Introduction to business 1 _
- 1. Ing. Pablo San Andres.
- 2. Economics. Economics is the social science that analyzes the production, distribution, and consumption of goods and services.
- 3. Microeconomics The branch of economics that analyzes the market behavior of individual consumers and firms in an attempt to understand the decision-making process of firms and households. It is concerned with the interaction between individual buyers and sellers and the factors that influence the choices made by buyers and sellers. It is focused on the actions of individual agents, such as firms and consumers, and how their behavior determines prices and quantities in specific markets.
- 4. A fall in the supply of strawberries perhaps due to a poor harvest, has caused and increase in price and reduced the quantity demanded
- 5. Macroeconomics Macroeconomics is concerned primarily with the forecasting of national income, through the analysis of major economic factors: • Employment/unemployment • Gross Domestic Product (GDP) • Balance of payment position • Prices (Deflation or inflation)
- 6. It studies the behavior of the whole (aggregate) economies or economic systems instead of the behavior of individuals, individual firms or markets (which is the domain of Microeconomics) Often with the aim of studying the effect of government policy on these factors
- 7. Positive economies It is the branch of economics that concerns the description and explanation of economic phenomena. For example: The price of milk has risen from $3 a gallon to $5 a gallon in the past five years. It can be proven true or false by comparison against real-world data. In this case, the statement focuses on facts.
- 8. Normative economics It is the part of economics that expresses value judgments about economic fairness or what the economy ought to be like or what goals of public policy ought to be. For example: The price of milk should be $6 a gallon to give dairy farmers a higher living standard and to save the family farm. This specific statement makes the judgment that farmers need a higher living standard and that family farms need to be saved
- 9. They are resources that must be used to produce a good or to provide a service. Land: Natural resources found on the planet that are available to production.
- 10. Labour: Physical and mental effort of people used in the production of a good or service
- 11. Capital : Non-natural (manufactured) resources that are used in the creation and production of other products
- 12. Investment in Human Capital Economic growth
- 13. Physical capital
- 15. Enterprise: It’s also known as entrepreneurship, because it refers to the management, organization and planning of the other three factors of production
- 16. It is what you give up in order to have something else.
- 19. The opportunity cost walking to school= 20 minutes The opportunity cost taking a taxi= What I can do with the money paid for the service and health benefits.
- 20. Exercise By taking an airplane Larry can travel from Denver to Houston in one hour. The same trip takes 5 hours by bus. Airfare is $90 and the bus fare is $30. Larry, when he is not traveling, can work and earn $30/hour. Answer the following questions: 1) What is the opportunity cost (OC) for Larry of traveling by bus? 2) What is the OC for Larry of traveling by plane? 3) Which is the cheaper mode of travel for Larry? 4) How would the answers be different for another person Moe (who can work and earn $6/hour when he is not traveling)?
- 21. Solution: 1) OC = (Total cost) + (Bus Fare) + (Time Cost) = $30 + (5 hours) ($30/hour) = $30 + $150 = $180 2) OC = $90 + (1 hour)($30) = $120 3) Plane is cheaper for Larry 4) For Moe, OC (bus) = $30 + (5 hours)($6/hour) = $60 OC (plane) = $90 + (1 hour) ($6/hour) = $96 Therefore, bus is cheaper for Moe.
- 22. Scarcity We use different type of resources to satisfy our wants: Resources Human resources: Natural resources labour air, water, land and oil Man made resources: machines
- 23. It is the fundamental economic problem of having humans who have wants and needs in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs Scarcity implies that not all of society's goals can be pursued at the same time. WANTS ARE MORE THAN WHAT IS AVAILABLE http://www.socialstudiesforkids.com/article s/economics/scarcityandchoices1.htm
- 24. People with high time value (e.g. busy executives) are more likely to travel by plane than by bus; whereas, people with low time value (seniors, students on vacation) are more likely to travel by bus.
- 25. If a good or service has an opportunity cost then it must be relatively scarce in supply, so it will have a price and be classified as an “Economic good”, human effort is required to obtain it.
- 26. Free good A good that is not scarce. A free good is available in as great a quantity as desired with zero opportunity cost to society. Abundant supply, and needs no conscious effort to obtain it
- 27. In case • On a magazine, there • The coupons are not a is a list of ice-cream free good. The quantity coupon. The coupon of coupons are scare. It are free of charge. is costly to produce and • use. So the coupons • Does mean that the are coupon are free • not a free good. goods?
- 28. Depending on how we use goods, goods can classified into two types. Consumer goods Capital goods Capital goods are the Consumer goods are the goods produced for goods produced for production of other direct consumption. goods.
- 29. The basic economic problem As resources are scare, we need to face three basic economic problems. 1.- What will be produced? Question is concerned with what products and in what quantities they are to be produced.
- 30. 2.- How will it be produced? Question is concerned with the method of production. Should crops be grown with high usage of fertilizer or organically?. There are different ways of producing things. There are different combination of resources
- 31. 3.- For whom will it be produced? How those goods or services are distributed?
- 32. Market economy & Planned economy Planned • Private ownership economy of property is widespread. • Private • people are free to ownership of make production property is and consumption limited. decisions. • Government Market makes economy production decisions.
- 33. How they solve problems The what question: Market prices serve as The for whom question: signals in deciding what People’s ability to pay goods to produce and in determines the quantity what quantities. of goods they can get. M a eco rk no et my The how question: Producers are interested in finding the lowest cost method of production; factor prices guide them in their choice of production method.
- 34. The what question: The government draws up its production plans, and decides what goods and in The how question: what quantities to produce. The method of production is determined by Pla central planning. eco nn no ed my The for whom question: The government controls people’s wage rates and ability to pay. Coupons are given to people to ration the limited goods available.
- 35. These essential questions must be answered in every economy to determine the fundamental goals of the society. How each society handles these questions is determined by the role of government and the people in the decision- making process. Each group of people makes decisions or fails to make decisions that control the flow of money, goods, and services. The control of these decisions determines the type of economy present
- 36. How resources are allocated is the process of choosing which needs will be satisfied and how much of the limited resources will be used to satisfy those needs. Allocation by definition indicates choice. Economics is the social science that deals with how society allocates its scarce resources among the unlimited wants and needs of individuals that make up that society. http://smallbusiness.chron.com/difference-between-project-allocation-project- leveling-36089.html