what is business slides

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Chapter One

What is Business?

2007 The McGraw-Hill Companies, Inc., All Rights Reserved.McGraw-Hill/IrwinIntroduction to Business


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What is Business?

Business

- goal-directed behavior aimed at getting and

using productive resources to buy, make,trade, and sell goods

and services that can

be sold at a profit


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Productive Resources and

Operating Costs

Figure 1.1


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Key Business Terms

Business Model

- a companys plan of action to use

resources to create a product that will giveit a competitive advantage

Competitive advantage

- a companys ability to offer customers aproduct that has more value to them than

similar products offered by other

companies


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Key Business Terms

Sales revenue

- the amount of money or income that a

company generates from the sale of theproduct

Profit

- the total amount of money left over afteroperating costs have been deducted from

sales revenues


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Key Business Terms

Capital

- profit that is kept in a company and

invested in its business Wealth

- the sum total of the resources, assets,

riches, and material possessions owned bypeople and groups in society


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Profit and Profitability

Profitability

- a measurement of how well a company is

making use of its resources relative to itscompetitors

Profit- the difference between sales revenues and

operating costs


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Business as Commerce

Trade

- the exchange of products through the use

of money Barter

- the exchange of one product for another

product


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Transaction Costs Related to

Business

Transaction Costs

- the costs of bargaining, negotiating,

monitoring, and regulating exchangesbetween people in business


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Demand, Supply, and

the Market Price

Diminishing marginal utility

- the principle that the value people receive

from an additional unit of a product declinesas they obtain more of a product


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Demand, Supply, and

the Market Price

Law of demand

- the principle that states as the price of a

product rises, consumers will buy less of it,and as the price of it falls, consumers will

buy more of it


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Demand, Supply, and

the Market Price

Law of supply

- the principle that states that as the price of

a product rises, producers will supply moreof it, and that as the price of it falls,

producers will supply less of it


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Demand, Supply, and

the Market Price

Figure 1.3


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Determining the Market Price

Market

- buyers and sellers

for a particularproduct


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The Invisible Hand of the Market

Invisible hand

- the principle that the pursuit of self-interest

in the marketplace naturally leads to theimproved well-being of society in general


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The Invisible Hand of the Market

Monopoly

- a situation in which one company controls

the supply of a product and can charge anartificially high price for it

Human capital

- a persons stock of knowledge, skills,experience, judgment, personality, and

abilities


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Business Organizations

Organizational structure

- the framework of task and authority

relationships that coordinates people sothey work towards a common goal

Functional activities

- the task-specific operations needed toconvert resources into finished goods and

services sold to customers

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