Introduction to Business Lesson II Ass. Prof. Özgür Kökalan İstanbul Sabahattin Zaim University
Dec 25, 2015
Introduction to BusinessLesson II
Ass. Prof. Özgür Kökalan İstanbul Sabahattin Zaim University
Lesson Objectives1. Define the concept of Business
2. Difference between business and not-for-profit organizations and identify the factors of production.
3. Describe the economic systems and explain how competition and entrepreneurship contribute to the system.
What is business?
Business: profit seeking activity that provides goods and services to satisfy consumers’ needs.
Business: consists of all activities to serve goods and services to the community with the purpose of profit for surviving.
Profits: financial rewards received by a businessperson for taking the risks involved in creating and marketing want-satisfying goods and services.
Business is so crucial (important) for economies.
Why?
Business is so crucial (important) for economies. Why?
Business ( firm), Offers necessities
Provides jobs
Pays taxes
Reinvests profits
Creates higher standard of living
Organizations: deliberately established groups working together in a systematic way for common purpose
There are two kinds of organization :
Profit Seeking Organizations: the main aim to take profit from their operations
Not For Profit Organizations: Businesslike establishments that have primary objectives
other than returning profits to their owners
The Corporate Angel Network: A Not-for-Profit Organization
Labor Intensive versus Capital Intensive Businesses
rely on human resources to prosper
require large amounts of money or equipment to start and to operate
Labor Intensive Capital Intensive
Factors of ProductionResources societies use to produce and distribute goods and services. Businesses rely on five factors of production to optimize profits.
What do we need to produce something?
Natural Resources
Human Resources
Capital
Entrepreneurs
Knowledge
Factors of ProductionNatural resources: assets useful in their natural state (land, minerals, water, and forests).
Human resources: anyone involved in the production of goods and services
Capital: resources such as money, equipment, and buildings necessary for production of goods and services.
Entrepreneurs: innovative risk-takers who create and operate new businesses
Knowledge: the collective intelligence of an organization
Which factor is the most important?
Economic SystemEconomic System: Basic set of rules for
allocating a society’s resourcesAnswers three questions:
What to produce How much to produce Who gets what
There are mainly four kinds of economic system in the world. These are:
Free market economy ( Capitalism) Communism Socialism Mixed Economy
CommunismThere are some characteristics of
communism listed below: Governments control all or part of resources
Governments limit individuals’ freedom of choice
Government sets goals
Examples: North Korea, Cuba
SocialismThere are some characteristics of listed
below: Governments control major industiries in the
country
It provides more individuals’ freedom of choice than communism
Majority of people work for government owned industires. But small business owned by private person is encouraged.
Examples: Sweden, India, Syria, Israel
Mixed EconomyThere are some characteristics of listed
below: major industiries in the country are owned by both
government and individuals
It provides individuals’ freedom of choice in many areas
people work for both government owned industires and private enterprises.
Examples: Turkey, Romania, Italy, France
Free Market Economy ( Capitalism)In free market economics,
Marketplace determines what goods and services get produced.
Basic Rights in the Private Enterprise System
Free Market EconomyFree market economy have three important
rules. These are:
Theory of Supply and Demand
Competition
Some Government Intervention
Theory of Supply and DemandAccording to free market economy, all things
in market are determined by supply and demand, not by government. It is called as invisible hand.
Supply; The number of products that businesses are willing to sell at different prices at a specific timeBusinesses are willing to supply more of a good or service at
higher prices because the potential for profits is higher.Demand; The number of goods and services that
consumers are willing to buy at different prices at a specific time.Consumers are usually willing to buy more of an item as its
price falls because they want to save money.
Supply Curve for Gasoline
Demand Curve for Gasoline
Equilibrium Point for Gasoline
CompetitionMarket in which two or more suppliers of a
product serve the same customers.There are some kinds of competition in the
market. These are:Pure competitionMonopolistic competitionOligopolyMonopoly
Pure CompetitionIn pure competition,• Multiple buyers and sellers exist• Nearly identical products/services• Low barriers to entry (sellers can easily
enter and exit the market place)• No single firm or group of firms can
influence priceExample; Agriculture product
Monopolistic Competition In monopolistic competition;
Varying degrees of competitive power
Most advanced free-market economies features monopolistically competitive firms
Large number of sellers
Differentiated products—very similar—single distinguishing feature
Example; Retailing
OligopolyIn oligopoly, Industry dominated by only a few sellers Similar product are offered to consumer Differentiatial is so importat.
Example: GSM operators in Turkey, Airline companies in domestic lines.
MonopolyIn monopoly; Single seller controls the supply of a good
and service Ability to determine the price There is no competition in the market
Example; TCDD