Questions for discussion and review

In groups of two or three discuss the following points and report back to the class on your major conclusions.

1. Why should you study business, including its successes, failures, history, and principles?

2. Profits are presented as a reward for conducting a number of activities. What are these activities?

3. Why should everyone understand basic economics?

4. Economics is sometimes called 'the study of scarcity and choice'. How does this relate to your budget for the month?

5. Economics doesn't require much knowledge of mathematics.

6. “Economists are sometimes confronted with the charge that their discipline is not a science. Do you agree or disagree with the statement? Prove it.

SUMMARY OF LEARNING OBJECTIVES

1. Business involves the exchange of goods, services, or money for mutual benefit. We need to study business because (a) we have become so interdependent on others, both individually and as a nation, (b) increasing globalization of business will bring many opportunities, (c) we strive to maintain and improve our standard of living, (d) coping with unforeseen events will be easier and less traumatic, and (e) we will be able to separate fact from fiction in business issues.

2. Business needs people as owners, managers, employees, and consumers. Businesses may be operated differently, and the objectives of business may differ, but the universal element in all business activities is people.

3. A business must first survive if other objectives are to be accomplished. Growth is an objective because business does not stand still. Businesses must accept social responsibility in areas such as the environment and protection from discrimination. The profit objective plays a major role in business. Profits reward a business enterprise for effectively conducting a number of activities.

4. Business profit is calculated by subtracting all costs, including taxes, from the revenue received from selling a product or service in the marketplace.

5. To define the term economics and discuss three types of economic resources. Economics is the study of how a society chooses to use scarce resources to produce goods and services and then distribute them to people for consumption. Natural resources are provided by nature in limited amounts (e.g., coal, oil, natural gas); capital resources are goods produced for making other goods and services (e.g., fuel, money, factories); labor resources are the nation's human talent, the most valuable national resource.

6. To define the term merger and identify three types of mergers.

Amergertakes place when two or more corporations combine to form a single enterprise. There are three types of mergers: horizontal, vertical, and conglomerate.

KEY TERMS

Business The exchange of goods, services, or money for mutual benefit or profit.

Barter The exchange of goods without using money.

Consumer A person who purchases a good or service for personal use.

Business Profit The difference between business income (revenue) and business expenses (costs):

Economics The study of how a society chooses to use scarce resources to produce goods and services and to distribute them for consumption.

Natural Resources Resources provided in limited amounts by nature, such as oil, coal, water, and timber.

Capital Resources Goods produced for the purpose of making other types of goods and services.

Labor Resources The human talent, skills and competence, available in a nation.

Allocation The process of choosing how resources will be used to meet a society's needs and wants; includes the distribution of products to consumers.

Sole Proprietorship A business owned and man aged by one individual.

Partnership A business owned by two or more people.

General Partnership A partnership in which at least one partner has unlim­ited liability; a general partner has authority to act and make binding decisions as an owner.

Limited Partnership A partnership with at least one general partner, and one or more limited partners who are liable for loss only up to the amount of their investment.

Joint Venture A formal cooperation of two or more businesses to share business decision making, investment risks, and profits.

Syndicate Two or more businesses joined together to accomplish specific business goals; a popular form in underwriting large amounts of corporation stocks.

Business Trust A business used to hold securities for investors; allows the transfer of legal title to a property of one person for the use and benefit of another.

Corporation A business that is a legal entity separate from its owners.

Domestic Corporation An enterprise organized under the laws of one state or country and doing business within that state or country.

Foreign Corporation A business incorporated in one state or country and doing business in another state or country.

Nonprofit Corporation An enterprise (e.g. university, charity, church) that is not driven by a profit-seeking motive.

Merger Combining two or more business enterprises into a single entity.

Horizontal Merger A merger involving competitive firms in the same market.

Vertical Merger A merger in which a firm joins with its supplier.

Conglomerate Merger A merger involving firms selling goods in unrelated markets.

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