Economics- Study of the Production Distribution and Consumption of Goods and Services

Ch. 1

Economics- study of the production distribution and consumption of goods and services.

Economist tell what everyone wants.. It’s like a weather forecast for what people want.

Business needs entrepreneurship, land, labor & capital.Economist Questions:

1.What goods & services should be produced…?

2.How should goods & services be produced…?

3.Who…Receive(s) the goods & services produced..?

A MIXED MARKET ECONOMY RELIES ON BOTH MARKETS AND THE GOVERNMENT TO ALLOCATE RESOURCES.

PRIVATIZATION- CONVERTING PREVIOUSLY GOVERNEMNT-OWNED BUSINESS TO PRIVATE OWNERSHIP.

Perfect competition exists:

Numerous sellers

Standardized product

Many consumers

The equilibrium price: when the supply and demand is equal.

Monopolistic competition: many sellers, differentiated products, selling to different groups.

Oligopoly: few sellers, similar products , different groups.

Monopoly: one seller, all buyers

World’s main economic goals and measures

A.Growth-gross domestic product

B.High employment-unemployment

C.Price stability –consumer price index

D.Gross domestic product-market value of all goods and services produced by economy in a given year includes only goods and services produced domestically.

The business cycle

•Has four phases

•Prosperity-economy expands, unemployment is low, incomes rise, and consumers buy more products.

•Recession-slow down

•Recovery-start to grow again

•Depression-severe long lasting recession

Price stability- inflation, deflation, consumer price index (CPI)

Leading economic indicators- predict the status of the economy three to twelve months in the future

Macroeconomics-big economy decisions

Microeconomics- small economy decisions

Ch. 2

Ethical - pertaining to or dealing with morals or the principles of morality; pertaining to right and wrong in conduct.

Business ethics - the study and examination of moral and social responsibility in relation to business practices and decision-making in business

Corporate social responsibility - a form of corporate self-regulation integrated into a business model.

Stakeholders - is that which can affect or be affected by the actions of the business as a whole.

Ethical decision - the basis for making ethically sensitive decisions.

Ethical lapse - a mistake or error in judgment that produces a harmful outcome

Conflicts of interest - occurs when an individual or organization is involved in multiple interests

Insider trading – The buying or selling of a security by someone who has access to material, nonpublic information about the security.

Whistle-blower - a person who informs on another or makes public disclosure of corruption or wrongdoing.

Code of conduct - a set of conventional principles and expectations that are considered binding on any person who is a member of a particular group

Fiduciary responsibility - looking after the assets on the other's behalf is expected to act in the best interests of the person whose assets they are in charge of.

Sustainability - the ability to be sustained, supported, upheld, or confirmed.

Social responsibility –

•This is the actions that affect a variety of parties in a company's environment.

•Socially responsible companies show concern for their stakeholders.

How can you recognize an ethical organization?

oTreating employees, customers, investors, and the public fairly

oMaking fairness a top priority

oHolding every member personally accountable for his or her action.

oCommunicating core values and principles to all members.

oDemanding and rewarding integrity from all members in all situations.

How to recognize unethical organizations

They consistently feel uneasy about the work they do.

They object to the way they’re treated.

They’re uncomfortable about the way coworkers are treated.

They question the appropriateness of management directives and policies.

Businesspeople face two types of ethical challenges: ethical dilemmas and ethical decisions.

Steps to solving ethical dilemmas. Making ethical decisions.

Ethical behavior everywhere: Ethical behavior can be applied to your daily life. At school, you must keep academic honesty. If not, you may be suspended or even expelled from most high schools, and kicked out of most colleges. This can deeply detriment your grades & career.

IDENTIFYING ETHICAL ISSUES

Sometimesits hard to tell when something is unethical …

Know when a bribe is a bribe or just a gift.

Conflicts of interest occur when individuals must choose between taking actions that promote their personal interests over the interests of others or taking actions that don’t. Try to find a decision best for everyone.

Sometimes you find yourself in a bind between being loyal either to your employer or to a friend or family member. It’s important to ask your employer before giving out information.

Identifying ethical issues

Ethical Leadership

1.organization promotes ethical behavior

2.Leaders should keep in constant touch with subordinates about ethical policies and expectations.

3.code of conduct:

4.more large companies have taken additional steps to encourage employees to behave according to specific standards

Corporate social responsibility: refers to the approach that an organization takes in balancing its responsibilities toward different stakeholders when making legal, economic, ethical, and social decisions

Whistle-blower-an individual who exposes

illegal or unethical behavior in an organization

Sexual harassment

Sexual harassment occurs when an employee makes “unwelcome sexual advances, requests for

sexual favors, and other verbal or physical conduct of a sexual nature” to another employee who doesn’t welcome the advances.

Equal Opportunity and Diversity

Must provide equal opportunity for women & men alike.

Must provide equal opportunity despite race, religion, or beliefs.

ENVIRONMENTALISM

Land Pollution

Air Pollution

Water Pollution

Sustainability

Stages of Corporate Responsibility

Ch. 3

In 2010, the total value of worldwide trade in merchandise and commercial services was $18.5 trillion.

Certain countries import or export certain products because not every country (or region) can produce the same products.

A nation has an absolute advantage if it’s the only source of a particular product or it can make more of a product using the same amount of or fewer resources than other countries because of climate and soil conditions.

Comparative advantage exists when a country can produce a product at a lower opportunity cost compared to another nation.

We determine a country’s balance of trade by subtracting the value of its imports from the value of its exports. If a country sells more products than it buys, it has a favorable balance.

In the USA, we buy far more goods from the rest of the world than we sell overseas.

Importing and exporting are the oldest and most prevalent forms of international trade. For many companies, importing is the primary link to the global market.

A company that wants to get into an international market quickly while taking only limited financial and legal risks might consider licensing agreements with foreign companies.

A firm might enter into a strategic alliance with a local company or even with the government itself. A strategic alliance is an agreement between two companies to pool resources in order to achieve business goals that benefit both partners.

A common political rationale for establishing tariffs and quotas is the need to combat dumping.

Vocab

Absolute advantage- condition whereby a country is the only source of a product or is able to make more of a product using the same or fewer resources than other countries

Comparative advantage- Condition whereby one nation is able to produce a product at a lower opportunity cost compared to another nation

Balance of trade- Difference between the value of a nation’s imports and its exports during a specified period.

Trade surplus- Condition whereby a country sells more products than it buys, resulting in a favorable trade balance.

Trade deficit- Condition whereby a country buys more products than it sells, resulting in an unfavorable trade balance.

Balance of payments- Difference between the total flow of money coming into a country and the total flow of money going out.

Importing- Practice of buying products overseas and reselling them in one’s own country.

Exporting- Practice of selling domestic products to foreign customers

Outsourcing- Practice of using outside vendors to manufacture all or part of a company’s actual products

Strategic alliance- Agreement between two companies (or a company and a nation) to pool resources in order to achieve business goals that benefit both partners.

Culture- System of shared beliefs, values, customs, and behaviors that govern the interactions of members of a society.

Dumping- Practice of selling exported goods below the price that producers would normally charge home markets.

Ch. 4

1.Sole Proprietorship-Business is owned and run by one person. The owner receives all profits and carries responsibility for loses and debts.

2.Unlimited liability-A type of investment in which a partner or investor can lose an unlimited amount of money.

3.Partnership (or general partnership) - A partner with unlimited legal responsibility for the debts and liabilities of a partnership.

4.Limited partnership-Only one partner is agreed to be general partner.

5.Corporation- Company or group of people authorized to act as a single entity (legally a person) and recognized as such in law.

6.Shareholders- Owner of shares in a company.

7.Stock- The goods or merchandise kept on the premises of a business or warehouse and available for sale or distribution.

8.Board of directors- A group of persons chosen to govern the affairs of a corporation or other large institution

9.Dividends- A sum of money paid regularly by a company to its shareholders out of its profits

10.Limited liability- The liability of a firm's owners for no more than the capital they have invested in the firm.

11.Privately-held corporation- A corporation owned by a few people; shares have no public market

12.Public corporations- Company whose shares are traded freely on a stock exchange.

13.Least attractive- Good business

14.Most attractive- Bad business

15.Cooperative-Business that is owned and run jointly by its members, who share the profits or benefits.

16.Not-for-profit corporation- Receive no profit from money they make

17.Merger-Combination of two businesses into one

18.Acquisition-Learning a skill

Chapter 4 ACTIVITY – QUIZ

1.) What are the three main types of ownership?

2.) What are three advantages and three disadvantages to a sole proprietorship?

3.) What is something that partners must agree upon in a partnership?

4.) Who owns a Corporation?

5.) What is the difference between a private corporation and a public corporation?

6.) What does LLC stand for?

7.) What is a Hostile Takeover?

8.) What are 2 advantages and 1 disadvantage of a partnership?

9.) Why are non-for-profit organizations created?

10.) Why are small businesses important to the economy?

Ch. 5

Entrepreneur-someone who identifies a business opportunity and assumes the risk of creating and

running a business to take advantage of it

Small Business

1.Independent ownership

2.Little influence industry

3.Fewer than 500 employees

SB important because

•Job creation

•innovative

•Helps big business

Ownership

1.Advantage

a.Independence

b.Financial Rewards

c.Lifestyle

d.learning opps.

e.Creative

2.Disadvantage

a.Financial Risk

b.Stress

c.Time Commitment

d.Undesirable

Start business from scratch

Buy Existing

Franchise – Buy into another company to use their name

•Advantage

•Recognized Name Product

•Help in start-up

•Advertising

•Ongoing Support

Business Plan-a document that identifies the goals of your proposed company and explains how they will be achieved

•Purpose

•Sections of Plan

Mission statement and core values

1)Mission Statement-purpose or mission of company

2)Core Values-Fundamental beliefs…what is/is not appropriate in business activities, ideas

Succeeding in business

1)Know business

2)Know management

3)Proper

4)Get adequate

5)Manage Money

6)Manage Time

7)Know People

8)Satisfy Customers

9)Know how to compete

Why business fail

1)Bad business idea

2)Cash Problem

3)Inexperience or incompetence

4)Lack of customers focus

5)Inability to handle growth

Ch. 5 Vocab

Small Business

Entrepreneur- someone who identifies a business opportunity and assumes the risk of creating and running a business to take advantage of it

Franchise – buy into another company to use their name

Business Plan- a document that identifies the goals of your proposed company and explains how they will be achieved

Mission statement- purpose or mission of company

Core values- fundamental beliefs…what is/ is not appropriate in business actives

Ch. 6

Management-the process for planning, organizing, directing, and controlling resources to achieve specific goals.

4 functions of management

•Planning- manager set goals and determine the best way to achieve them

oStrategic plan (establishing an overall course of action)

1.Mission statement

2.Core values/ beliefs

3.SWOT

4.Goals & objectives

5.Tactical/ operational plans

•Organizing- allocates resources (people, equipment, and money) to achieve a company’s plan

•Directing- providing focus and direction to others and motivating them to achieve organizational goals

•Controlling- - comparing actual to planned performance and taking necessary corrective action.

Mission Statement- describes the purpose of your organization- the reason for its existence

•Core Values- fundamental beliefs about what’s important and what is and isn’t appropriate in conduction company activities

•SWOT- examine internal and external force that affect the company

oStrengths

oWeakness

oOpportunities

oThreats

Organizing-

Levels of managers

oTop managers

oMiddles managers

oFirst- line managers

Lines of Authority

•Chains of command- who reports to whom

•Unity of command- one boss

•Matrix structure- form teams to combine skills on specific project

•Span of control- number of people reporting to a manage

Delegating Authority

•Delegation- entrusting work to subordinates

•Responsibility and authority

•Centralization and decentralization

Leadership styles

•Autocratic

•Democratic

•Laissez-faire

Theories of effective leadership

•Transactional- exercise authority based rank in organization

•Transformational- mentor/develop subordinates by stimulating

Ch. 7

Human resources management- all actions that an organization takes to attract, developed, and retains quality employees.

Strategic human resource planning- developing a plan for satisfying an organizations HR needs.

Job analysis- identify the tasks, responsibilities and skills that it entails, as well as the knowledge and abilities needed to preform it

Recruiting- identifying suitable candidates and encouraging them to apply for openings

Discrimination- a person is treated unfairly on the basis of a characteristic unrelated to ability

Selection- gathering information on candidates, evaluating their qualifications, and choosing the right one

Contingent workers- hired to supplement a company’s permanent workforce

Orientation- the way (the employer) introduces new employees to the organization and their jobs

Labor union- an organized group of workers that bargains with employers to improve its members’ pay, job security, and working conditions

Collective bargaining- the process of settling differences and establishing mutually agreeable conditions under which employees will work

Ch. 8

Team – a group of people with complementary skills who work together to achieve a specific goal.

Group v. Team

-Group members work independently and come together primarily to share info.

-Team- common goals and empowered to make decisions.

Team Characteristics

1.Accountable for specific goals

2.Function interdependently

3.Are stable

4.Have authority

5.Operate in social context

Why Teams?

30-40% more productive

Reduce errors 13%

However, 50-70% fail

Types of Teams

-Manager-Led- Manager sets goals and activities for the team, manager responsible for team meeting goals.

-Self-Managing- Team might set overall goals, employees control activities.

-Cross-Functional- Designed to take advantage of special expertise.

-Virtual- allows the team to work together without being together

Effective Teamwork Factor

-Dependent on each other

-Trust one another

-Work better together than individually

-Become Boosters

Group Cohesiveness/ Attractiveness

-Size

-Similarity

-success

-Excluviness

-Competition

Why Teams Fail

-Unwilling to cooperate

-Lack of managerial support

-failure to delegate authority

Team Skills Needed

a.Technical

b.Decision-making and problem solving

c.Interpersonal

What does it take to lead a Team?

-Demonstrate integrity

-Be clear & concise

-Generate positive energy

-Acknowledge common points of view

Communication- the process of transferring information from a sender to a receiver

Need for Communication Skills

-Convincing decisions & faster solution

-Warning signs appear earlier

-Smooth workflow & increased productivity

-Stronger business relationships

-Persuasive marketing

-Professional image enhanced

-Employee satisfaction up & turnover down

Communication flows

What to do about “Grapevine”

-Learn to live with it

-Tune into it

-Don’t participate in rumors

-Check out what you hear

-Take advantage of it

Listening- 80% rated as the most important skill in getting things done

Tips for Writing E-Mails

1. Formal/Informal

2. Meaningful subject line

3. Keep message focused & readable

4. Avoid attachments

5. ID yourself

6. Be Kind

7. Proofread

Non-Verbal Communication- ‘nonword’ messages communicated through facial expressions, posture, gestures, tone of voice.