Supply & Demand

1. PowerPoint Image Slideshow
Introduction
to Business

2. Learning
Outcomes
• How do businesses and not-for-profit organizations help create our
standard of living?
• What are the sectors of the business environment, and how do
changes in them influence business decisions?
• What are the primary features of the world’s economic systems, and
how are the three sectors of the U.S. economy linked?
• How do economic growth, full employment, price stability, and
inflation indicate a nation’s economic health?
• How does the government use monetary policy and fiscal policy to
achieve its macroeconomic goals?
• What are the basic microeconomic concepts of demand and supply,
and how do they establish prices?
• What are the four types of market structure?
• Which trends are reshaping the business, microeconomic, and
macroeconomic environments and competitive arena?

3. Team Rubicon
• As featured in the
Introduction, Exploring
Business Careers, Team
Rubicon is an organization
that offers opportunities for
those interested in nonprofit
careers as well as those
passionate about helping
others.

6. Standard of living
Measured by the
output of goods and
services people can
buy with the money
they have.

7. Knowledge
Knowledge is the combined
talents and skills of the
workforce and has become a
primary driver of economic
growth

8. Knowledge
• The four factors of production are
typically thought to be combined to
create entrepreneurial success, but
should Knowledge fit into the recipe
as a fifth element? Watch this video
now posted about various subjects
related to Economics, and after
viewing it, research one or more of
the entrepreneurs mentioned in this
section, such as Microsoft cofounder
Bill Gates, or Google founders
Sergey Brin and Larry Page.

9. 1. How do
businesses and
not-for-profit
organizations
help create our
standard of
living?
•CONCEPT CHECK
•Explain the concepts of
revenue, costs, and profit.
•What are the five factors of
production?
•What is the role of an
entrepreneur in society.

10. Exhibit 1.4 The Dynamic Business Environment

11. External Environment
Economic
Forces
Inflation, interest rates, unemployment rates,
taxes
Political &
Legal
Government activity, laws passed, political
stability
Demographic Age, gender, race & ethnicity, location
• Uncontrollable
• Define markets for products
• Size & composition of workforce
Social Attitudes, values, lifestyles
• Change as we get older
Technology Mobile, cloud computing, robots
• Maintain & build wealth

12. The External Business Environment
• Understanding the seven parts of
the external environment are key
to business success, particularly
because these are outside the
control of businesspeople. Watch
this video from Khan Academy:
The External Business Environment,
and after viewing, think about how
a regional disaster such an
earthquake or global pandemic
such as COVID-19 might affect
each of the seven components of
the business environment that
Exhibit 1.4 illustrates.

13. 2. What are the sectors of the business environment, and
how do changes in them influence business decisions
• CONCEPT CHECK
1. Define the components of the internal and the
external business environments.
2. What factors within the economic environment
affect businesses?
3. Why do demographic shifts and technological
developments create both challenges and new
opportunities for business?

14. Table 1.1 The Basic Economic Systems of the World

15. Table 1.1, The Basic Economic Systems of the World - Continued

16. Economic Systems: Free, Mixed, and Planned
Economies
• The extremes of both free market
and centrally planned economic
systems have moved to the center as
most global economies have
embraced a more mixed
approach. As described in Section
1.2, a nation’s economic system is
the combination of policies, laws,
and choices made by its government
to establish the systems that
determine what goods and services
are produced and how they are
allocated. After reviewing the video
from mjmfoodie titled Economic
Systems: Free, Mixed, and Planned
Economies, andwer the questions on
the next slide.

18. Exhibit 1.6 Economics as a Circular Flow

19. 3. What are the primary features of the world’s economic
systems, and how are the three sectors of the U.S. economy
linked?
• CONCEPT CHECK
1. What is economics, and how can you benefit from
understanding basic economic concepts?
2. Compare and contrast the world’s major economic
systems. Why is capitalism growing, communism
declining, and socialism still popular?
3. What is the difference between macroeconomics
and microeconomics?

20. Macroeconomics: The Big Picture

21. Macroeconomic Goals
Strive for Economic Growth
• Gross Domestic Product
Decline in Economic Growth
• Recession (two consecutive months)
Full Employment
• All people who want to work can
Frictional Unemployment
• Short term, not related to business
cycle
Structural Unemployment
• Mismatch between available jobs &
skills, not related to business cycle
Cyclical Unemployment
• Downturn in business cycle
Seasonal Unemployment
• Specific seasons in certain industries

22. Keeping Prices
Steady
• Inflation
• Demand-pull
• Demand greater than supply
• Cost-push
• Increase in production costs
• Expenses for materials, wages
• Consumer Price Index (CPI)
• Prices paid by urban consumers
• Producer Price Index (PPI)
• Prices paid by producers & wholesalers

24. 4. How do economic growth, full employment, price stability,
and inflation indicate a nation’s economic health?
• CONCEPT CHECK
1. What is a business cycle? How do businesses adapt
to periods of contraction and expansion?
2. Why is full employment usually defined as a target
percentage below 100 percent?
3. What is the difference between demand-pull and
cost-push inflation?

25. • To influence the money supply
and interest rates:
• Open market operations
• The discount rate
• Reserve requirements
• Interest on reserve balances

26. • Fed restricts money supply
• Sell Gov’t securities
• Raise interest rates
Contractionary
Policy
• Fed loosens money supply
• Stimulates economy
• Business & consumers
spending goes up
Expansionary
Policy
Federal Reserve System
• Prints money
• Controls how much will be in circulation

27. Fiscal Policy
• Cuts Taxes
• Increases Spending
• Rising public
sector spending
drives down or
eliminates
private sector
spending
Crowding
Out

29. Exhibit 1.9 Revenues and Expenses for the Federal Budget

30. Role of FED in Achieving Macroeconomics Goals
• The Federal Reserve Bank - FED
• Central Banking System of the United States
• Fed prints money and controls how much of it will be in circulation
• Most importantly the money supply is also controlled by the Fed’s regulation
of certain bank activities.

32. 5. How does the government use monetary policy and
fiscal policy to achieve its macroeconomic goals?
• CONCEPT CHECK
1. What are the two kinds of monetary policy?
2. What fiscal policy tools can the government
use to achieve its macroeconomic goals?
3. What problems can a large national debt
present?

34. Hudsucker Proxy
• Supply and Demand
• The power of this scene is that
we are reminded that changes
in price cannot shift the
demand curve. Shifts in
demand can only happen when
something other than price
changes.

35. Exhibit 1.11
Demand
Curve for
Jackets for
Snowboarders
Demand tells you how much you can sell and at what price

36. Exhibit 1.12
Supply Curve
for Jackets for
Snowboarders
Higher the price, the greater the number of jackets a supplier will supply,

37. Exhibit 1.13
Equilibrium
Price and
Quantity for
Jackets for
Snowboarders

38. Exhibit 1.14
Shifts in
Demand for
Jackets for
Snowboarders

40. Table 1.2 Factors That Cause Demand and Supply Curves to Shift

42. 6. What are the basic microeconomic concepts of
demand and supply, and how do they establish prices?
• CONCEPT CHECK
1. What is the relationship between prices and
demand for a product?
2. How is market equilibrium achieved? Describe the
circumstances under which the price for gasoline
would have returned to equilibrium in the United
States after Hurricane Katrina.
3. Draw a graph that shows an equilibrium point for
supply and demand.

43. Table 1.3 Comparison of Market Structures

44. Table 1-3, Comparison of Market Structures - continued

47. Competing in a Free Market

48. Competing in a Free Market
Complete this table with at least one example by name of a real organization
or company that fits into that structure. For example, into which structure
would organizations like Apple, Microsoft, and Facebook go? What about the
farmer who grew the carrots, broccoli or potatoes for sale at your local grocery
store? Where would you place a small, local business like a dry cleaner, nail
shop or auto repair. What about the power, cable TV or utility company in your
geographic area? Any others you can think of?

49. Perfect Competition Monopolistic
Competition
Oligopoly Monopoly
Numbers of firms in
market
Firm’s ability to control
price
Barriers to
entry
Product differentiation
Name some real
company examples
Differentiating Between Market Structures Table
Company chosen:_______________________________

50. 7. What are
the four
types of
market
structure?
CONCEPT CHECK
• What is meant by market
structure?
• Compare and contrast perfect
competition and pure monopoly.
Why is it rare to find perfect
competition?
• How does an oligopoly differ
from monopolistic competition?

51. Changing Workforce
Demographics
Global Energy
Demands
Meeting Competitive Challenges
Millennials now total
more than 40 percent
of the total workforce
Emerging economies
such as China and
India need energy to
grow
Relationship management
• Practice of building, maintaining, and
enhancing interactions with customers
and other parties
Workers are delaying
retirement past the
traditional retirement
age of 65
Standards of living
improve worldwide
Demand for energy
continues to rise;
driving up prices
• Supply chain management, which builds
strong bonds with suppliers
• Relationship marketing, which focuses on
customers

52. 8. Which trends are reshaping the business,
microeconomic, and macroeconomic environments
and competitive arena?
• CONCEPT CHECK
1. What steps can companies take to benefit from the
aging of their workers and to effectively manage a
multigenerational workforce?
2. Why is the increasing demand for energy
worldwide a cause for concern?
3. Describe several strategies that companies can use
to remain competitive in the global economy.
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