1. CHAPTER 1
Understanding
The Business System
Presented by: Anna Riana Putriya

2. The Concept Of Business and
The Concept Of Profit
• Business is an organization
that provides goods or services to
earn profits
• Profits represent the difference
business’
between a business’s revenues
and its expenses
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3. What Are Factors of Production?
Resources used in the
production of goods and
services—
services—labor, capital,
entrepreneurs, physical
resources and information
resources
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4. Factors of Production
1. Labor/Human resources /
Labor/
Intelectual Capital are the
physical and mental
capabilities of people as they
contribute to economic
production
2. Capital are the funds needed to
create and operate a business
enterprise
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5. 3. Entrepreneur is an individual who accepts the
risks and opportunities involved in creating and
operating a new business venture
4. Physical resources are tangible things
organizations use in the conduct of their
business
5. Information resources are data and other
information used by business
Can you name any others ?
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6. Economic Systems Around the World
An economic system is a nation’s system for
nation’
allocating its resources among its citizens.
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7. Types of Economic Systems
Planned
Economies
Communism Socialism
(Mixed Market)
Capitalism vs. Market
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8. 1. Planned Economy
Relies on a centralized
government to control all or
most factors of production and
to make all or most production
and allocation decisions. The
Kremlin is shown above.
What Is Communism?
Planned economy in which the government owns and
operates all factors of production
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9. 2. Market Economy
Relies on individuals to control production and
allocation decisions through supply and
demand
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10. What is Market?
Mechanism for exchange between the buyers and
sellers of a particular good or service
What Is Capitalism?
Market economy that provides for private ownership of
production and encourages entrepreneurship by offering
profits as an incentive
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11. Circular Flow in a Market Economy
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12. 3. Mixed Market Economy
Features characteristics of both planned and market
economies
• Privatization is the process of converting
government enterprises into privately
owned companies
• Socialism is a partially planned system
in which the government owns and
operates selected major industries
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13. Demand and Supply in a Market Economy
• Demand is the willingness
and ability of buyers to
purchase a good or service
• Supply is the willingness
and ability of producers to
offer a good or service for sale
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14. The Laws of Supply and Demand
The law of demand:
Buyers will purchase (demand) more
of a product as its price drops and less
as its price increases.
The law of supply:
Producers will offer (supply) more of
a product for sale as its price rises
and less as its price drops.
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15. What Is the Market Price (or Equilibrium Price)?
Profit-
Profit-maximizing price at which the quantity of goods
demanded and the quantity of goods supplied are equal
High
2500 Surplus
D S
2000
Pizza Price
1500
1000 Market Equilibrium
500
0 Shortage
2 4 6 8 10 12 14 16 18 20
Low
Quantity High
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16. Private Enterprise and Competition in a
Market Economy
Private enterprise is an economic system that allows
individuals to pursue their own interests without
undue governmental restriction.
Four elements:
– Private Property Rights
– Freedom of Choice
– Profits
– Competition
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17. Degrees of Competition
Monopolistic
Oligopoly Competition
One Many
Monopoly Perfect
Competition
Sellers
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18. Degrees of Competition
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19. Evolution in Business
Production Era Marketing Era
Laissez-Faire &
Laissez- Global Era
Entrepreneurship Era
Information &
Industrial Revolution Internet Era
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