1

chapt

The U. S. Business Environment

er
Business Essentials, 7th Edition
Ebert/Griffin

Student PowerPoints
2009 Pearson Education, Inc.

PowerPoint Presentation prepared by

Carol Vollmer Pope Alverno College

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After reading this chapter, you should be able to:
1.

Define the nature of U.S. business and identify its main

goals and functions.

2.

Describe the external environments of business and

discuss how these environments affect the success or
failure of any organization.

3.

Describe the different types of global economic systems

according to the means by which they control the factors
of production.

4.

Show how markets, demand, and supply affect resource

distribution in the United States.
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(contd)
(contd)
After reading this chapter, you should be able
to:
5. Identify the elements of private enterprise
and explain the various degrees of
competition in the U.S. economic system.
6. Explain the importance of the economic
environment to business and identify the
factors used to evaluate the performance
of an economic system.
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The Concept of Business and Profit

Business
Profits
Consumer Choice and Demand

Opportunity and Enterprise

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The Concept of Business and Profit

(cont.)
The Benefits of Business

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The External Environments of Business

External Environment
Everything outside an organizations
boundaries that might affect it

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The External Environments of Business

(cont.)
Domestic Business Environment
The environment in which a firm
conducts its operations and derives its
revenues by:

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The External Environments of Business

(cont.)

Global Business

Environment
The international forces that affect a
business:

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The External Environments of Business

(cont.)
Technological Environment
All the ways by which firms create value
for their constituents:

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The External Environments of Business

(cont.)
Political-Legal Environment
The regulatory relationship between business and the
government (legal system) and its agencies that define
what organizations can and cant do:

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The External Environments of Business

(cont.)
Sociocultural Environment

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The External Environments of Business

(cont.)
Economic Environment
The relevant conditions that exist in the
economic system in which a company operates
Examples:

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Economic Systems
Economic System
Factors of Production

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Types of Economic Systems

Planned Economy
Market Economy
Market

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Planned Economies
Communism
A system Karl Marx envisioned in which
individuals would contribute according
to their abilities and receive benefits
according to their needs.

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Market Economics
Capitalism

Mixed Market Economy

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The Economics of Market Systems

Demand
Supply
The Laws of Demand and Supply in a
Market Economy
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Demand and Supply in a Market

Economy
Demand and Supply Schedule
The relationships among different levels
of demand and supply at different price
levels as obtained from marketing
research, historical data, and other
studies of the market.

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FIGURE 1.2

Demand and Supply

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FIGURE 1.2

Demand and Supply

(Cont.)

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Surpluses and Shortages

Surplus

Shortage

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Private Enterprise in a Market

Economy
Private Enterprise System

Elements of a Private Enterprise

System

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Degrees of Competition
Perfect Competition
Prices are determined by supply and
demand because no single firm is
powerful enough to influence the price
of its product.

Principles of perfect competition:

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Degrees of Competition (Cont.)

Monopolistic Competition

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Degrees of Competition (Cont.)

Oligopoly

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Degrees of Competition (Cont.)

Monopoly
An industry or market that has only one
producer (or else is so dominated by one
producer that other firms cannot
compete with it).
Natural monopolies:

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Economic Indicators
Economic Indicators

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Economic Growth, Aggregate Output,

and Standard of Living
Business Cycle

Aggregate Output

Standard of Living
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Economic Indicators (cont.)

Gross Domestic Product (GDP)

Gross National Product (GNP)

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Economic Indicators (cont.)

Real Growth Rate

Real GDP

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Economic Indicators (cont.)

Nominal GDP

GDP per Capita

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Economic Indicators (cont.)

Purchasing Power Parity

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FIGURE 1.3 Purchasing Power Parity

Big Mac Index

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Economic Growth
Productivity
A measure of economic growth that
compares how much product a system
produces with the resources needed to
produce that product.

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Economic Growth (cont.)

Balance of Trade
The economic value of all the products a
country exports minus the economic value of
its imported products.

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Balance of Trade
How does a trade deficit affect
economic growth?

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FIGURE 1.4 Balance of Trade

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Economic Growth (cont.)

National Debt
The amount of money that the government
owes its creditors.

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Economic Growth (cont.)

Stability

Inflation

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Economic Indicators
Consumer Price Index (CPI)
A measure of the prices of typical
products purchased by consumers living
in urban areas

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Economic Growth (cont.)

Unemployment
The level of joblessness among people
actively seeking work in an economic
system

Cyclical Unemployment

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Economic Growth (cont.)

Recession

Depression

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Managing the U.S. Economy

Fiscal Policy

Monetary Policy

Stabilization Policy
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Key Terms
aggregate output
balance of trade
business
business cycle
capital
capitalism
communism
competition
consumer price index
demand
demand and supply schedule
demand curve
depression
domestic business
environment

economic environment
economic indicators
economic system
entrepreneur
external environment
factors of production
fiscal policies
global business environment
gross domestic product (GDP)
gross national product (GNP)
inflation
information resources
labor (human resources)
law of demand

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Key Terms (cont.)

law of supply
market
market economy
market price (equilibrium
price)
mixed market economy
monetary policies
monopolistic competition
monopoly
national debt
natural monopoly
nominal GDP
oligopoly
perfect competition
physical resources

planned economy
political-legal environment
private enterprise
privatization
productivity
profits
purchasing power parity
real GDP
recession
shortage
socialism
sociological environment
stability
stabilization policy

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Key Terms (cont.)

standard of living
supply
supply curve
surplus
technological
environment
unemployment

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