Chapter 1 What is the relationship of businesses profit to risk assumption Profit is money a business earns above and beyond the money that it spends for salaries and other expenses Businesspeople make profits by taking risks Risk is the chance an entrepreneur takes of losing time and money on a business that may not prove profitable A loss occurs when a business s costs and expenses are higher than its revenues Who are stakeholders and which stakeholders are most important to business Stakeholders include customers employees stockholders suppliers dealers bankers the media people in the local community environmentalists and elected government leaders The goal of business leaders is to try to recognize and respond to the needs of these stakeholders and still make a profit What are the advantages and disadvantages of entrepreneurship Working for others means getting benefits like paid vacations and health insurance Entrepreneurs take more risks and lose those benefits They gain the freedom to make their own decisions more opportunity and possible wealth What are the five factors of production The five factors of production are land labor capital entrepreneurship and knowledge Of these the most important are entrepreneurship and knowledge Entrepreneurs are people who risk time and money to start and manage a business What make rich countries rich today are a combination of entrepreneurship and the effective use of knowledge What can governments in developing countries do to reduce the risk of starting businesses and thus help entrepreneurs The government may allow private ownership of businesses pass laws that enable businesspeople to write contracts that are enforceable in court establish a currency that s tradable in world markets help to lessen corruption in business and government and keep taxes and regulations to a minimum From a business perspective lower taxes mean lower risks more growth and thus more money for workers and the government How has technology benefited workers businesses and consumer Technology enables workers to be more effective efficient and productive Effectiveness means doing the right thing in the right way Efficiency means producing items using the least amount of resources Productivity is the amount of output you generate given the amount of input What are some ways in which businesses meet and beat competition Some companies have found a competitive edge by focusing on making high quality products all the way to zero defects Companies also aim to exceed customer expectation Often that means empowering frontline workers by giving them more training and more responsibility and authority How have social changes affected businesses Diversity has come to mean much more than recruiting and keeping minority and female employees Diversity efforts now include seniors disable people homosexuals atheists extroverts introverts married people singles and the devout It also means dealing sensitively with workers and cultures around the world Providing Social Security benefits to senior citizens in the future will draw huge amounts of money from the working population That is why there is so much discussion about social security in the media today Which countries are creating the greatest challenges China and India are two major competitors What will be the impacts of future wars and terrorism Some businesses such as those in the defense industry may prosper Others such as tourism may suffer One way to minimize world tensions is to help less developed countries to become more prosperous Chapter 2 What is economics Economics is the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals What are the two branches of economics There are two major branches of economics macroeconomics studies the operation of a nation s economy as a whole and microeconomics studies the behavior of people and organizations in particular markets Ex why people buy smaller cars when gas prices go up How can we be assured of having enough resources Resource development is the study of how to increase resources and create conditions that will make better use of them How does capitalism create a climate for economic growth Under capitalism businesspeople don t often deliberately set out to help others they work mostly for their own prosperity and growth Yet people s efforts to improve their own situation in life act like an invisible hand to help the economy grow and prosper through the production of needed goods services and ideas What is capitalism Capitalism is an economic system in which all or most of the means of production and distribution are privately owned and operate for profit Who decides what to produce under capitalism In capitalist countries businesspeople decide what to produce how much to pay workers and how much to charge for goods and services They also decide whether to produce certain goods in their own countries import those goods or have them made in other countries What are the basic rights people have under capitalism The four basic rights under capitalism are 1 The right to private property 2 The right to own a business and to keep all of that business s profits after taxes 3 The right to freedom of competition and 4 The right to freedom of choice How does the free market work The free market is one in which buyers and sellers negotiating prices for goods and services influence the decisions about what gets produced and in what quantities Buyers decisions in the marketplace tell sellers what to produce and in what quantity When buyers demand more goods the price goes up signaling supplies to produce more Price is the mechanism that allows free markets to work What is socialism Socialism is an economic system based on the premise that some businesses should be owned by the government What are the advantages and disadvantages of socialism Socialism intends to create more social equity Workers in socialist countries usually receive more education health care and other benefits and also work fewer hours with longer vacations The major disadvantages of socialism are that it lowers the incentive to start a business or to work hard Socialist economies tend to have a higher unemployment rate and a slower growth rate than capitalist economies How does socialism differ from communism Under communism the government owns almost all major production facilities and dictates
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