- pany Suntech Power, one of the world’s largest suppliers of photovoltaic (PV) solar modules. (PV is one of two main solar electricity methods; an alternative method uses mirrors to concentrate sunlight to boil water for steam generators.) Shi’s ambitious goal is to achieve grid parity by 2012 and even- tually to make PV even cheaper than coal or gas. Suntech became one of the world’s fastest-growing companies after its founding in 2001, quickly shooting past a billion dollars in rev- enue and making China a major player in solar energy. The company has a strong presence in Europe— Germany and Spain are among the world’s largest markets for PV power—and
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M02_BOVE9656_05_SE_C02_LOW_RES - 1:31 PM Page 25 CHAPTER 2...

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