YOU WERE LOOKING FOR: Economic Systems And Decision Making Chapter 2 Test Answers
Microsoft powerpoint econch02sect04onlinelecturenotes author. Economics chapter 2 vocab 30 terms. The proper type of worksheet can make a large difference and also you will as a matter of fact be in a placement to locate the greatest. Create a word...
Owners of property and money resources can use resources as they choose. Workers can choose the training, occupations, and job of their choice. Consumers are free to spend their income in such a way as to best satisfy their wants consumer...
Economic Growth Capitalist economies tend to have more rapid rates of growth 2. Equity There is no characteristic of capitalism which will guarantee equity Often, the government gets involved to help achieve equity 5. Full Employment Economists disagree over whether capitalism will result in full employment Some say yes, and if there is unemployment it is usually caused by government interference Some say no, and at times government involvement is needed to move the economy towards full employment VI. Capitalism and the Five Fundamental Questions A. Introduction 1. The five fundamental questions must be answered by all economic systems. The five fundamental questions are: a. What goods and services will to be produced? How will the goods and services be produced?
Who will get the output? How will the system accommodate change? How will the system promote progress? What will be produced? Allocative Efficiency 1. In order to be profitable, businesses must respond to consumers' individuals, other businesses, and the government wants and desires. Consumer Sovereignty and "dollar votes" C. Productive Efficiency 1. The market system encourages and rewards those producers who are achieving least-cost production. The most productively efficient technique will be the one that produces a given amount of output with the smallest input of limited resources. Equity 1. Products go to those who are willing and able to pay for them.
The productivity of the resources, the relative supply of particular resources, and the ownership of the resources will determine the income of individuals and households. The resulting distribution of income may not be the most equitable fair. Markets are dynamic - what is efficient today may not be efficient tomorrow as tastes, technology, and resource supplies change. Prices help signal those changes and the market will respond. This guiding function of prices is essential to a well-functioning market system. In the absence of such signals, government or some similar institution would have to decide where resources are allocated, but without knowing what people in society want.
The market system promotes technological improvements and capital accumulation economic growth. An entrepreneur or firm that introduces a popular new product will be rewarded with increased revenue and profits. New technologies that reduce production costs, and thus product price, will spread throughout the industry as a result of competition. Creative destruction occurs when new products and production methods destroy the market positions of firms that are not able or willing to adjust. NOTE: this is good for society.
Presentation Summary : 1. Economic efficiency. Decisions made by a huge bureaucracy can be inefficient—can get waste and fraud. Slow to respond to changing economic conditions. Economic Systems and Decision Making. How do economic systems help society deal with the fundamental economic problem of scarcity? Economic Systems and Decisions. Economic Systems. Section 1. Did You Know? Economic Systems and the American System. Main idea: All economic systems face the same basic questions. Chapter 2: Economic Decisions. Chapter 2. In this lesson, students will examine the four economic systems. All societies have an economic system or a way of providing for the wants and needs of their people. Section 1: Answering the Three Economic Questions. An economic system is the method used by a society to produce and distribute goods and services. Traditional Economies. Chapter 1 Vocabulary due Friday! Political Economy.
Chapter 1: Economic Systems and Business Learning Objectives After reading this chapter, you should be able to answer these questions: How do businesses and not-for-profit organizations help create our standard of living? What are the sectors of the business environment, and how do changes in them influence business decisions? How does the government use monetary policy and fiscal policy to achieve its macroeconomic goals? What are the basic microeconomic concepts of demand and supply, and how do they establish prices? What are the four types of market structure? Take a moment to think about the many different types of businesses you come into contact with on a typical day. Need more cash? You can do your banking on a smartphone or another device via mobile apps. A business is an organization that strives for a profit by providing goods and services desired by its customers.
Businesses meet the needs of consumers by providing medical care, automobiles, and countless other goods and services. Goods are tangible items manufactured by businesses, such as laptops. Physicians, lawyers, hairstylists, car washes, and airlines all provide services. Businesses also serve other organizations, such as hospitals, retailers, and governments, by providing machinery, goods for resale, computers, and thousands of other items. Revenue is the money a company receives by providing services or selling goods to customers.
Costs are expenses including rent, salaries, supplies, transportation, and many other expenses a company incurs from creating and selling goods and services. For example, some of the costs Microsoft incurred by developing its software include salaries, facilities, and advertising. If Microsoft has money left over after it pays all costs, it has a profit. A company whose costs are greater than revenues shows a loss. When a company such as Microsoft uses its resources intelligently, it can often increase sales, hold costs down, and earn a profit.
Not all companies earn profits, but that is the risk of being in business. Without enough blood donors, for example, the Canadian Red Cross faces the risk of not meeting the demand for blood by victims of disaster. Businesses such as Microsoft face the risk of falling short of their revenue and profit goals. In Canadian business today, there is generally a direct relationship between risks and profit: the greater the risks, the greater the potential for profit or loss.
Thus, businesses create the goods and services that are the basis of our standard of living. The standard of living of any country is measured by the output of goods and services people can buy with the money they have. Canada has one of the highest standards of living in the world. As a result, the same amount of money buys less in those countries.
Businesses play a key role in determining our quality of life by providing jobs, goods, and services to society. Quality of life refers to the general level of human happiness based on factors including life expectancy, educational standards, health, sanitation, and leisure time. Building a high quality of life is a combined effort between businesses, government, and not-for-profit organizations. At the other end of the scale, Baghdad, Iraq is the city scoring the lowest on the annual survey. Not-for-Profit Organizations Not all organizations strive to make a profit. A not-for-profit organization is an organization that exists to achieve some goal other than the usual business goal of profit. Charities such as Habitat for Humanity, the United Way, the Canadian Cancer Society, and the World Wildlife Fund are not-for-profit organizations, as are most hospitals, zoos, arts organizations, civic groups, and religious organizations.
Over the last 20 years, the number of nonprofit organizations—and the employees and volunteers who work for them—has increased considerably. Government is our largest and most pervasive not-for-profit group. Like their for-profit counterparts, these groups set goals and require resources to meet those goals. However, their goals are not focused on profits. The boundaries that formerly separated not-for-profit and for-profit organizations have blurred, leading to a greater exchange of ideas between the sectors. As discussed in detail in the ethics chapter, for-profit businesses are now addressing social issues.
Successful not-for-profits apply business principles to operate more effectively. Not-for-profit managers are concerned with the same concepts as their colleagues in for-profit companies: developing strategy, budgeting carefully, measuring performance, encouraging innovation, improving productivity, demonstrating accountability, and fostering an ethical workplace environment. Factors of Production: The Building Blocks of Business To provide goods and services, regardless of whether they operate in the for-profit or not-for-profit sector, organizations require inputs in the form of resources called factors of production.
Four traditional factors of production are common to all productive activity: natural resources, labour human resources , capital, and entrepreneurship. Many experts now include knowledge as a fifth factor, acknowledging its key role in business success. By using the factors of production efficiently, a company can produce more goods and services with the same resources. Commodities that are useful inputs in their natural state are known as natural resources. They include farmland, forests, mineral and oil deposits, and water. Sometimes natural resources are simply called land, although the term means more than just land.
Companies use natural resources in different ways. Today urban sprawl, pollution, and limited resources have raised questions about resource use. Conservationists, environmentalists, and government bodies are proposing laws to require land-use planning and resource conservation. This input includes the talents of everyone—from a restaurant cook to a nuclear physicist—who performs the many tasks of manufacturing and selling goods and services. The tools, machinery, equipment, and buildings used to produce goods and services and get them to the consumer are known as capital. Sometimes the term capital is also used to refer to the money that buys machinery, factories, and other production and distribution facilities. However, because money itself produces nothing, it is not one of the basic inputs. Instead, it is a means of acquiring the inputs. Therefore, in this context, capital does not include money. Entrepreneurs are the people who combine the inputs of natural resources, labour, and capital to produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal.
These people make the decisions that set the course for their businesses; they create products and production processes or develop services. Because they are not guaranteed a profit in return for their time and effort, they must be risk-takers. Of course, if their companies succeed, the rewards may be great. Today, many individuals want to start their own businesses. They are attracted by the opportunity to be their own boss and reap the financial rewards of a successful firm. Many start their first business from their dorm rooms, such as Mark Zuckerberg of Facebook, or while living at home, so their costs remain low. Entrepreneurs include people such as Microsoft cofounder Bill Gates, who was named the richest person in the world in , as well as Google founders Sergey Brin and Larry Page. Businesses do not operate in a vacuum but rather in a dynamic environment that has a direct influence on how they operate and whether they will achieve their objectives.
This external business environment is composed of numerous outside organizations and forces that we can group into seven key subenvironments, as Exhibit 1. Each of these sectors creates a unique set of challenges and opportunities for businesses. Business owners and managers have a great deal of control over the internal environment of business, which covers day-to-day decisions. They choose the supplies they purchase, which employees they hire, the products they sell, and where they sell those products.
They use their skills and resources to create goods and services that will satisfy existing and prospective customers. However, the external environmental conditions that affect a business are generally beyond the control of management and change constantly. To compete successfully, business owners and managers must continuously study the environment and adapt their businesses accordingly. Other forces, such as natural disasters, can also have a major impact on businesses. While still in the rebuilding stage after Hurricane Katrina hit in , the U. Gulf Coast suffered another disaster in April as a result of an explosion on the Deepwater Horizon oil-rig, which killed 11 workers and sent more than 3 million barrels of oil into the Gulf of Mexico. Seven years after the explosion, tourism and other businesses are slowly recovering, although scientists are not certain about the long-term environmental consequences of the oil spill.
Thus, managers are primarily adapters to, rather than agents of change. In some situations, however, a firm can influence external events through its strategies. For example, major U. Economic Influences This category is one of the most important external influences on businesses. Fluctuations in the level of economic activity create business cycles that affect businesses and individuals in many ways. For example, when the economy is growing, unemployment rates are low which lead to overall increase in consumer incomes.
Inflation and interest rates are other areas that change according to economic activity. The government may attempt to stimulate or curtail the level of economic activity through policies that affect taxes and interest rate levels. In addition, the forces of supply and demand determine how prices and quantities of goods and services behave in a free market. Political and Legal Influences The political climate of a country is another critical factor for managers to consider in day-to-day business operations. The amount of government activity, the types of laws it passes, and the general political stability of a government are three components of political climate. For example, a multinational company such as General Electric will evaluate the political climate of a country before deciding to locate a plant there. Is the government stable, or might a coup disrupt the country? How restrictive are the regulations for foreign businesses, including foreign ownership of business property and taxation?
Import tariffs, quotas, and export restrictions also must be taken into account. Demographic Factors Demographic factors are an uncontrollable factor in the business environment and extremely important to managers. Demographics help companies define the markets for their products and also determine the size and composition of the workforce. Demographics are at the heart of many business decisions. Businesses today must deal with the unique shopping preferences of different generations, which each require targeted marketing approaches, goods, and services. For example, more than 75 million members of the millennial generation were born between and These are technologically savvy and prosperous young people, with hundreds of billions of dollars to spend.
Which of the following is an example of an implicit cost? Dividends paid out to stockholders b. The uncompensated services of the spouse of a firm's owner c. Payments made to workers who are unproductive d. All of the above are implicit costs. Implicit cost is equal to a. Which theory of profit holds that profit will be higher in industries characterized by a high degree of variability in their revenues or their costs? Risk-bearing theory c. Monopoly theory d.
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