Notes Entrepreneurship, lecture 1

Economic for business summary notes

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Entrepeneurship

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Hogeschool Rotterdam

Studiejaar: 2012/2013

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How does Macro Economic Environment affect the company?

Definition: The study of the economy as whole including topics such as inflation,

unemployment, and economic growth.

The major external and uncontrollable factors that influence a company decision making and

affect its performance and strategies. These factors include the PEST which is respectively

Political

Environmental

Social

Technological

For instance the Japanese tsunami caused a wide spread devastation across several

technological and manufacturing firms in Japan. This resulted in halt of production of

computer and automobile components, causing disruption to worldwide supply chains. This is

a firm example of the environmental factors which is uncontrollable and has a huge impact on

companies.

The consequence of the natural disaster has resulted in fewer productions of many Japanese

goods For instance the Nissan engine factory in Iwaki, located in the same area as Fukushima

nuclear plant does not have enough water, electricity and gas to operate. This resulted in

fewer components for General Motors in Louisana which had to temporarily shut down for

lack of Japanese made auto parts.

Even the United States is not immune for the disaster because about 35% of 787s and 20% of

777s aircrafts come from Japanese companies such as Mitsubishi Heavy industries and

Kawaski Heavy industries. This is the reality that a small uncontrollable factor could have a

ripple affect around the world. Japan manufactures 32% of the world’s cars and 74% of the

navigation systems that go in all cars.

What is Micro-economics? Basic definiton

The study of how households and firms make choices, how they interact in markets, and how

the government attempts to influence their choices.

Explain opportunity cost, scarcity why they are important in economics? Definition+examples and their importance.

Market System (Demand and supply) *(What are the most important features of MS)

Draw demand and supply curve it should be clear which one is going up

Done on paper

Explain with 4 examples the factors that fuel demand

Definition of Demand is the amount of a particular economic good or service that a consumer or group of consumers will want to purchase at a given price.

Example factors which fuel demand

Income (income dictates what consumer power is of each person)

Price (An increase in demand price goes down and if the price goes up there is decrease price)

Number of consumers (if they increase so will the demand)

Complement goods (An increase in demand of cars will also raise the demand for petrol)

Demand is usually fuelled by wants and desire of consumers in relation with income, price, fashion, complement goods e.

Consumer demand theory provides valuable insight into an understanding of market demand and forms a cornerstone of modern microeconomics. In particular, this theory analyses consumer behaviour, especially market purchases, based on the satisfaction of wants and needs that is the generated from the consumption of a good.

The increase or raise in demand occurs usually after extensive advertising campaign whereby desires are created. Therefore unwillingly the person is confronted emotionally and mentally with a new desire. Desire and wants are the fuelling factors behind demand and this has been proven scientifically by Sigmund Freud. Another historic figure in the development of this theory was Jeremy Bentham who engineered the first major advancement in the field of consumer demand. Bentham coined the term utility in reference to the statisfaction of wants and needs. He also developed the notion that people are motivated by the desire to maximize utility. Bentham firmly believed that utility was measurable, quantifiable characteristic of a person, much like height or weight.

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