The Concept of Business and Profit
o Business- organization that provides goods or services to earn 
profits
o Profits- difference between a business's revenues and its 
expenses
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The External Environment of Business
o External Environment- everything outside an organization's boundaries that 
might affect it
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Dimensions of the External Environment
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The External Environments of Business (1 of 2)
o Domestic Business Environment - the environment in which a firm conducts 
operations and derives revenues
o Global Business Environment - international forces that affect a business and includes 
international trade agreements, international economic conditions, and political unrest
o Technological Environment - ways by which firms create value for their constituents
o Political-Legal Environment - the relationship between business and government
o Sociocultural Environment - includes the customs, mores, values, and demographic 
characteristics of the society and determines the business standards that a society is 
likely to value and accept
o The Economic Environment - includes relevant conditions that exist in the economic 
system in which a company operates
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Economic Systems
o Economic system- a nation's system for allocating its resources among its 
citizens, both individuals and organizations
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Factors of Production (1 of 2)
o Labor (Human Resources) includes the physical and intellectual 
contributions people make while engaged in economic production and 
is also called human resources or human capital.o An Entrepreneur is a person who accepts the risks and opportunities 
entailed in creating and operating a new business venture.Both buyers and sellers know the prices that others 
are paying and receiving in the marketplace.Private enterprise system- ownership of the resources used to create wealth is in the hands 
of individuals
2.the number of firms in the industry must be large
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Perfect Competition
1.The products of each firm are so similar that buyers 
view them as identical to those of other firms.Going prices are set exclusively by supply and 
demand and accepted by both sellers and buyers.all firms in an industry must be small, and 
2.2.3.4.