1 BMGT 110 Final Study Guide Mitchell Reichenberg Key Terms the probability of loss the amount remaining after all expenses the total amount a business receives from activities a person who takes the risk of starting a business those entities that stand to gain or lose by the activities of any Profit Revenue Risk Entrepreneur Stakeholders business Productivity Economics Technology Standard of Living factors such as disposable income housing health education political freedom etc the output of a business in relation to the resources the study of how society chooses to employ resources physical equipment used in business to make it efficient the quality of life enjoyed by a population depending on o Businesses can be huge contributors through employment taxes creation of wealth etc Factors of Production land labor capital entrepreneurship The Business Environments Economic and Legal Environment o Government can create a positive business through Freedom of Ownership Contract and Business Laws Eliminating Corruption Currency Taxes and Regulations Technological Environment o Technology is anything that increases business efficiency and o An environment in which rival sellers are trying to gain extra business productivity o Manufacturing Technology o Computer Hardware Software Network o Internet E commerce o Symbologies Competitive Environment at another s expense o Competition today is fierce o Meeting exceeding customer expectations o Increasing speed of delivery o Corporate Restructuring Changes in organization empowerment Social Environment 2 o The social environment is a distinctive economic organization of interacting people who share a geographical region sense of common identities and a common culture o Inglehart Values Map different cultures visualizes the strong correlation of values in o Extends to mutual interests beliefs and a common system of political authority o Societies are often in a state of change with shifts occurring in the way people live their cultural background what they buy etc density age race gender etc the study of human population with regard to size o Demography Global Environment o Today businesses transcend national boundaries and are often not committed to a single home country o Globally international competition and free trade are on the rise o The global business environment holds great promise but the challenge is tremendous Perspectives in Business Ethics Intro Moral Values o Integrity o Honesty o Self Control o Respect for Others Ethical Dilemmas o Illegalities are obvious Basic Economics and Economic Systems o Macroeconomics Study and analysis of the overall economy using info such as unemployment inflation production GDP etc o Microeconomics o Adam Smith Concerned with individual parts of the economy Scottish Published The Wealth of Nations The role of self interest in the economy Function of markets The Invisible Hand Used to demonstrate how self interest guides the most efficient use of resources in a nation s economy with public welfare coming as a byproduct Benefits of free trade Division of Labor Benefits of specialization Impacts of laissez faire economics 3 Freedom of ownership o Free Market Capitalism System where decisions are determined by the actions of buyers and sellers o Foundations of Capitalism Right to own private property Right to keep your profits Right to freedom of competition Right to freedom of choice o How Free Markets Operate Marketplace determines price supply and demand o Competition in the Free Market Ceteris Paribus assuming all else is held constant many sellers and no seller is large enough to dictate large number of sellers produce products that Perfect price are similar but perceive differently Monopolistic Oligopoly few sellers dominate the market Often due to high initial investment costs Monopoly market with only one seller Usually illegal in the US but are still allowed in certain situations o Failings of Free Market Hunger Exploitation Pollution Poverty Homelessness Perspectives in Business Ethics Contract Ethics The ability to form legally binding contracts and the laws are an important component of any free marketplace Contracts can still be incredibly unbalanced and still be illegal Socialism basic production and distribution so benefits can be more evenly distributed system where the government owns and operates much of the o There is private ownership but taxes are very high o Value added tax on purchases is often 15 20 o Income tax is usually 45 55 o Socialist nations tend to supply or heavily subsidize health and education o Social equality is the major benefit o High taxation and lack of business incentives create many drawbacks o Socialism tends to discourage people from staying or working hard Results in fewer innovations 4 Communism economic system where the government makes virtually all decisions and owns all of the factors of production o Many problems shortages are common o 1948 Karl Marx wrote Communist Manifesto o Usually totalitarian governments The Emergence of Mixed Economies o Free Market and Command economies are the two categories o All countries combine aspects of both o Key Economic Indicators Unemployment Rate Gross Domestic Product total value of goods and services produced by a country in a given year percentage of the population over 16 who are unemployed and have tried to find work within the last 4 weeks Price Indexes help measure the economy Deflation rise in general price level that results in a Inflation decline in the purchasing power of money usually occurs in a recession and is characterized by supply exceeding demand and prices declining paid for a market basket of about 400 goods and services bought by a typical US consumer domestic producers of goods and services measure of the average prices price changes received by Consumer Price Index Producer Price Index Economic Boom Recession GDP Depression deflation Recovery o The Business Cycle There are periodic rises and falls in all economies over time Joseph Schumpeter s 4 Phase Cycle in order increased business activity 2 or more quarters of consecutive decline in rare severe recession usually with economy stabilized and started to grow o Fiscal Policy influence the level of economic activity the use of government spending and taxation to try to During recessions more spending and less taxation can boost economy During inflations increased taxation and or cutting government spending can reduce demand o Monetary
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