INTRODUCTION TO BUSINESS
(GED 1102)
Course Instructor:
Mafi Rahman
Lecturer
Department of Business Administration-
General
Faculty of Business Studies
Bangladesh University of Professionals (BUP)
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WE ARE GOING TO LEARN ABOUT…
How Economic Conditions Affect Businesses:
What Is Economics?
Adam Smith and the Creation of Wealth
How Businesses Benefit the Community
Understanding Free- Market Capitalism:
The Foundations of Capitalism
How Prices are Determined
The Economic Concept of Supply and Demand
The Equilibrium Point, or Market Price
Competition within Free Markets
The Business Cycle 2
UPON COMPLETION OF THIS CHAPTER, YOU WILL BE ABLE TO:
Explain basic economics.
Explain what capitalism is and how free markets work.
Describe the business cycle.
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HOW ECONOMIC CONDITIONS AFFECT BUSINESSES
Economics: The study of how society chooses to employ resources to produce goods
and services and distribute them for consumption among various competing groups
and individuals.
Macroeconomics: The part of economics study that looks at the operation of a
nation’s economy as a whole.
Microeconomics: The part of economics study that looks at the behavior of people
and organizations in particular markets.
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HOW ECONOMIC CONDITIONS AFFECT BUSINESSES
Adam Smith and the Creation of Wealth
Creating more resources so that everyone could become wealthier.
freedom is vital to the survival of any economy, especially the freedom to own land or property and
to keep the profits from working the land or running a business.
People will work long and hard if they have incentives for doing so—that is, if they know they’ll be
rewarded.
As a result of those efforts, the economy would prosper, with plenty of food and all kinds of products
available to everyone.
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HOW ECONOMIC CONDITIONS AFFECT BUSINESSES
How Businesses Benefit the Community
Invisible Hand: A phrase coined by Adam Smith to describe the process that turns self-directed
gain into social and economic benefits for all.
How do people working in their own self-interest produce goods, services, and wealth for
others?
It is important for businesses to be ethical as well as generous.
Unethical practices undermine the whole economic system.
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UNDERSTANDING FREE- MARKET CAPITALISM
Capitalism: An economic system in which all or most of the factors of production and
distribution are privately owned and operated for profit.
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UNDERSTANDING FREE- MARKET CAPITALISM
The Foundations of Capitalism:
1. The right to own private property.
2. The right to own a business and keep all that business’s profits.
3. The right to freedom of competition.
4. The right to freedom of choice.
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UNDERSTANDING FREE- MARKET CAPITALISM
How Prices Are Determined:
In a free market, prices are not determined by sellers; they are determined by buyers
and sellers negotiating in the marketplace.
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UNDERSTANDING FREE- MARKET CAPITALISM
The Economic Concept of Supply:
Supply refers to the quantities of products manufacturers or owners are willing to sell at different prices at a specific
time. Generally speaking, the amount supplied will increase as the price increases, because sellers can make more
money with a higher price.
The Economic Concept of Demand:
Demand refers to the quantity of products that people are willing to buy at different prices at a specific time.
Generally speaking, the quantity demanded will increase as the price decreases.
The Equilibrium Point, or Market Price:
If you were to lay the two graphs one on top of the other, the supply curve and the demand curve would cross where
quantity demanded and quantity supplied are equal. That crossing point is known as the equilibrium point or
equilibrium price. In the long run, that price will become the market price. Market price, then, is determined by
supply and demand. It is the price toward which the market will trend.
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UNDERSTANDING FREE- MARKET CAPITALISM
Competition within Free Markets
Perfect Competition: The degree of competition in which there are many sellers in a market and
none is large enough to dictate the price of a product.
Monopolistic Competition: The degree of competition in which a large number of sellers produce
very similar products that buyers nevertheless perceive as different.
Oligopoly: A degree of competition in which just a few sellers dominate the market.
Monopoly: A degree of competition in which only one seller controls the total supply of a product
or service, and sets the price.
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THE BUSINESS CYCLE
Business Cycles: The periodic rises and falls that occur in economies over time.
Economist Joseph Schumpeter identified the four phases of long-term business cycles as
boom–recession–depression–recovery:
1. An economic boom is just what it sounds like—business is booming.
2. Recession is two or more consecutive quarters of decline in the GDP.
3. A depression is a severe recession, usually accompanied by deflation.
4. A recovery occurs when the economy stabilizes and starts to grow. This eventually leads
to an economic boom, starting the cycle all over again.
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THE BUSINESS CYCLE
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IN THE NEXT CLASS
Ch-3: Doing Business in Global Markets
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