Chapter 2: Economics: The Framework for Business

1. How does economics relate to business? Can an understanding of economics help business people succeed? If so how? Economics relates to business because it teaches business people how to make choices that can get their business the most revenue with the least amount of cost. The understanding of economics can help business people succeed, economics can teach you things like marginal cost and revenues and this is essential to an type of business. Economics can teach you statistics that if used properly can provide you with an upper hand against competition.

2. Compare and contrast microeconomics and macroeconomics. How do the 2 approaches interrelate? Use a specific example to explain.

Macroeconomics and Microeconomics are both dealing with economics but indifferent levels, Macroeconomics is the study of a country's overall economic issues and Microeconomics deals with economics on an individual consumer,families and individual businesses. They can affect how much you can purchase for your family and what is available for you to purchase for your family.

3. What are the fundamental elements of the free market economic system? How can businesses thrive within this system?

1. The rights to own a business and keep after-tax profits
2. The right to private property
3. The right to free choice
4. The right to fair competition
Free Market economies allows businesses to thrive by allowing owners to keep the profits, encouraging growth.

4. Describe the 4 degrees of competition within the free market system. Offer 2 to 3 examples of each type of competition by filling in the chart. Pure Competition: A market structure in which a very large number of firms sell a standardized product into which the is very easy in which the