Business and Marketing: Chapter 1-3

Business and

Marketing chapter

1-3 study slides

Abby Cole

Table of contents
Chapter

Chapter

-Explain the purpose of a business

-Explain and give examples of
business activities (Operational,
Financial, and Investing)

-Describe the role of businesses in
society

Wants vs. Needs

-Explain and give examples of
economic resources (labor, land,
and capital)

-Explain and give examples of
each type of business model
(direct sales, freemium,
subscription, and franchise)

-Define the two types of
businesses (for-profit and
not-for-profit)

-Explain the characteristics of
each type of business
ownership (sole proprietorship,
partnership, LLC, corporation)

01

02

Chapter

-Explain scarcity vs a shortage. Give an example of each

-Explain opportunity cost and give an example

-Describe the features of each type of economy (traditional, command,
market, and mixed)

-Explain the law of supply and the law of demand

-Describe how competition is good for the economy

-Describe how economic activity is measured (GDP, Inflation, Interest rates,
Unemployment rate, productivity)

-Describe the business cycle

-Explain each type of market structure (monopoly, oligopoly, monopolistic
competition, and perfect competition)

-Describe the government's role in the economy

03

Chapter

01

What is the purpose of a business?

-The purpose of a business refers to the aspects of making and selling
products in exchange for money.

Business activities:

-Operational activities include operations that contribute to the net worth of
a company.

-Investing activities include using money to create wealth over time and is
achieved through investment vehicles such as stocks, bonds, mutual funds
and real estate.

-Financial activities involve the input and output of money into a business.

Examples of business activities:

Operational
Production of products
Providing services
Research
Administrative duties
Customer service
Hiring employee

Investing
Purchase of maintenance
Purchase of buildings
Providing loans to providers or
customers
Buying stock

Financial
Collecting money from sales
Repaying debt
Selling stock

Describe the role of business in society:

-
Businesses have 3 crucial roles in society. (1) providing products to
customers, (2) creating markets, and (3) increasing economic benefits

Wants vs. Needs:

-A need is something essential to survival (food, shelter), whereas a want
is something we desire but could ultimately live without (smart phone).

Economic Resources and Examples:

-Economic resources are the goods and services businesses use to
meet consumer wants and need (Land, Labor, Capital)

-Land: Timber, water, plants, fossil fuels, and animals

-Labor: Salespeople, painting contractor, human resources employees

-Capital: Buildings and machinery businesses use in their daily operations

Chapter

02

Business model and examples:

-Business model: plans for making a profit—describe a precise
course of action for how a company will secure customers and
generate income.

Direct sales

What is it?

-Employee of a
business sells
a product
directly to the
consumer

Example:

-Social media
and online
sales

Franchise

What is it:

-Owner of a
company
grants another
business owner
the right to use
the company
owners names

Example:

-Chain
Restaurants

Freemium

What is it?

-Company
provides goods
and services
for free but
later charges
for extra
features

Example:

-Gaming,music
subscriptions

Subscription

What is it?

-Customers pay
an upfront
subscription
price for a
product

Example:

-Magazines,
streaming
networks

Define the two types of businesses

-For-Profit: organization that generates profit for its owners

Example: walmart, amazon, mcdonalds

-Non-Profit: company created to benefit a public interest

Example: teach for america, make a wish foundation

Types of business ownership

-Sole proprietorship: business owned and operated by one
person

-Partnership: form of business owned by two or more individuals

-Corporation: business owned by stockholders who share in
profits and losses

-Limited Liability Company: owners have limited liability and are
not held directly accountable for the companies losses

Chapter

03

Scarcity vs. Shortage

-Scarcity: the problem of trying to meet infinite wants with limited
resources

Example: Land Scarcity

-Shortage: when demand for a good or service is greater than the supply

Example: shortage of food

Opportunity Cost

-The value of the next best alternative that wasn’t chosen in a trade-off is
called an opportunity cost

Example: stocks vs cash

Economic Systems

Law of Supply

-The law of supply states that the higher a product’s price, the higher the supply will be for that
product.

Law of Demand

-The law of demand states that the higher the price of a product, the less demand there will be for
that product. As a product’s price rises, so does its opportunity cost.

Traditional

Centrally Planned

Market

Mixed

Customs and culture
guide economic
decisions

Government sets
prices and controls all
economic factors of
production;
government
redistributes profits

Private businesses
own factors of
production;
businesses keep
profits

Factors of production
are regulated by
government and
owned by private
businesses

How is competition good for economy?
-Competition is beneficial to the economy because it promotes
economic growth

How is economic activity measured?
-GDP: measured in dollars (GDP = C + I + G + (X-M) )

-Inflation: consumer price index

-Interest rates: when demand for loans increases interest rates
increase

-Unemployment rate: % of people without a job

-Productivity: measures economic output in terms of a workers input

Business Cycle

-Business cycles are periods of growth and contraction measured
by GDP

Market Structure

Government's role in economy
-To stimulate growth of the US economy, the government provides
economic development incentives to businesses, benefits such as tax
breaks, low-interest loans, and grants.

Type

Description

Example

Monopoly

Single business has all
control of the market

Water or electric

companies

Oligopoly

Small # of businesses

control the market

Car companies

Monopolistic competition

Many business sell slightly

different products

Shoe companies

Perfect competition

Many business sell identical

products

NONE

THE
END