BUS 101 Chapter 1 Study Questions

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

• A good (automobile, calculator, beverage, or notebook). Business 101 | Introduction to Business | Fall 2016 | Professor Lafferty Exam 1 Review • A service (dry cleaning, overnight mail delivery, a haircut, a checkup by a doctor). • An idea (consultants and attorneys, for example, generate ideas for solving problems).

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

• Communism (China, North Korea, Vietnam, and Cuba) • Socialism (Sweden, India, Denmark, and Israel) • Capitalism (United States, Canada, and Australia) • Mixed economies (most nations operate as mixed economies)

Why are fluctuations in the economy harmful?

• Fluctuations in the economy are associated with inflation and unemployment. They are a major cause of human distress. Moreover, the potential for fluctuations in the economy make it more difficult for businesses and consumers to plan for the future.

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

• Supply is the quantity of goods or services that businesses are willing to sell at different prices at a specific time, while demand is the quantity of products and services that consumers are willing to buy at different prices at a specific time. Equilibrium price is the price at which the quantity of products that businesses are willing to supply equals the quantity of products consumers are willing to buy at a specific point in time. Competition is the rivalry among businesses to convince customers to buy their products. • These forces interact in the American economy, causing the distribution of resources and products to be determined by supply and demand. Supply and demand change in response to changes in economic conditions, availability of resources, and degree of competition.

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?

• The Industrial Revolution led to an increase in factories as technology provided machines by which workers could make products more efficiently. Work in factories became more specialized. Transportation, especially railroads, allowed farmers to send their surplus crops and goods to markets. Innovations in farm equipment increased farm productivity; fewer workers were required on the farm, and more workers moved to factory jobs in the cities. • The U.S. economy is devoted to the production of services that make life easier for consumers.

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

• The U.S. economic system operates as modified capitalism because business is regulated to a certain extent through federal, state, and local governments. Most government regulation seeks to preserve competition and to protect consumers and employees

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

• The fundamental goal of business is to earn profits. • Nonprofit organizations do not share this fundamental goal, although they often provide goods and services.

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

• The gross domestic product is the sum of all goods and services produced by a country during a year. It measures only those products made within a country and therefore excludes profits from companies' overseas operations. It does include profits earned by foreign companies within the country being measured. • The existence of a budget deficit indicates that a nation is spending more than it is getting from taxes. • Inflation is characterized by a continuing rise in prices. When unemployment is high, the demand for products and services is low; thus, the level of production decreases. Accordingly, the growth of the GDP is small.

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 in business are owners, employees, and customers. • The main business activities include management, marketing, and finance. • Other factors having an effect on the conduct of business are legal and regulatory forces, the economy, competition, technology, and ethical and social concerns.

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

• Pure competition (agricultural commodities such as wheat, corn, and cotton) • Monopolistic competition (aspirin, soft drinks, and vacuum cleaners) • Oligopolies (aluminum industry, steel industry, automobile manufacturers, and airlines) • Monopolies (utility companies)