CHAPTER 1: INTRODUCTION


Business plays a major role within our society. It is a creative and competitive activity that
continuously contributes to the shaping of our society. By satisfying the needs and wants people cannot
satisfy themselves, businesses improve the quality of life for people. It is a way for individuals to provide
goods and services to consumers, and at the same time, produce a profit for themselves. Businesses are not
only important because they provide goods and services for consumers, but they also improve the economy
and increase jobs for people within society to create a higher standard of living.
CHAPTER 2: OUR ECONOMIC SYSTEM
To measure our societies standard of living, we must look to our "Gross National Product", which is the
complete measure of our nations output. Unfortunately, inflation is a major problem in our nation which
often reduces the Gross National Product. Inflation occurs when the goods become too high within society
and spending decreases.1
The Business Cycle
A central function within our economic system is satisfying the needs of the consumers with the
use of limited supplies. The purpose of a business is to combine resources such as land, labor, and capital
in a way that will make them more valuable. Operating in a political and economic climate that supports
individual rights, American business has as its guiding principle the right to private ownership and profit.
The amount of goods produced depends upon the number of resources available for use. This idea is
commonly known as "Supply and Demand"2 . Businesses must attempt to reach an equilibrium between
the two which will directly impact the price of the products produced. If something is heavily demanded
and at the same time, it’s resources are limited, the price of the product will rise. This idea of course works
both ways. The easier it is to produce something, the cheaper it will be. All economic systems begin with
the same resources including land, labor, capit!
al and technology. These resources may be limited at any given time, varying within the world at large,
from country to country. This business cycle explains how business fluctuates from high to low prosperity,
recession, depression and recovery over time. The major challenges faced by our nation today are the
Federal Budget Deficit, international trade deficit, the Decline of Smokestack America, and the
conservation of energy. The Federal Budget Deficit occurs when our expenditures are greater then our
revenues. International trade deficits occur when a nation imports more then it exports. The Decline of
Smokestack America is when there is a change from an industrial to a post-industrial economy. Finally,
the conservation of energy is so that there are a sufficient amount of natural resources necessary to produce
goods.3 General economic growth or stagnation also has an important influence on business within our
society. Many factors can affect it’s condition, such !
as war, new inventions and technology, political assassinations, the discovery of physical and natural
resources, labor negotiations, government action, and many others. When the economy is strong and the
demand is high, businesses can prosper. Regardless of how great the economy may become, businesses
still must compete with other firms for scarce raw materials and labor.
CHAPTER 3: THE ENVIORNMENTS’ INFLUENCE ON BUSINESS

A businesses’ environment creates many opportunities as well as problems for prospering businesses. The
environment determines what a business can do by shaping and channeling its development. Businesses
function within an environment by allowing entrepreneurs to raise capital and create profits freely. The
supply of money available within a business as well as the economic stability through times of growth and
recession have strong effects on businesses. Not only is the physical environment, including natural
resources, pollution and energy as discussed previously, important, but many other aspects within the
environment influence business. A business must adapt and overcome consumerism and ecology, and it
has a social responsibility to do so. Cultures surrounding businesses also play a major role. A business
must adapt to a changing society with age, lifestyle, culture and location. When a business learns to adapt
to these changes, it will be profitable for both the b!
usiness and consumers.
CHAPTER 4: CLASSIFICATIONS OF ECONOMIC SYSTEMS

Economic systems can be classified into three categories. These include capitalism, socialism and
communism. Pure capitalism is an unrestrained freedom to