Question

• Who are the 3 main participants in a business? Explain their roles.

• What external factors influence businesses?

• What functional areas/activities (3) are needed to run a business?

• Which three key questions do economists try to answer? Will answers to these questions differ, depending on whether they’re working in the United States or in Cuba? Explain your answer.

• What is perfect competition and how does it relate to supply and demand?

• Identify the four types of competition, explain the differences among them, and provide two examples of each. (Use examples different from those given in the text.)

• What are the three main economic goals of most economies, including the economy of the United States? What economic measures do we examine to determine whether or how well these goals are being met? (Hint: Read Section 1-5, Economic Cycles and Productivity)

Answer 1

The 3 main business participants of a business are:
1. Employees - make sure that the business delivers the promised quantity on time, keeping the time constraint.

2. Customer - The ultimate buyers. The demand by customers define what products the business should produce.

3. Owners - the stakeholders. The Executive Team which responsible for charting long term growth avenues for the business. The main focus lies in creating value in short/long term.

External factors that influence business may be categorized as:

1. Competition: Competitors drive your strategies. A business needs to analyse what its competitors are offering. Price wars are one of the major factors in competition.

2. Legal: Regulatory environment plays an important role. Suppose the government increases taxes on the your main product. It will increase your costs. Now if you opt for increased prices, customers may look for substitutes.

3. Technological changes: How well your business adapts latest technological changes, will define your profitability in the long term. Suppose, you are a manufacturing firm, if there is a new technology which increases the productivity, it makes value to accept that technology to stay ahead of competition.

Following are the functional areas/activities needed to run a business:

1. Marketing: The product needs to be visible among the consumers. No doubt the companies advertise so much as it helps gain market share.

2. Production - Its the main unit. Unless the product is produced in time, no other activity can function smoothly.

3. Accounting and Finance: The business needs a firm system to record its accounts and finance for analyzing and projecting cash flows. Its a vital component which tells us how much the company is earning on day to day basis.

Although economists answer a variety of questions. Below are the listed 3 major questions:

1. What goods/services to produce

2. How much to produce

3. Who gets the goods/services