Professional Documents
Culture Documents
Understanding
Economics
and
How It Affects
Business
1. Explain basic economic; what capitalism is and how free markets work.
4. Contrast fiscal policy and monetary policy, and explain how each
affects the economy.
2-2
Profile JOHN MAYNARD KEYNES
2-3
What Is
Economics? The MAJOR BRANCHES of
LG1
ECONOMICS
2-4
What Is
Economics? RESOURCE DEVELOPMENT
LG1
• Resource
Development --
The study of how to
increase resources
and create
conditions that will
make better use of
them.
2-5
What Is
Economics? EXAMPLES of WAYS to
LG1 INCREASE RESOURCES
2-7
The Secret to
Creating a
Wealthy
Economy
POPULATION as a RESOURCE
LG1
2-8
BRINGING in the GREEN
with GREEN PRODUCTS
(Thinking Green)
2-9
Adam Smith &
the Creation of ADAM SMITH the
Wealth
LG1
FATHER of ECONOMICS
Smith believed that:
• Freedom was vital to any economy’s survival.
• Freedom to own land or
property and the right to
keep the profits of a
business is essential.
• People will work hard if
they believe they will be
rewarded.
• The Invisible Hand Theory
2-10
How Businesses
Benefit the
Community
UNDERSTANDING the
LG1 INVISIBLE HAND THEORY
• A farmer earns money by
selling his crops.
• To earn more, the farmer hires
farmhands to produce more
crops.
• When the farmer produces
more, there is plenty of food
for the community.
• The farmer helped his
employees and his community
while helping himself.
2-11
Understanding
Free-Market
Capitalism
CAPITALISM
LG2
2-14
How Free
Markets Work
FREE MARKETS
LG2
2-15
How Prices are
Determined
PRICING
LG2
2-17
Competition
Within Free FOUR DEGREES
Markets
LG2
of COMPETITION
1. Perfect
Competition
2. Monopolistic
Competition
3. Oligopoly
4. Monopoly
2-18
Benefits and
Limitations of
Free Markets
FREE MARKET BENEFITS
and LIMITATIONS
Benefits:
• It allows for open
competition among
companies.
• Provides opportunities for
poor people to work their
way out of poverty.
Limitations:
• People may start to let
greed drive them.
2-19
Understanding
Socialism
SOCIALISM
LG3
2-21
The Trend
Toward Mixed
Economies
TWO MAJOR
LG4
ECONOMIC SYSTEMS
2-25
Key Economic
Indicators
The UNITED STATES GDP
LG5
2-26
Key Economic
Indicators UNEMPLOYMENT
LG5
• Four Types of
Unemployment
1. Frictional
2. Structural
3. Cyclical
4. Seasonal
2-27
Key Economic
Indicators
INFLATION
LG5
2-28
Key Economic
Indicators
PRICE INDECES
LG5
2-29
Productivity in
the United States
PRODUCTIVITY
LG5
• Productivity in the
service sector grows
more slowly because
of fewer
technologies.
2-30
Productivity in
the Service
Sector
PRODUCTIVITY in the
LG5 SERVICE SECTOR
2-31
The Business
Cycle BUSINESS CYCLES
LG5
2-34