BUS X100 1st Edition Lecture 1 Outline of last lectureFirst lecture.Outline of Current LectureFree Enterprise and Economic SystemsI. Businessa. definitionII. Resourcesa. human, material, informational, and financial III. Economic Systemsa. definitionIV. Types of Economic Systemsa. capitalismb. socialismc. communismV. Key Features of the U.S ‘Free Enterprise’ Systema. consumer’s freedom of choiceb. private ownership of land and real propertyc. competitiond. supply and demande. circular flowf. business cyclesVI. Types of Competitiona. definitionb. pure competitionc. monopolistic competitiond. oligopolye. monopolyVII. The Basis For International Businessa. absolute advantageb. comparative advantageThese 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.Current LectureFree Enterprise and Economic SystemI. Businessa. the organized effort of individuals to produce and sell, for a profit, the goods and services that satisfy society’s needs. II. Fundamental Business Resourcesa. Human resources- hospital staff, researchers, police officers, etc.b. Informational resources- television, court trials, newspaper, articlesc. Material resources- buildings, machinery, raw materialsd. Financial resources- money required to pay employees, purchase materials, banks, loanersIII. Types of Economic Systemsa. Economics is the study of how wealth is created and distributed. IV. two perspectives: microeconomics and macroeconomicsa. Microeconomics- the study of the decisions made by individuals and businesses. b. the decisions that are made and how people deal with the distribution of wealth determines the kind of economic system/economy the nation has. c. Macroeconomics- the study of national economy and the global economy.V. Capitalisma. Economic system where individuals own and operate the majority of businesses that provide goods and services, as well as having the right to own and sell private property. b. Adam Smith’s ‘Laissez-Faire’- argued that society’s interests are best served whenthe individuals within a society are allowed to pursue their own self-interestc. Market Economy- (free economy) businesses and individuals decide what to produce and buy, and the market determines prices and quantities sold. i. owners of resources should be free to determine how these resources areused and also to enjoy the income and profits. d. Mixed Economy- (USA’s economy) exhibits elements of both capitalism and socialism and is the result of interactions of households, businesses, and governments.VI. Socialisma. Government owns and controls key industries, although private ownership of smaller businesses may be permitted.b. Aims to give equal distribution of income, elimination of poverty, distribution of social services based on need, and eliminate economic waste. c. Visible Socialism- present in many democratic governments and is the most notable with a high degree of socialism including Sweden, Finland, and India.d. Command Economy- government decides what will goods and services will be produced, how they will be produced, for whom available goods and services willbe produced, and who owns and controls the major factors of production.VII. Communisma. Government owns almost all of the economic resources and practices a strictly controlled type of socialism. b. Dwindled with breakup of the Soviet Union and economic reforms in china. North Korea and Cuba are the best remaining examples.c. Karl Max- ‘classless society’ where all the individuals contribute based on their capabilities and receives benefits based on their needs. d. Command Economy- where emphasis is placed on production of goods that the government needs rather than on products consumers might want.VIII. Key Features of the U.S. ‘Free Enterprise’ Systema. Consumer’s freedom of choicei. to allocate their own resources and spend their own money as they pleaseb. Private ownership of land and real propertyi. by individuals and businesses as governed by law and covenantsc. Competitioni. among businesses for the consumers’ dollarsd. Supply and Demandi. determined by consumer demand, availability, prices and market forcese. Circular Flowi. money for labor, resources and capital in exchange from goods and services.f. Business Cyclei. driven by economic growth and contraction ii. *The U.S has a federal deficit- meaning that the government’s imports > exports. IX. Types of Competitiona. Pure Competition- many buyers and many sellers but they must accept going price. i. not many today and similar to a farmer’s market where they are selling the same products at the same prices. b. Monopolistic Competition- many buyers and a large amount of sellers but these businesses compete with product differentiation, or what makes them different from the others. i. these types are very common such as McDonalds.c. Oligopoly- market or industry with few sellers and each seller has considerable price control.i. those who sell diamonds are an exampled. Monopoly- market or industry with only one seller.i. these business owners have complete control over prices1. an example is the utilities you have on your house, usually you only have one choice of who powers your house or you won’t have electricity.ii. Natural Monopoly- requiring huge capital investmentiii. Legal Monopoly- with a patent, copyright or trademark (windows operating system)X. The Basis for International Businessa. International business- exchanges across national boundarieb. Absolute advantage- the ability to produce a specific product more efficiently than any other productc. Comparative advantage- the ability to produce a specific product more efficientlythan any other productd. *side note- not every nation has an absolute advantage but every nation has a comparative advantage. The U.S has a comparative advantage on entertainment and technology. South Africa has an absolute advantage on diamonds and Brazil has an absolute advantage on coffee.e. *With ‘Globalization’ these sources of advantages are becoming less important because:- Financial markets are now global - with telecommunications and the internet, geographical location per se adds very little value- companies find it relatively easy to bring work to employees, wherever workers live- natural resources can be imported from any location around the