Chapter 1 Questions

Can you have a combined economic system (some of each)? Explain.

Yes, you can have a combined economic system with elements of more than one economic system. These are called mixed economies.

Why are fluctuations in the economy harmful?

Inflation can be harmful if individuals' incomes do not increase at the same rate as rising prices, because then the consumers buy less. Economic contraction is harmful because companies begin to lay off workers, and the economy slows down.

Who are these people and why are they important to the history of America and the business economy?

1. Carnegie, Andrew (1835-1918): invested in railroads and founded the United States Steel Corporation 2. Eastman, George (1854-1932): American entrepreneur who founded the Eastman Kodak Company and popularized the use of roll film, helping to bring photography to the mainstream 3. Edison, Thomas Alva (1847-1931): early American entrepreneur that invented the record player and the light bulb 4. Ford, Henry: One of the first people to develop mass assembly methods in the automobile industry 5. Fulton, Robert (1765-1815): American engineer and inventor who is widely credited with developing a commercially successful steamboat 6. Gillette, King Camp (1855-1932): American businessman that invented the safety razor 7. Goodyear, Charles (1800-60): American self-taught chemist and manufacturing engineer who developed vulcanized rubber 8. Morgan, J.P.: started financial institutions to fund the business activities of other entrepreneurs 9. Rockefeller, John D.: built Standard Oil out of the fledgling oil industry 10. Vanderbilt, Cornelius: American entrepreneur that made his wealth through railroads and shipping 11. Tesla, Nikola: He invented the alternating current to improve electricity.

What are four types of economic systems? Can you provide examples of a country using each type?

1. Communism: Russia, Poland, Hungary 2. Socialism: Sweden, India, and Israel 3. Capitalism (free enterprise): United States, Canada, Japan, and Australia 4. Mixed Economies: Great Britain and Mexico

List the four types of competitive environment and provide an example of a product of each environment.

1. Pure competition: wheat, corn, and cotton 2. Monopolistic: aspirin, soft drinks, and vacuum cleaners 3. Oligopoly: airlines 4. Monopoly: electricity, natural gas, water

List and define the various measures government may use to gauge the state of their economies. If unemployment is high, will the growth of GDP be great or small?

1. Trade of balance: the difference between our exports and our imports 2. Consumer price index: measures changes in prices of goods and services purchased for consumption by typical urban households 3. Per Capita Income: indicates the income level of "average" Americans. Useful in determining how much "average" consumers spend and how much money Americans are earning. 4. Unemployment Rate: indicates how many working-age Americans are not working who otherwise want to work 5. Inflation: monitors price increases in consumer goods and services over specified periods of time. Used to determine if costs of goods and services are exceeding working compensation over time

How did the industrial revolution influence the growth of the American economy? Why do we apply the term service economy to the United States today?

A service economy may be contrasted with an automobile production economy of 1921. That industrial Revolution of the late 19th Century and early 20th centuries is different from a current services provided economy of sales and software. A service economy is defined as an economy or the sector of an economy that is based on trade in services.

Explain the terms supply, demand, equilibrium price, and competition. How do these forces interact in the American economy?

Supply: the number of products-- goods and services-- that businesses are willing to sell at different prices at specific times. Demand: the number of goods and services that consumers are willing to buy at different prices at a specific time. Equilibrium Price: the price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time. Competition: the rivalry among businesses for consumers' dollars. Because the supply and demand curves intersect to make them equal ( this is the equilibrium price) they are all connected and the supply and demand are partly determined by the competition in the area. With more competition this could affect supply and demand negatively, but with less competition supply and demand could increase.

Name the forms a product may take and give some examples of each.

The forms that a product takes is tangible: which is computers, phones, clothing; but products can also take intangible forms through services: such as dry cleaning, checkups, or performances by sports players or entertainers.

Explain the federal government's role in the American economy.

The government regulates business to preserve competition and protect consumers and employees

Who are the main participants of business? What are the main activities? What other factors have an impact on the conduct of business in the United States?

The main participants of business are employees, customers, and owners. Their main activities are finance for their customers, marketing for the employees, and management for the owners. Other factors that have an impact are the economy, competition, social responsibility, information technology, and legal, political, and regulatory forces.

What is the fundamental goal of business? Do all organizations share this goal?

The primary goal of all businesses is to earn a profit. No, not all organizations share this goal. Some are non-profit, and offer goods and services without the purpose of earning money.