BUS 101C 1st Edition Lecture 2 Outline of Previous Lecture - Section 1: What is Business? Know grandchildren names & ages for extra credit What is Business?o Contract is Businesso Other business factors that support transactionso We teach silos, not interrelatedness 1776 – Adam Smith’s Wealth of Nationso The invisible hando USA largest military and economic economyo 1860’s – Karl Marx’s Das Kapitalo 1929 – Hoover and stock market crashCurrent Lecture- Section 2: Democracy, Business, and Intro to Stakeholder/ Stockholder Democracy – self governmento People are the governmento Types of governmento Problems with the economic systemo Two pillars of capitalism Business and innovationo New Producto Barriers to Entryo Post-war capitalistico Government is reactive Stakeholder/ Stockholder Theoryo Father of Stakeholder Theoryo Father of Stockholder Theory- Section 2: Democracy – Self governmento People are the governmentThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Government reflects the will of the peopleo Types of government Capitalism – Market controlled through free markets Socialism – government controls markets- Public ownership- Common good- Contracts minimalized, little enforcement- Corruption main issue, not equal: bribes, disparity of wealtho Economic problems become political problems Keynesian – mixed markets, acting based on the will of the people- Insertion of government into market place based on the will of the peopleo Problems with economic system Economic issues come into politics, are never reasonable & rational, lack complete information, and have little social well being When buying something, always betting that you are getting a good deal: Supply-valuable theory- Buyer – betting the product will go up in value- Seller – Betting the product will go down in valueo Two pillars of capitalism: Private Property Right to Contract- Private and self-interest Business and Innovationo New product: New product is released- High price, low quality New product further develops- Price lowers, quality rises Result of market efficiency- Competitors will decrease when they cannot keep up- Monopoly will form, causing efficiency to decreaseo Cut corners and raise prices until competitors reentero Barriers to entry Monopoly forms when company comes in and drops prices- New company will actively lose money for short amount of time- Old, similar companies won’t be able to keep up, go out of business No brakes on capitalist economy, monopolies are able to form- Cause disparity of wealtho Post-world war capitalistic Government regulation begins to put brakes on economy Government becomes player in economy- Follow Keynesian theoryo Bush – inefficient, government best when out of market and homes- Libertarian – government stays out of everything, no government in market of homeso Requires too much regulation and paperworko Government is reactive Respond to problems when they arise No problem, no government involvement- Fix problem yourself prior to government getting involved, better of Stakeholder/ stockholder Theory o Father of Stakeholder Theory – Edmund Freeman – 1980’s Stakeholders – all who have a claim in a company- Suppliers, customers, employees, stockholders, community & management- Legal, economic, political, and moral challenges that companies must recognize when making decisions- Main incentive is still to make moneyo If doesn’t make money or is not legal, company does not do ito Father of Stockholder Theory (Liaise-Faire) – Friedman Stockholders – act in the interest of increasing profits, working within the constraints of regulation- Only two questions ask: o Is it legal? If no, don’t do ito Will it make us money? If no, don’t do it- No attention to social responsibility – only responsibility is to utilize resources to increase
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