Unit 5.01 – 5.03 MPA
Unpacked Content
A) Distinguish between economic goods and services (EC:002, EC LAP 10) (CS)
1) Define wants
a) Economic want
b) Noneconomic want
2) Define goods and services
a) Consumer goods
b) Industrial goods
c) Capital goods
B) Explain the concept of economic resources (EC:003, EC LAP 14) (CS)
1) Define economic, natural and human resources.
2) Factors of production
C) Describe the concepts of economics and economic activities (EC:001, EC LAP 6) (CS)
1) Define the following terms: economics, scarcity, economizing, opportunity cost, trade-offs,
consumption, consumer, production, producer, exchange, and distribution
2) The three economic questions that all societies must answer
a) What will be produced?
b) How will the products be produced?
c) How will the products be allocated?
3) Describe four economic activities
a) Consumption
b) Production
c) Exchange
d) Distribution
D) Determine economic utilities created by business and marketing activities (EC:004, EC LAP 13)
(CS)
1) Form utility
2) Place utility
3) Time utility
4) Possession utility
E) Explain the principles of supply and demand (EC:005, EC LAP 11) (CS)
1) Define the following terms: demand, law of demand, supply, law of supply, law of supply
and demand, buyer’s market, seller’s market, elasticity, elastic demand, and inelastic
demand
2) List the conditions required for demand to exist
a) Desire for a good or service
b) Buying power to pay for a good or service
c) Willingness to give up some buying power
F) Describe the functions of prices in markets (EC:006, EC LAP 12) (CS)
1) Relative prices
2) Substitution effect
3) Rationing
4) Equilibrium price
5) Excess supply
6) Excess demand
7) Market price
5.01 – How It’s Made (page 1)
Part I.
Directions: Students will answer the following questions as they follow a product as it makes its
way through the production/distribution channel to the consumer. The teacher will assign a
product or the student will choose a video from “How It’s Made” website to learn about how a
product is made.
The website is http://www.sciencechannel.com/tv-shows/how-its-made/videos/
Industrial Goods and Services
1. What is the product?
2. Where is this product made (location)?
3. What industrial goods were used to create the product?
4. What classification of the industrial goods were used in the production of this product?. Use
the following link to view the categories of classification. Manage Mentor website http://www.themanagementor.com/enlightenmentorareas/mrkt/Bps/Classify.htm
5. Who provides the raw material to make the product?
6. In your own words, describe the process used to create the product. Use complete sentences.
7. What happens to the product after it is made?
8. How does it get into the hands of the consumer?
9. What is the consumer classification of this product - Convenience goods, shopping goods or
specialty goods? Explain your answer. Use complete sentences.
10. How is this product used?
11. Who is the target market for this product?
12. Where is this product sold?
5.01 – How It’s Made (page 2)
Part II.
Directions. Use your own resources to complete the following:
Define service industry.
Provide an example of a service industry.
Define consumer service.
Provide an example of a consumer service.
5.01 – Those Golden Jeans Activity (page 1)
As you go through the steps of this assignment, record your answers here.
Website used - http://www.econedlink.org/lessons/index.php?lid=557&type=student
Part I.
Step 1
$2.00 a slice –
$1.50 a slice –
$1.00 a slice –
$0.50 a slice –
Price Per
Slice
You
Friend
Quantity Demanded
Friend
Friend
Total
$2.00
$1.50
$1.00
$0.50
What happens to the number of slices of pizza, you and your friends are willing and able to buy as
the price goes up?
What generalization can you make about the relationship between price and quantity?
After reading the art of pizza, answer the following:
1. An example of a human resource in the first paragraph.
2. An example of a natural resource in the fourth or sixth paragraph.
3. An example of capital resources in the fourth paragraph.
5.01 – Those Golden Jeans Activity (page 2)
Part II.
List the productive resources beside the type of resource that it represents.
Natural –
Human –
Capital –
Look at the alternative prices for slices of cheese pizza and answer the following:
1. How many slices are consumers willing to buy at $2.50?
2. What problem does this create?
3. How much would the surplus be at $2.00?
4. Explain how you determined the amount of surplus.
5. What would happen if the price is set at $1.00?
6. How many slices are the pizza owners willing and able to supply at $1.00?
7. At $1.00, how many slices are consumers willing and able to buy?
8. How could this shortage be eliminated? Explain.
9. A surplus exists at $2.50 per slice and a shortage exists at $1.00 per slice. How much
could pizza owners charge for a slice of pizza without causing a shortage or a surplus?
Explain.
5.01 – Those Golden Jeans Activity (page 3)
Part III.
You are now going to apply what you have learned to blue jeans. Using the websites provided,
answer the following:
o Find an example of a natural resource.
o Find an example of a human resource.
o Find an example of a capital resource.
Activity 2 – Market Schedule for Blue Jeans
$60
Price
$50
$40
$30
$20
20
40
60
80
Quantity
100
120
5.01 – Those Golden Jeans Activity (page 4)
Part III (continued)
What is the market clearing price or equilibrium for blue jeans?
Explain why this is the equilibrium price.
At what price would there be a shortage?
Why would there be a shortage?
At what prices would surplus occur?
BF10 Principles of Business and Finance
Summer 2016
212
5.01 Those Golden Jeans Lesson Plan
5.01 Those Golden Jeans Lesson Plan.pdf
Adopted from: http://www.econedlink.org/lessons/index.php?lid=557&type=student
5.01- Key Briefing: Economics Concepts and Activities
Define economics.
The study of how to meet unlimited, competing wants with limited resources
Describe two basic types of wants.
 Economic wants: Desires for items that can only be obtained by spending money.
 Noneconomic wants: Desires for things that can be obtained without money (e.g., fresh
air and sunshine).
Discuss the characteristics of wants.
 Unlimited: Everyone always has them. That includes individuals, businesses, and
governments.
 Changeable: Wants change. Think of things that children want vs. what teens wants vs.
what adults want vs. what senior citizens want.
 Competing: Everyone must choose which wants to satisfy at any one time because
resources are limited. We don’t have enough resources to satisfy all needs at the same
time.
Define and describe resources in economics.
Any items that can be used to produce goods and services. Categories:
 Natural resources: Items that are found in nature that are used to produce goods and
services. Examples include trees, air, and land.
 Human resources: People. In economics, they are valued for the physical and mental
work that they do to produce goods and services. They include anyone who works.
 Capital goods: All of the manufactured or constructed items that are used to produce
goods and services (e.g., buildings, equipment, transportation systems).
BF10 Principles of Business and Finance
Summer 2016
213
Discuss reasons for limited resources.
 Natural resources: There simply are not enough resources available to satisfy
everyone. We depend on the earth for practically all of our natural resources. As the
world’s population increases, there will be more and more people making use of those
resources. As a result, there will be fewer resources per person.
Some natural resources are difficult or costly to obtain. For example, wind power can be
difficult to capture when the wind isn’t blowing. Some developing countries lack the
technology to tap their natural resources. And finally, weather conditions and the
environment affect the supply of some natural resources.
 Human resources: Only some of the world’s people are willing and able to work. Others,
especially those who are young, disabled, or elderly, are not part of the workforce.
Many parts of the world experience worker shortages in such professions as nursing and
welding. This may be due to a lack of special training, or the people may not live in the
geographic region where the job opportunities exist.
 Capital resources: In some parts of the world, capital resources are limited due to a lack
of technology. In under-developed societies, people still use primitive hand tools rather
than mechanized machinery to produce goods and services. As a result, they produce
fewer goods and services than we do in our society and those that they produce are for
personal use rather than for capital goods.
What is scarcity?
This is the gap between unlimited wants for goods and services and limited resources.
Economics is sometimes called the study of scarcity. Goods and services are said to be
scarce, or limited, because not everyone can have everything s/he wants
The only ways to eliminate scarcity are to find unlimited resources or to limit human needs
and wants. Neither one can happen.
Discuss the fact that scarcity requires economic choices.
 Involves allocating resources: Resources must be directed to their best use.
 Involves economizing: The process of deciding which goods and services to purchase
or provide so that the most satisfaction can be obtained is known as economizing.
 Involves opportunity costs: When we economize, we decide how scarce resources will
be used. When people, governments, and businesses make decisions about allocating
their resources, they feel that they will gain more satisfaction from one choice rather than
from another. When a choice is made about the best use of resources, the next-best
alternative that is given up is called the opportunity cost of that choice. This is the
benefit that is lost from making one choice vs. another.
 Involves tradeoffs: This means that individuals, businesses, and governments must be
willing to give up all or a part of one thing to get something else. The trade-offs that
everyone is willing to accept should be based on the opportunity costs involved.
Explain that making economic choices involves economic questions.
To use scarce resources efficiently, all societies must answer three basic economic
questions:
 What to produce?
They must determine what and how many goods and services to produce. They must
BF10 Principles of Business and Finance
Summer 2016
214
decide how to allocate their limited resources between the production of capital goods
and consumer goods.
 How will products be produced?
Most goods and services can be produced in a variety of ways. Societies must decide the
best, most efficient ways to use their limited resources to produce products.
 How to allocate products?
Societies must determine how the goods and services will be divided among people.
They need to decide how individuals, businesses, and governments will share products.
Explain the relationship between economics and decision making.
The heart of economics is decision-making—choosing among alternatives. The objective of
studying economics is to prepare for effective decision-making and responsible citizenship in
society.
Describe major economic activities.
Today, people rely on others to provide them with at least some of the goods and services they
desire. As a result, goods, services and resources must move, or flow, from one person to
another. The following four economic activities make that movement possible.
 Consumption
This is the ultimate goal of all economic activity. It is the process or activity of using goods
and services. Anyone who used goods and services is a consumer. People consume
goods and services to satisfy their wants and desires.
 Production
For consumption to occur, goods and services must be produced. Individuals who make or
provide goods and services are called producers. They transform natural, human, and
capital resources into more valuable goods and services for consumers. Examples of
producers: hairstylists, clothing manufacturers, farmers
 Exchange
Resource owners—people and organizations who provide human resources, natural
resources, or capital goods for use in production—require some form of payment for the
use of their resources. Usually, this payment is in the form of money—wages, salaries,
profits for human resources; interest or rent for capital goods; etc.
After acquiring enough resources from resource owners, producers are able to produce
goods and services. Consumers make money payments to the producers for the goods and
services. This money payment is the price of the good or service.
Distribution
This is the process or activity by which income is divided among resource owners and
producers. Money received by resource owners and producers is known as income. Resource
owners use their money to buy more goods and services. Producers use their income to buy
more resources. Those receiving larger incomes are able to buy more goods, services, and
resources than those with lower incomes.
Resource owners must feel that their incomes are large enough so that they will continue to
supply resources. If they decided that their incomes weren’t sufficient, they may choose not to
share their resources with producers. This would cause production to cease. Likewise,
BF10 Principles of Business and Finance
Summer 2016
215
producers must receive enough income to continue making or providing goods and services. If
they decided their incomes weren’t sufficient, they might choose not to make goods and
services. In that case, consumption would cease. This results in a tug of war between resource
owners and producers over how to divide the income they receive from consumers. The manner
in which resource owners and producers divide their income depends on the type of economic
system that exists.
BF10 Principles of Business and Finance
Summer 2016
216
5.01- Key Briefing: Economics Concepts and Activities
Graphical Organizer (page 1)
Define economics.
The study of how to meet unlimited, competing wants with limited resources.
Describe two basic types of wants.
 Economic wants:
 Noneconomic wants:
Discuss the characteristics of wants.
 Unlimited:
 Changeable:
 Competing:
Define and describe resources in economics.
Any items that can be used to produce goods and services.
Categories:
 Natural resources:
 Human resources:
 Capital goods:
Discuss reasons for limited resources.
 Natural resources:
 Human resources:
 Capital resources:
BF10 Principles of Business and Finance
Summer 2016
217
5.01- Key Briefing: Economics Concepts and Activities
Graphical Organizer (page 2)
What is scarcity?
Discuss the fact that scarcity requires economic choices.
 Involves allocating resources:
 Involves economizing:
 Involves opportunity costs:
 Involves tradeoffs:
Explain that making economic choices involves economic questions.
To use scarce resources efficiently, all societies must answer three basic economic
questions:
 What to produce?
 How will products be produced?
 How to allocate products?
Explain the relationship between economics and decision making.
Describe major economic activities.
Today, people rely on others to provide them with at least some of the goods and services they
desire. As a result, goods, services and resources must move, or flow, from one person to
another. The following four economic activities make that movement possible.
 Consumption
 Production
 Exchange Resource owners
 Distribution
BF10 Principles of Business and Finance
Summer 2016
218
5.01 Economic Question Activity
The 3 Key Economic Questions every Society must answer:
As we have been learning, everyone is forced to deal with scarcity. We, as individuals, are
forced to deal with it. We, as families, are forced to deal with it. And we, as societies, as
countries, are forced to deal with it. The way we, as individuals, face it is through the choices we
make. Since all of us make different individual choices, it stands to reason that we all use
different methods, or reasoning, to arrive at those choices. Different societies & countries also
use different methods to arrive at their choices. Because of scarcity (not enough to go around
because of LIMITED resources), every nation is faced with The 3 Key Economic Questions
Every Society Must Ask:
●
●
●
What –goods & services should be produced?
“What to produce?” is an allocation question. All economic systems must determine how
to allocate productive resources in the form of land (natural resources/raw materials),
labor (work for which we earn pay) and capital (human - education & job training)
(physical – buildings, equipment & tools).
Who – consumes the goods & services produced in society?
“For whom?” is a public choice question. All economic systems must determine which
goods and services will be available for public use and which for private use.
How – should goods & services be produced?
“How to produce?” is an efficiency (the ability to do something or produce something
without wasting materials, time, or energy) question. All economic systems must
determine how goods and services will be produced.
In Column 1 list the three questions that each society must answer. In column 2
explain the question that must be answered.
Column #1
Column #2
123-
How do different economic systems respond to the 3 Key Economic questions? First of all, we
need to define exactly what an “Economic System” is:
● The institutional framework of formal and informal rules that a society uses to
determine
what to produce, how to produce and how to distribute goods and services.
Another, more popular term for economic system is economy. An economy, or economic
system, is the structural framework in which households, businesses, and governments
undertake the production and consumption decisions that allocate limited resources to satisfy
unlimited wants and needs.
Economic systems can be categorized according to who makes most of the decisions in
BF10 Principles of Business and Finance
Summer 2016
219
an economy. Most economies can generally categorized as one of two kinds:
● Market Economy
An economy that relies on a system of interdependent market prices to allocate
goods, services, and productive resources and to coordinate the diverse plans of
consumers and producers, all of them pursuing their own self-interest.
● Command Economy
An economy in which most economic issues of production and distribution are
resolved through central planning and control.
So, how do different economic systems respond to the three basic economic questions?
In a socialist or command system, the central authority determines what, how, and for whom
goods and services will be produced. A Mixed System incorporates elements of both command
and market systems in determining answers to the three questions. Mixed economies with
strong market components also include a public goods and services sector, just as command
economies like Cuba include a private goods and services sector.
●
●
In a market economy, most of the decisions in the economy about what to
produce, how to produce it and who receives it are made by individuals and
firms.
At the other end of the spectrum:
In a command economy, government officials make most of the decisions in
the economy about what to produce, how to produce it and who receives it.
Most economic systems also contain elements of tradition or repeating decisions in ways
made at an earlier time or by an earlier generation. Today, nearly all economies are actually
mixed, in that some economic decisions are made by individuals and private firms, but some are
also made by government officials, either through rules and regulations or through governmentowned firms.
The U.S. economy leans toward the market-oriented side of the spectrum. An economy
like Cuba or North Korea is near the command economy side of the spectrum. But the dividing
line between market and command economies in most nations is blurry rather than bright.
Market Economies (“Capitalism”)
Capitalism is undoubtedly at the top of any list of economic systems operating in the
modern world. This system is based on: (1) private property--private ownership of resources
and the means of production, (2) individual liberty--relative freedom on the part of the resource
owners to use their resources as they see fit, and (3) competitive markets--a system of relatively
competitive markets.
Under capitalism, governments establish the basic rules of the game and are
responsible for the production of public goods, but the vast majority of resource allocation
decisions are undertaken by individuals, as either consumers or producers. The United States is
one of the more noted examples of capitalism. However, most modern industrialized economies
of Europe, Asia, North America, and South America operate under capitalism.
Command Economies (“Socialism”)
In theory, socialism is the transition between capitalism and communism and is based
on: (1) government ownership of resources and the means of production, (2) worker control of
government, and (3) income distributed according to needs. As practiced in the real world,
socialism is an economic system based on (1) nationalized industries--government ownership
and control of key industries and (2) central planning--relatively detailed, but not
BF10 Principles of Business and Finance
Summer 2016
220
comprehensive, resource allocation decision making by the central government.
Under real world socialism, governments exert extensive control over resource allocation
decisions, primarily involving key industries such as transportation, energy production,
communication, and health care. While Sweden exemplifies modern socialism, several
European nations have practiced varying forms of socialism over the decades.
BF10 Principles of Business and Finance
Summer 2016
221
Command Economies (“Communism”)
In theory, communism is an economic system based on: (1) a classless society, (2)
common ownership of resources, (3) no government, and (4) income distributed according to
needs. As practiced in the real world, communism is an economic system based on (1)
government ownership--government ownership and control of most resources and the means of
production and (2) central planning--excruciatingly detailed and comprehensive resource
allocation decision making by the central government.
Under real world communism, governments undertake the vast majority of the resource
allocation decisions, with few decisions undertaken by individuals. The former Soviet Union was
the primary example of real world communism before if disbanded in the late 1980s. China,
Cuba, and a scattering of African nations continue to operate under various forms of
communism.
BF10 Principles of Business and Finance
Summer 2016
222
5.01 The 3 Key Economic Questions every society must answer:
Who? What? And How?
●
Who
______________________________________________________________________
____________________________________________________________________________
__
____________________________________________________________________________
__
●
What
_____________________________________________________________________
____________________________________________________________________________
__
____________________________________________________________________________
__
●
How
______________________________________________________________________
____________________________________________________________________________
__
____________________________________________________________________________
__
Economic System
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
Mixed System
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
In a Market Economy:
____________________________________________________________________________
__
BF10 Principles of Business and Finance
Summer 2016
223
____________________________________________________________________________
_
In a Command Economy:
____________________________________________________________________________
__
____________________________________________________________________________
__
Market Economies (“Capitalism”)
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
Command Economies (“Socialism”)
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
Command Economies (“Communism”)
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
____________________________________________________________________________
__
BF10 Principles of Business and Finance
Summer 2016
224
Unpacked Content
G) Types of economic systems
1) Define the following terms: economic system, traditional economic system, command
economic system, communism, and socialism
2) Describe the characteristics, strengths and weaknesses of:
a) Traditional economic systems
b) Communism
c) Socialism
d) Market economic system
3) The three economic questions
a) What to produce?
b) How to produce?
c) For whom to produce?
H) Private enterprise
1) Define the term private enterprise
2) Describe the characteristics, advantages and disadvantages of a private enterprise
system
I) Factors affecting a business’s profit
1) Define the following terms: profit, profit motive, income, expenses, cost of goods,
operating expenses, gross profit, and net profit
2) Profit
a) Calculation: Revenues-Expenses
b) Importance of profit
J) Business risk
1) Define the following terms: business risk, economic risks, natural risks, human risks,
pure risks, speculative risks, guarantees, and warranties (see key terms)
2) Managing risk:
a) Control risks
b) Transfer risks
c) Retain risks
d) Avoid risks
K) Competition
1) Define the following terms: competition, direct competition, indirect competition, price
competition, non price competition, monopoly, oligopoly, perfect competition, and
regulated monopolies (see key terms)
2) Government legislation affecting competition
a) Competition
b) Freedom of Choice
c) Private Property
d) Profit
Key Terms
Key Term
Business risk
Command
economic system
Definition
The possibility of loss (failure) or gain (success) inherent in conducting
business (EC LAP 3)
An economic system in which all or many of the means of production
and distribution are owned and controlled by the government. (EC LAP
17)
BF10 Principles of Business and Finance
Summer 2016
225
Communism
Competition
Cost of goods
Direct competition
Economic risks
Economic system
Expenses
Guarantee
Human risk
Income
Indirect
competition
Monopoly
Natural risks
Non-price
competition
Operating
expenses
Oligopoly
Perfect
competition
Price competition
Private enterprise
system
Profit
A command economic system in which the government controls the
economic system and does not allow private ownership of the means
of production and distribution (EC LAP 17)
The rivalry among two or more businesses to attract scarce customer
dollars (EC LAP 8)
The amount of money a business pays for the products it sells or for
the raw materials from which it produces goods to sell; the amount of
money a business pays for the products (or for any part of the
products) it sells. (EC LAP 2, FI LAP 5)
Rivalry between or among businesses that offer similar types of goods
or services. (EC LAP 8)
Risks that result from changes in overall business conditions.
The organized way in which a country handles its economic decisions
and solves its economic problems. (EC LAP 15, EC LAP 17)
Money spent or cost incurred in an organization's efforts to generate
revenue, representing the cost of doing business. (FI LAP 11, EI LAP
19)
A promise made to the consumer that a product’s purchase price will
be refunded if the product is not satisfactory (SE LAP 115)
Perils caused by human errors as well as the unpredictability of
customers, employees, or the work environment.
The money received by resource owners and by producers for
supplying goods and services to customers (EC LAP 2, EC LAP 6, EC
LAP 19, FI LAP 3, FI LAP 4, IM LAP 7, MP LAP 2)
Rivalry between or among businesses that offer dissimilar goods or
services. (EC LAP 8)
A type of market structure in which a market is controlled by one
supplier, and there are no substitute goods or services readily
available. (EC LAP 8, EC LAP 16, SE LAP 129)
Perils resulting from environmental causes.
A type of rivalry between or among businesses that involves factors
other than price (e.g., customer services, modern facilities, trained
personnel, and variety of products) (EC LAP 8)
All of the expenses involved in running a business. (EC LAP 2, FI LAP
4, FI LAP 5, FI LAP 6, PI LAP 3, QS LAP 38, QS LAP 44)
A market structure in which there are relatively few sellers, and industry
leaders usually determine prices. (EC LAP 8, PI LAP 3)
A market structure in which there are many businesses selling a lot of
identical products for about the same price to many buyers; also known
as pure competition. (EC LAP 8, EI LAP 15)
A type of rivalry between or among businesses that focuses on the use
of price to attract scarce customer dollars. (EC LAP 8)
An economic system in which individuals and groups, rather than
government, own or control the means of production–the human and
natural resources and capital goods used to produce goods and
services. Also known as free market economy, private profit system,
market system, capitalistic system, or free enterprise system (BL LAP
1, EC LAP 2, EC LAP 3, EC LAP 16, MK LAP 1, SE LAP 117)
Monetary reward a business owner receives for taking the risk involved
in investing in a business; income left once all expenses are paid. (BL
BF10 Principles of Business and Finance
Summer 2016
226
Profit motive
Pure risks
Regulated
monopoly
Socialism
Speculative risks
Traditional
economy
Warranty
LAP 2, EC LAP 2, EC LAP 3, EC LAP 12, EC LAP 14, EC LAP 15, EC
LAP 17, EC LAP 19, EI LAP 4, FI LAP 5, HR LAP 19, HR LAP 25, IM
LAP 7, MK LAP 1, MP LAP 2, OP LAP 5, PI LAP 3, SE LAP 130, SM
LAP 1)
The desire to make a profit which moves people to invest in business
(EC LAP 2, EC LAP 15)
The possibility of loss to a business without any possibility of gain.
Monopoly that the government allows to exist legally. (EC LAP 8)
A modified command economic system in which government owns the
basic means of production and allows private ownership of businesses
as well. (EC LAP 17)
Chances of loss that may result in loss, no change, or gain. (EC LAP 3,
FI LAP 8)
An economic system in which people produce only what they must
have in order to exist; all economic decisions are based on habit and
tradition. (EC LAP 17)
A promise made by the seller to the customer that the seller will repair
or replace a product that does not perform as expected. (EC LAP 3, FI
LAP 10, IM LAP 7, MP LAP 2, OP LAP 2, PM LAP 4, PP LAP 7, SE
LAP 115, SE LAP 119, SE LAP 130, SE LAP 131)
A promise to the purchaser that a product will be repaired or replaced if
it proves to be defective (PM LAP 7)
5.02 – Economic Systems World Fact Book Activity
Use the CIA’s online database, The World Fact Book,
https://www.cia.gov/library/publications/the-world-factbook/index.html, to study various features of
four unique countries (North Korea, Singapore, United States, and Zambia) and be able to
identify the economic system for each country. Fill in all data points about the four assigned
countries. If data is unavailable, write “N/A” in the box.
Government
Country Name
Expenditures
Education Expenditure
Economy
Rate
Military Expenditures
GDP (PPP)
Rate
GDP per Capita
Other Notable Facts
GDP Real Growth Rate
Labor Force by
Occupation
agriculture
industry + services
Unemployment Rate
Poverty Rate
BF10 Principles of Business and Finance
Summer 2016
227
Export Value
Import Value
Investment Rate
People
Population
Urban Population Rate
Life Expectancy Age
Fertility Rate
Literacy Rate
What supporting evidence did you find to help you label this country’s economic system?
BF10 Principles of Business and Finance
Summer 2016
228
5.02 – A Private Enterprise System
Directions: In a private enterprise system, businesses are owned by individuals instead of the
government. There are many entrepreneurs that started their business at an early age. Find an
entrepreneur in the United States that is younger than 25. Use your findings to complete the
chart below.
Name of the Entrepreneur
Provide a brief back story of the
entrepreneur
Name of the Business
Type of business
What is the entrepreneur’s monetary
worth?
Private Enterprise
What goods or services are produced?
How are the goods or services produced?
Who is the intended target market for
these goods and services?
Freedom in the Marketplace
What resources are needed for the
production of the goods or services?
How are the products or services
marketed?
Private Property
What type of property or equipment is
needed for this business?
Limited Government Control
Are there any government regulations or
mandates concerning this business?
Would there be any concerns to protect
citizens from any part of this business?
Competition
List two competitors of this business
Economic Freedoms
What economic freedoms did the
entrepreneur have when starting this
business?
What limits to freedom may this business
experience or has experienced?
BF10 Principles of Business and Finance
Summer 2016
229
BF10 Principles of Business and Finance
Summer 2016
230
5.02 – Just WHAT is PROFIT? Activity
Identify factors affecting a business’s profit
Read the article, Just What is Profit, located at http://www.entre-ed.org/_teach/profit.htm to
complete this worksheet?
What is a misunderstanding about profit?
Complete this sentence. The higher the risk,
.
Define the following terms:
Return on investment –
Fixed costs –
Examples:
Variable costs Examples:
Overhead Markup Margin -
Write the formula for profit.
What decisions can affect profit?
BF10 Principles of Business and Finance
Summer 2016
231
5.02 – Let’s Practice Making Profit
This is the story of Goodies Gift Shop in its third year of operation in Small Town USA. Amelia
Goodies, the owner, runs the shop with 4 full time employees, 2 part timers and herself. Her
sales last year were $500,000 and her profit was $20,000 after taxes. If her balance sheet
shows a net worth of $100,000 can you tell us what her return on investment was last year?
Balance Sheet (Year 2)
Current Assets
Cash
10,000
Accounts Receivable
15,000
Inventory
200,000
Property and Equipment
100,000
Total Assets
Liabilities
Accounts Payable
80,000
Loan Balance
145,000
Owner’s Equity
100,000
Total Liabilities and Equity
325,000
325,000
This year Amelia has projected sales of $600,000 with a margin of $250,000. She has budgeted
the following overhead:
Owner Salary
Employee Wages
Rent
Advertising
Supplies
Telephone
Other utilities
Insurance
Payroll Taxes
Maintenance
Legal and other professional
fees
Miscellaneous
Interest on Loan
Total Overhead Expenses
35,000
100,000
10,000
4,200
1,000
1,000
600
2,000
30,000
3.700
500
2,000
10,000
200,000
If taxes are 20% of Net Income, what is the planned profit for the year?
BF10 Principles of Business and Finance
Summer 2016
232
5.02 – Let’s Practice Making Profit
EFFECTS ON PROFIT
The day-to-day decisions for the gift shop and the level of business Amelia is able to maintain
will affect this budget, resulting in many variations of the plan. What are the effects the following
issues would have on profit?
1. The employees demand a 10% raise.
2. The lease is up on the building and the owner would like to sell her the building for $150,000
or increase the rent to $15,000.
3. Amelia is considering adding another full time employee for an annual cost of $20,000.
4. Insurance coverage is too low and she needs to double it.
5. There are new opportunities to advertise in connection with community events that would
expand her advertising budget.
6. She needs to buy a computer to improve her record keeping systems.
7. Shoplifting losses force her to increase her markup an extra 5%.
8. Sales in the first six months have been 10% below expectations.
9. Her daughter "borrows" money from the register and does not repay it.
10. She is considering buying a used van for $10,000 and offering free delivery services to her
customers.
5.02 Factors Affecting Business Risks
Directions: Review the Factors Affecting Business Risks movie (or PowerPoint) to fill in the
blanks to the following information.
Identify Business Risks
Define Risk:
Risk Management:
Business Risk:
Speculative Risk:
Examples:
Pure risk:
BF10 Principles of Business and Finance
Summer 2016
233
Economic risk:
Examples:
Natural risk:
Examples:
Human risk:
Examples:
BF10 Principles of Business and Finance
Summer 2016
234
5.02 Factors Affecting Business Risks
Methods of dealing with business risks:
Risk reduction:
• Design
accident or fire.
• Educate
• Check and service safety
• Stress the limits of your company’s
• Implement ways to reduce
• Control employee
• Implement ways to reduce
Risk Transfer:
 Property insurance –
areas to reduce the chance of
on safe use of equipment.
on a regular basis.
.
.
.
.
Real property –
Personal property –
Business interruption insurance –

Casualty insurance –
Errors-and-omission insurance –
Product liability insurance –
Fidelity bonds –

Performance bonds –
Life insurance –

Worker’s Compensation –
Risk Retention –
Emergency Planning –
Avoidance –
BF10 Principles of Business and Finance
Summer 2016
235
5.02 Factors Affecting Business Risks
Classify each of the following situations according to the risk it represents – economic human,
or natural.
1. Basketball shoes endorsed by professional players are no longer
trendy among teenagers
2. A high unemployment rate causes a downturn in the retail sales for
the year.
3. Employees at a local restaurant improperly cook hamburger
leading to customers being hospitalized.
4. Hurricane Floyd led to increased losses for insurance companies.
5. Because of a flu epidemic, a local school district must employee
additional substitutes
6. Faulty wiring done by an electrician leads to an apartment fire.
7. Poor employee cash register training causes some customers to
leave the store because of the long lines.
8. The National Football League goes on strike causing the
cancellation of several games.
9. A local manufacturer has to pay higher wages because there is a
lack of skilled apprentices in the community.
10. High gasoline prices resulted in lower attendance on the South
Carolina beaches.
Each of the examples below fall into one of these categories. Assume that you are the
entrepreneur in each instance, and decide which form of risk management is being used. Write
your answers in the appropriate blanks. Determine whether the risk is avoidance, reduction,
transfer, or retention.
1. You hold employee meetings to discuss ways of reducing
accidents.
2. You purchase fire insurance.
3. You choose not to carry a line of products that appears to be
especially easy to shoplift.
4. You move your store from an isolated corner to a busy mall.
5. You bond your employees who handle cash.
6. When it rains, you place rubber mats in the entryways of your
business.
7. You provide your employees with safety gear and see that it is
used routinely and properly.
8. When it rains, you lace the nonskid floor mats in the entryways of
your business.
9. You put flood lamps at each exterior corner of the store.
10. You have a silent alarm system installed that signals the nearest
policy station.
BF10 Principles of Business and Finance
Summer 2016
236
Unpacked Content
L) Explain the role of business in society (EC:070, EC LAP 20) (CS)
1) Define the following terms: social responsibility, producers, raw-goods producers,
manufacturers, builders, trade industries, retailers, wholesalers, and service businesses.
2) Categories of social responsibility:
a) Economic Responsibilities- Companies need to make sure that the company itself if
profitable.
b) Legal Responsibility- Requirements placed on company by law.
c) Ethical Responsibility- Corporation leadership core mission aligns to their actions.
d) Philanthropic Responsibilities- Going above and beyond ethical responsibility making
an effort to benefit society.
M) Describe types of business activities (EC:071, EC LAP 19) (CS)
1) Define the following terms: business, accounting, customer relations, finance, human
resources management, information management, management, marketing, operations,
and production.
2) Primary business activities
a) Financial Analysis
b) Human Resources Management
c) Information Management
d) Marketing
e) Operations Management
f) Strategic Management
N) Explain the nature of business ethics (EC:106, EC LAP 21) (SP)
1) Distinguish between ethics and regulations.
2) Discuss the need for business ethics.
O) Describe factors that affect the business environment (EC:105, EC LAP 26) (SP)
1) Internal factors affecting the business environment.
2) External factors affecting business environments.
3) Discuss reasons that the business environment can be affected by external factors.
4) Ethical factors that affect the business environment.
5) Cultural factors that affect the business environment.
6) Socio-political factors that affect the business environment.
7) Economic factors that affect the business environment.
P) Discuss the global environment in which businesses operate (EC:104, EC LAP 22) (SP)
1) The impact of globalization on businesses
2) Factors driving the existence of a global business environment
3) Forces that maintain differences between countries/regions
4) Reasons that businesses go abroad
5) Ways in which businesses can enter a foreign market.
Q) Explain how organizations adapt to today’s markets (EC:107, EC LAP 25) (SP)
1) Forces that are driving market changes
a) Globalization
b) Consumer demands
c) Spending trends
d) Industry structure changes
2) Discuss management processes that aid adaptation to market conditions
a) Proactive management
b) Competitive aggression
c) Innovative management
d) Organizational learning
e) Market orientation
BF10 Principles of Business and Finance
Summer 2016
237
f) Slack resources
R) Explain the organizational design of businesses (EC:103, EC LAP 23) (SP)
1) Explain principles of organizational design.
2) Types of organizational structures that businesses use:
a) Functional structures
(i) Advantages
(ii) Disadvantages
b) Divisional structures
(i) Advantages
(ii) Disadvantages
c) Matrix structures
(i) Advantages
(ii) Disadvantages
d) Lateral relations
(i) Advantages
(ii) Disadvantages
Key Terms
Key Term
Accounting
Authority
Builders
Business
Business ethics
Competitive aggression
Consumer demands
Customer Relations
Ethics
Finance
Globalization
Human Resources
Management
Definition
The process of gathering, recording, organizing, and reporting
financial data (FI LAP 9)
Power to influence or control the opinions or behavior of others.
(HR LAP 36, QS LAP 10)
A type of producer that constructs roads, bridges, buildings, or
houses. (EC LAP 20)
An organized effort to produce and/or distribute goods and
services. (EC LAP 19)
The basic principles that govern a business’s actions (EC LAP
21)
A negotiating style in which one or both parties view the
negotiation as a game-like challenge or a rivalry; one or both
parties consider only their interests to achieve a desired
outcome. (EI LAP 8, QS LAP 3)
Manner in which individuals act that determines what they buy
and sell (CD LAP 2)
All the activities a business engages in to interact with its
customers (CR LAP 1)
The basic principles that govern your behavior (EC LAP 21, EI
LAP 4, EI LAP 16, EI LAP 21, HR LAP 19, MN LAP 44, QS LAP
8, SE LAP 117, SE LAP 129)
The process of obtaining funds and using them to achieve the
goals of the business (PD LAP 15, SM LAP 1)
The rapid and unimpeded flow of capital, labor, and ideas across
national borders (EC LAP 4, EC LAP 22, EC LAP 25, EC LAP
26, EC LAP 29, EI LAP 11, HR LAP 35, KM LAP 1)
The process of planning, staffing, leading, and organizing the
employees of the business. (EC LAP 19, HR LAP 35)
BF10 Principles of Business and Finance
Summer 2016
238
Information
Management
Innovative management
Line authority
Line of command
Management
Manufacturers
Market orientation
Marketing
Operations
Organizational learning
Proactive management
Producers
Production
Raw-goods producers
Regulations
Responsibility
Retailers
Service businesses
Slack resources
The process of accessing, processing, maintaining, evaluating,
and disseminating knowledge, facts, or data for the purpose of
assisting business decision making. (NF LAP 3)
A style of management that is more participative and facilitative
than traditional, controlling management (EC LAP 25)
Formal, direct authority that affects a business’s day-to-day
operations (EC LAP 23)
The flow of authority within an organization; also called line of
command (EC LAP 23)
The process of coordinating resources in order to accomplish an
organization's goals (Career Opps in BMA, HR LAP 36, SM LAP
1)
A type of producer that changes the shapes or forms of materials
so that they will be useful to customers (EC LAP 13, EC LAP 20,
FI LAP 3, OP LAP 2, SE LAP 117)
A strong focus on meeting customer needs and wants (EC LAP
25)
The process of planning and executing the conception, pricing,
promotion, and distribution of ideas, goods, and services to
create exchanges that satisfy individual and organizational
objectives (EC LAP 13)
The day-to-day activities for continued business functioning. (OP
LAP 3, SM LAP 1)
A concept that refers to a firm’s ability to accept and respond to
change appropriately, becoming as effective and efficient as it
can be (EC LAP 25)
A style of management that involves anticipating and planning in
advance for change, rather than simply reacting to outside
events when they occur (EC LAP 25)
The people who make or provide goods and services. (CM LAP
1, CM LAP 2, EC LAP 6, EC LAP 10, EC LAP 12, EC LAP 13,
EC LAP 14, EC LAP 17, EC LAP 20, MK LAP 4, SE LAP 117)
The economic process or activity of producing goods and
services. (EC LAP 6, EC LAP 14, EC LAP 19, IM LAP 9)
A type of producer that provides goods in their natural state. (EC
LAP 20)
An established set of rules (QS LAP 40)
Fulfilling one’s obligations in a dependable, reliable manner. (EI
LAP 16, QS LAP 8)
The duty to get the job done (EC LAP 23)
A business that buys consumer goods or services and sells them
to the ultimate consumer (CM LAP 1, CM LAP 2, EC LAP 13, EC
LAP 20, FI LAP 3, IM LAP 9, OP LAP 2, SE LAP 117, SE LAP
119)
A type of business that performs intangible activities that satisfy
the wants of consumers or industrial users. (EC LAP 18, EC LAP
20, FI LAP 3, OP LAP 3)
Resources above and beyond what are needed to operate an
organization (EC LAP 25)
BF10 Principles of Business and Finance
Summer 2016
239
Social responsibility
Span of control
Staff authority
Trade industries
Wholesalers
The duty of business to contribute to the well-being of society
(EC LAP 20, EC LAP 21, EC LAP 26)
The measurement of how many workers are supervised by one
manager (EC LAP 23)
Advisory authority, often without the ability to enforce or take
action (EC LAP 23)
Businesses that buy and sell goods to others; retailers and
wholesalers. (EC LAP 20)
Intermediaries who help to move goods between producers and
retailers by buying goods from producers and selling them to
retailers. (CM LAP 1, CM LAP 2, EC LAP 13, EC LAP 20, HR
LAP 19, IM LAP 9, OP LAP 2, SE LAP 117)
5.03 – Different Forms of Social Responsibility
Part I. All businesses have a level of social responsibility, whether it be to employees, the
company itself, the community or to customers. Using the list of businesses provided, choose
four businesses to research. Determine how each business demonstrates social responsibility.
Record your answers in the table provided.
Social Responsibility by Companies
Company Name
How is the company socially responsible?
Part II. In your own words, write a paragraph stating which business has the best form of
social responsibility. This should be written as your opinion and addressing the four businesses
that you researched. Use facts from the research to support your answer. Submit the
paragraph per the teacher’s instructions.
Part III. If you were starting a company, what would be included in your social responsibility
statement?
BF10 Principles of Business and Finance
Summer 2016
240
5.03 – Great Examples of Socially Responsible Businesses*
Adidas
Apple
Ben & Jerry’s
BMW
Bombardier, Inc.
Burt’s Bees
Cisco Systems, Inc.
Colgate-Palmolive
Daimler (Mercedes-Benz)
Dell Inc.
Ecomagination: GE
Ford Motor Company
GAP Inc
General Electric Company
Gildan Activewear
Google
Intel Corp.
International Business Machines, Corp
(IBM)
Kellogg Company
Kenneth Cole
LEGO Group
LinkedIn
McDonald’s
Method (cleaning product)
Microsoft
Nokia Corp
Pedigree
People Water
Pepsico
Phillips Electronics
Sony Corporation
Starbucks Corporation
Surveymonkey
The Hersey Company
The Walt Disney Company
Toms shoes
United Parcel Services Inc
Verizon
Volkswagen
Whole Foods
Zappos
BF10 Principles of Business and Finance
Summer 2016
241
*This listing can be modified to fit the needs of the individual teacher and the assignment.
BF10 Principles of Business and Finance
Summer 2016
210
5.03 –Business in Society Activity
Directions: Describe in your own words the following four terms and provide an example of
each.
Distribution
Type of
Medium
Commodity
Description
Description
Examples
Examples
Retailer
Service
Wholesaler
Good
BF10 Principles of Business and Finance
Summer 2016
211
Key Briefing- 5.03 Describe Types of Business Activities
What is a business?
An entity with goals that can be financial or tied to a particular mission
 A business that operates for profit makes money to fulfill financial goals.
 A nonprofit business makes money to fulfill a specific mission or undertaking. The money
it makes goes to support that mission.
 Both for-profit and nonprofit businesses are organized efforts to produce and/or distribute
goods, services, or ideas.
What does a business need to accomplish?
 Obtain necessary resources
 Produce/provide goods and services
 Market/sell those goods and services
 Store/retrieve information effectively
 Plan for the future
To get everything done, businesses involve themselves in:
 Financial analysis
 Human resources management
 Information management
 Marketing
 Operations management
 Strategic management
These primary business activities are the main things businesses do to stay in
business.
What are types of business activities?
 Financial analysis is the process of planning, maintaining, monitoring, controlling, and
reporting the use of financial resources. It includes finance and accounting.
o Businesses need money to make money, and finance activities help them obtain that
money.
 They need money for land, equipment, supplies, employees, and overhead
expenses.
 They need money for whatever it takes to run the business.
 They get this money from venture capital, debt, and equity.
 Venture capital is the money “angel” investors put into start-up businesses. The
purpose is to get those start-up businesses off the ground. Investors look for
long-term growth in return for their risky investment.
 Using debt to finance a project involves issuing bonds or taking out loans that
require principal and interest repayment over time.
 Equity (what the business owns or controls minus debt) is used when
businesses sell shares of stock, company real estate, or other business assets
to benefit a particular undertaking.
 Whatever finance method a business chooses, obtaining funds provides an important
way to accomplish business goals.
 Financial analysis is also about keeping accurate and useful financial records—and
analyzing and interpreting the recorded information. These activities form the basis of
accounting.
BF10 Principles of Business and Finance
Summer 2016
212
o
o
By accounting for all expenses, and comparing expenses to income, businesses can
make judgments and predictions about their own financial status.
They can work toward:
 Being able to pay their bills
 Being able to make a healthy profit
 Human resources management is the process of planning, staffing, leading, and
organizing employees.
o Every business needs people to accomplish the tasks intended to meet business
objectives.
o Without employees, businesses would have difficulty operating.
o Although specific robotic machines can “replace” employees in certain manufacturing
situations.
o Most businesses do not have machines that can perform job tasks as well as humans
can.
o Most businesses must hire people to do the job.
o All employees of a business fall under the label of human resources.
o Besides “regular” employees, businesses usually require supervisors, managers, and
executives.
o Human resources management covers everything the business needs in this regard.
o Human resources management involves:
 Planning for organizational changes
 Recruiting appropriate employees
 Selecting the “right” people to do the job
 Orienting new employees to their jobs
 Training employees in policies and procedures
 Evaluating employee performance
 Facilitating employee compensation
 Human resources management takes care of the responsibilities associated with
having employees and makes the business a fair and inviting place to work
 Information management is the process of coordinating the resources pertaining to
business knowledge, facts, or data.
o Each business should ensure that valuable information is available when and how it is
needed.
o This will avoid the uncomfortable (and unprofitable) situation in which vital business
information has been discarded or is unable to be retrieved.
o Businesses should have a system for:
 Identifying necessary information—includes knowing which facts the business will
need to use in the future
 Determining how that information should be presented, viewed, or accessed
 Information can be viewed in formats such as reports, graphs, or spreadsheets.
 Format depends on how it is going to be used.
o Providing appropriate access to the information
 To access information, an employee could just walk to a file cabinet and pull out a
client file.
 Or, the employee can do something complex, such as run an advanced query on a
company database.
 Situations in which having the right information at the right time can be critical to the
success of a business include:
BF10 Principles of Business and Finance
Summer 2016
213


o
o
When an airline needs to know who is flying on a particular airplane
When a law enforcement officer needs to know if a specific person is a risk to
the community
 When a board of directors needs to know the profits from last quarter
 When a sales representative needs to know if a product requested by a
customer is available
All of these things can be handled with technology, but how technology is used to
manage information has changed—and will change—over time.
Information management is not as much about pinning down the perfect technology for
the task as it is about making sure that a reliable system is in place, so the business
can make the best use of its information.
 Marketing is the process of creating, communicating, and delivering value to customers
and managing customer relationships in ways that benefit the organization and its
stakeholders.
o At first glance, marketing is simple: A good or service that is ready for sale is marketed
to potential customers so they can buy it. But, long before a product is ready for sale,
marketing is involved in the process of preparation.
 Marketing is present when the product idea is conceived.
 Marketing is present during the product’s design and creation.
 Marketing is actually involved in everything related to fulfilling a customer’s product
needs.
o Marketing is put into action with activities such as:
 Locating potential customers by determining who will benefit from the product
 Pricing the product appropriately by finding out what customers are willing to pay
 Promoting the product to potential customers by communicating product benefits
 Getting the product into customers’ hands by completing sales transactions
o To accomplish these four things, an office-supply store would:
 Identify local offices and businesspeople who should know about the store and what
it has to offer
 Conduct research, surveying the profit opportunity in its area
 Investigate what its competitors are doing—and how customers are responding to
their prices
 Price its products slightly higher or lower, depending on its findings
 Make a point of advertising the benefits of popular products it sells
 Let potential customers know why products at this store are better than products at
other stores
 Make the purchase process easy and seamless—by providing layaway, credit, or
whatever customers might need to purchase the product immediately.
 Operations is the process of planning, controlling, and monitoring the day-to-day activities
required for continued business functioning.
o This includes such activities as:
 Production
 Quality concerns
 Safety and security
 Purchasing
 Inventory management
 Project planning
 Expense control
BF10 Principles of Business and Finance
Summer 2016
214
o
o
o
 Property and equipment maintenance
Every business needs to produce or provide its product, whether that product is a good
or a service.
One aspect of operations is production
 To produce a good, a business obtains supplies for manufacturing, “makes” the
good, and then distributes the good to a warehouse or other holding facility.
 To provide a service, a business obtains the means for providing the service, and
then provides the service to its customers.
Operations also includes establishing the best processes for production and quality
control
 Need to vary processes to reduce unnecessary procedures and wasted materials.
 Need to provide easy-to-follow instructions to increase the likelihood that employees
will perform as needed
 Need to improve processes regularly to keep them up to date
 This leads businesses to engage in continuous process improvement by:
 Regularly evaluating how well the process works
 Finding its error points
 Correcting the errors as efficiently as possible
 Strategic management is the process of planning, controlling, and organizing an
organization or department.
o Businesses need to know where they are in the “big picture.”
o Just having the money, hiring the workers, making/providing the product, and
marketing/selling the product are not enough.
o They need to know:
 Are they headed in the right direction?
 Are they likely to experience long-term success?
o These questions can be answered by analyzing the strategic position of the company—
and managing that position effectively.
 Need to establish the organization’s capabilities
 Need to determine how they can succeed in the long term and what will put them in
reach of their goals
 Need to do what they’re capable of doing to reach the goals they’ve set for
themselves
o Strategic management involves long-term planning and organizing for future success.
 Long-term planning involves creating the mission and vision of the business,
determining its goals, and selecting strategies to support those goals.
 Long-term planning shows how the business intends to accomplish this.
 Organizing for future success includes determining what will be required to reach
the long-term goals of the business.
 “Organizing” spells out how the business should be set up to meet its objectives.
 If the business plan changes, then strategies and tactics will also likely change.
How are business activities interrelated or dependent on one another and work together?
 If a business (or a particular business project) changes in some way, the primary business
activities must adjust in response.
 If one business activity has to change, the others have to change, too.
Situation demonstrating interrelationship of primary business activities
 Company ABC is a large business that makes and sells soft drinks to bottling companies.
BF10 Principles of Business and Finance
Summer 2016
215
 Since the company wants to gain the strategic position of the most unique beverage
manufacturer in the industry, it has devised a plan for offering a new flavor of soft drink—
feijoa.
o About the feijoa:
 A subtropical fruit, the feijoa grows primarily in South America, Australia, New
Zealand, and California.
 Its aromatic flavor has been likened to that of the guava, but nothing can really
describe the feijoa’s unique taste.
 The company feels that a feijoa-flavored soft drink will have an edge over “boring” lemonlime soft drinks—and that the new product will bring in significant revenues.
 Before the revenues come flowing in, the company needs to obtain money to get the project
started.
o As part of its financial analysis, Company ABC determines that the best way to bring in
the necessary funds is through debt financing.
o The company feels certain that it can easily obtain a low-interest bank loan since it has
an excellent credit rating.
o If the new product is a “winner,” the company will be able to repay the entire loan in a
short period of time.
 All the company needs to do is make sure that the borrowed amount will cover the project’s
expenses—including things such as:
o Salaries for employees in research and development
 Through its human resources professionals, the company hires the most qualified
research-and-development experts it can find.
 It offers these employees competitive pay for their expertise, so that the company
can rely on the end result of their work.
o Advertising for the new product
 From the marketing side of things, the company plans and develops suitable
advertising.
 The advertising will let people know about the new product and when it will be
introduced to the public.
o Tools and equipment necessary for production
 The company examines its operations—including tools and processes involved in
producing the new soft drink.
 Although the company has purchased the best tools and has fine-tuned the
production process over time, there remains one error that needs to be addressed.
 The company does not have an appropriate system for storing and retrieving the
information involved in researching and developing this product, so it makes revision of its
information-management system. A revision means the entire plan changes (if even
slightly).
 Puts a strain on the financing available for the project, and causes every business activity to
adjust
o In human resources management, the company must scale back the number of
employees it hires to perform the product’s research and development.
o In marketing, the company must limit the number of advertisements it places to
introduce the product.
o In strategic management, the company must align the change with its long-term goals.
o In financial analysis, the company must determine if there is a way to avoid similar
financing shortages in the future.
BF10 Principles of Business and Finance
Summer 2016
216
Description of special situations
 When a business changes—internally or externally—it must adjust its primary business
activities to suit its new situation.
o Example: If during strategic management a business decides that internal structure
changes will help it be more effective in reaching its goals, human resources
management and operations management will be affected instantly.
o New job descriptions, new tasks, and possibly new processes will be involved.
o New methods of managing information may be required.
o With financial analysis, the business will provide the financial means for making the
change.
o Through marketing, the business will let the public know that the company is improving
for the benefit of its customers.
 External business changes affect the primary business activities, too.
o Consider the effects of a merger between two large businesses.
o The goals of the two businesses change as the two companies become one.
o This means that the strategic management of the two businesses combines.
o The same thing happens with marketing, information management, human resources
management, and financial analysis.
o What each business did before changes into what the single, united business does
now.
There are a few circumstances in which business activities are performed in an “out of the
ordinary” manner—although with the technological progress, these situations are becoming
much more common.
 Outsourcing
o Outsourcing involves using outside organizations or consultants to perform one or more
of the primary business activities.
o When a business needs human resources management, it can hire an outside firm to
perform the activity without hiring in-house employees for that purpose.
 Offering virtual services
o A virtual service is one that is offered through a medium of communication (such as the
Internet), rather than in person.
o Example: Online banking—Instead of expecting customers to drive to your banking
business, you can provide a way to complete their banking tasks through the Internet.
o The benefits of virtual services include speed and efficiency.
BF10 Principles of Business and Finance
Summer 2016
217
5.03 - Private Enterprise System
Directions: Brainstorm to create a list of benefits that you receive by living in a country in which
private enterprise is practiced. List advantages and disadvantages to each.
Benefit of Private Enterprise in
Advantage
Disadvantage
U.S.
BF10 Principles of Business and Finance
Summer 2016
218
5.03 - Business Ethics Case Studies
Directions for this assignment:
 This is a group activity. Teacher will place students in groups of 3 or 4. An ethical case
study will be assigned to each group. Students will assign roles to group members –
reader, recorder, and presenter.
 Each group is responsible for discussing their assigned case study and answering the
questions.
 Each group will present their case study, the answers, and their opinions on the case
study to the class.
 Each student will write a brief paragraph stating the overview and their opinion of each
case study presented.
The following is a list of case studies:
 Affirmative Action
 Discrimination in the Workplace
 Employee Absence
 Networking and JR
 Purchasing Ethics
 Substance Abuse
BF10 Principles of Business and Finance
Summer 2016
219
5.03 - Business Ethics Case Studies
Case Study: Affirmative Action
by Elaine E. Englehardt
Humanities/Philosophy
Peter is a vice president in a large corporation. As part of his duties, he supervises fifteen
managers; fourteen of these managers are men. Only one of the managers is a black man, and
one is a white female.
Peter is replacing one of the white, male managers. He has advertised the position both in
house and outside, as required by his company's hiring policies. After reviewing all of the
applications, he believes that Steve, an employee of the company for 12 years, is the most
qualified applicant. However, in the pool of applicants there are three qualified women and two
qualified black men. Morally what should Peter do?
Questions:
Is it fair to hire Steve, even though this will still mean that the managers will have definite gender
and race inequity?
Is it fair to Steve to hire someone less qualified to agree with Affirmative Action?
Should Peter give up and let the other manager’s vote on who should be hired?
Utah Valley State College 800 West University Parkway, Orem, UT 84058 (801) 863-INFO
Copyright © 2003 UVSC All Rights Reserved.
BF10 Principles of Business and Finance
Summer 2016
220
5.03 - Business Ethics Case Studies
Case Study: Discrimination in the Workplace
by Elaine E. Englehardt
Humanities/Philosophy
Marian, a top graduate from Loyola in Humanities, was hired by a major corporation into a
management position. Marian finished the corporation's management training program top in
her group, and is performing above the norm in her position. She is really enjoying her work.
As a black woman she feels isolated, as there are no other black women managers and few
women in her area. One night at a company party she heard a conversation between two of her
male co-workers and their supervisor. They were complaining to him about Marian's lack of
qualifications and her unpleasant personality. They cursed affirmative action regulations for
making the hiring of Marian necessary.
Marian is very upset and wants to quit.
Questions:
Should Marian quit?
Are her co-workers correct in their evaluation?
Should Marian confront the co-workers?
Should Marian file a discrimination suit?
Should Marian go to the supervisor?
What else could Marian do?
Utah Valley State College 800 West University Parkway, Orem, UT 84058 (801) 863-INFO
Copyright © 2003 UVSC All Rights Reserved
BF10 Principles of Business and Finance
Summer 2016
221
5.03 - Business Ethics Case Studies
Case Study: Employee Absence
by Stephen Adams
Graphics and Commercial Art
Joan, an employee of Great American Market, was warned about her excessive absenteeism
several times, both verbally and in writing. The written warning included notice that "further
violations will result in disciplinary actions," including suspension or discharge.
A short time after the written warning was issued, Joan called work to say she was not going to
be in because her babysitter had called in sick and she had to stay home and care for her
young child. Joan's supervisor, Sylvia, told her that she had already exceeded the allowed
number of absences and warned that if she did not report to work, she could be suspended.
When Joan did not report for her shift, Sylvia suspended her for fifteen days.
In a subsequent hearing, Joan argued that it was not her fault that the babysitter had canceled,
and protested that she had no other choice but to stay home. Sylvia pointed out that Joan had
not made a good faith effort to find an alternate babysitter, nor had she tried to swap shifts with
a co-worker. Furthermore, Sylvia said that the lack of a babysitter was not a justifiable excuse
for being absent.
Questions:
Was the suspension fair?
Did Sylvia act responsibly?
Should Joan be fired?
Should the babysitter be fired?
Was Sylvia fair in her actions?
Is there ever a solution for working mothers?
Should working fathers take turns staying home?
Utah Valley State College 800 West University Parkway, Orem, UT 84058 (801) 863-INFO
Copyright © 2003 UVSC All Rights Reserved.
5.03 - Business Ethics Case Studies
BF10 Principles of Business and Finance
Summer 2016
222
5.03 - Business Ethics Case Studies
Case Study: Networking and J.R.
by Doug Carter
Electronics Technology
The University needed to purchase a networking system. Tim pressed hard for the 3-COM
network which Tiddley endorsed and supported. C.G. made an excellent point that Novell was
the system used in the industry as a standard. When Tim learned that Tiddley could bid Novell,
he agreed and bids were let for Novell's Netware.
Three very high priced bids came back from companies C.G. had never heard of; Tiddley bid
$46,000 and BIG BYTE bid $20,000. Tim suggested that the low bid be thrown out as low bids
often are. C.G. was frustrated, claiming the hardware shouldn't cost more than $14,000 $15,000 at the most, proved it with ad prices, but Tiddley got the bid, this time through Cripple
Creek franchise's new salesman, Jim (J.R.'s son).
A clause in the bid required the equipment to be operational in thirty days. Three months later
the Tiddley installers contacted C.G. asking for help. C.G. found that Tiddley would have to
develop special drives. C.G. reported this to the CCVU purchasing agent who called Tiddley
Corporate Office (about the 30-day clause), they sent out 2 reps and fired the Cripple Creek
store manager on the spot. J.R. put his arm around the store manager, escorted him to CCVU
personnel office, and informed the personnel officer that Computer Services had a new
employee. The personnel officer questioned the hiring; he soon left the University. The former
Cripple Creek Tiddley franchise manager remained with the University. The system finally came
on line, but has had many problems during its operation.
Questions:
1. Does the information presented raise questions about J.R.'s ethical philosophy?
2. If so, who should be concerned?
3. Tim was apparently between a rock and a hard place. Should he have acted differently?
4. What has CCVU taught C.G. Farnsworth about ethics?
5. What should C.G. do?
6. What was the ethical thing for the personnel officer to do?
7. If you were a member of the CCVU faculty, what would you do?
BF10 Principles of Business and Finance
Summer 2016
223
5.03 - Business Ethics Case Studies
Case Study: Purchasing Ethics
by Doug Carter
Electronics Technology
J.R. accepted a position at Cripple Creek Vocational University and he and his family made a
permanent move. Soon, J.R. was promoted to Administrative Vice President, overseeing the
purchasing department of the University. His oldest son, Jim, got a good job in educational
equipment sales at Tiddley Computer Corporation in Fort Worth.
As Vice President, J.R. quickly saw the need for 4 to 5 computers in his office. Although CCVU
had a bidding policy, J.R. purchased Tiddley Corporation's computers direct from Tiddley for
about $3500 each, when IBM clones were selling for around $2000 and the clone had more
promising features than the Tiddley. Jim handled the sale and received a healthy commission
on the sale. If the purchase had gone through the normal bidding process, the TC model would
not have been selected. Tiddley's local Cripple Creek franchise dealer objected to Tiddley
Corporation that his protected franchise had been bypassed in the deal.
Questions:
Since J.R. was over the purchasing department and had final decision authority, should
purchasing have gone through the normal bidding routine?
Is it acceptable for a V.P. to bypass the normal routine to do business with a family member?
Was J.R.'s decision not to request bids an ethical choice?
What should the college purchasing agent do?
Should anyone else at CCVU have any interest in this activity?
Has Tiddley's Cripple Creek franchise owner been wronged?
Should Jim have made the sale? Received a commission?
Utah Valley State College 800 West University Parkway, Orem, UT 84058 (801) 863-INFO
Copyright © 2003 UVSC All Rights Reserved.
BF10 Principles of Business and Finance
Summer 2016
224
5.03 - Business Ethics Case Studies
Case Study: Substance Abuse
by Stephen Adams
Graphics and Commercial Art
Fred, a 17-year employee with Sam's Sauna, was fired for poor job performance and poor
attendance, after accruing five disciplinary penalties within a 12-month period under the
company's progressive disciplinary policy. A week later, Fred told his former supervisor that he
had a substance abuse problem.
Although there was no employee assistance program in place and the company had not been
aware of Fred's condition, their personnel director assisted Fred in obtaining treatment by
allowing him to continue receiving insurance benefits and approved his unemployment
insurance claim.
Fred subsequently requested reinstatement, maintaining that he had been rehabilitated since
his discharge and was fully capable of being a productive employee. He pointed to a letter
written by his treatment counselor, which said that his prognosis for leading a "clean, sober
lifestyle" was a big incentive for him. Fred pleaded for another chance, arguing that his past
problems resulted from drug addiction and that Sam's Saunas should have recognized and
provided treatment for the problem.
Sam's Saunas countered that Fred should have notified his supervisor of his drug problem, and
that everything possible had been done to help him receive treatment. Moreover, the company
stressed that the employee had been fired for poor performance and absenteeism. Use of the
progressive discipline policy had been necessary because the employee had committed a string
of offenses over the course of a year, including careless workmanship, distracting others,
wasting time, and disregarding safety rules.
Questions:
Should Fred be reinstated?
Was the company fair to Fred in helping him receive treatment?
Did the personnel director behave ethically toward Fred?
Did Fred act ethically for his company?
Would it be fair to other employees to reinstate Fred?
5.03 - How Organizations Adapt to Today’s Market
Directions: Choose a company from the Fortune 500 list (http://fortune.com/fortune500/)
Research the history of the company to answer the following questions.
1. What is the name of the business?
2. What type of business is this?
3. What changes have been made over the years to aid in the company’s success?
BF10 Principles of Business and Finance
Summer 2016
225
4. How can these changes be categorized (proactive management, innovative management,
organizational learning, competitive aggression, market orientation)? Explain your answer.
5. Did the company have success with every change made?
6. Does the company have a global component?
7. What resources are used to reach customers or potential customers?
8. Create a chart/timeline to show the businesses success with new products, mergers,
innovation, product improvement, etc).
BF10 Principles of Business and Finance
Summer 2016
226