Some concepts

A firm is an organization that transforms

resources (inputs) into products (outputs).
Firms are the primary producing units in a
market economy.
An entrepreneur is a person who
organizes, manages, and assumes the
risks of a firm, taking a new idea or a new
product and turning it into a successful
business.
Households are the consuming units in
an economy.

Business organisations
A business (also called a company,
enterprise or firm) is a legally recognized
organization designed to provide goods
and/or services to consumers.
Businesses are predominant in capitalist
economies, most being privately owned
and formed to earn profit that will increase
the wealth of its owners and grow the
business itself.

Business organisations
The owners and operators of a business
have as one of their main objectives the
receipt or generation of a financial return
in exchange for work and acceptance of
risk.
Notable exceptions include cooperative
enterprises and state-owned enterprises.
Businesses can also be formed not-for-profit
or be state-owned.

The Circular Flow of Economic

Activity
The circular flow of
economic activity
shows the
connections between
firms and households
in input and output
markets.

 Output, or product,
Payments flow in the
markets are the
opposite direction as
markets in which goods the physical flow of
and services are
resources, goods,
exchanged.
and services
(counterclockwise).
Input markets are the
markets in which
resourceslabor,
capital, and landused
to produce products,
are exchanged.

Input Markets
Input markets include:
The labor market, in which households supply work for
wages to firms that demand labor.

The capital market, in which households supply their

savings, for interest or for claims to future profits, to firms
that demand funds to buy capital goods.
The land market, in which households supply land or
other real property in exchange for rent.

ORGANISATION

organization
[awr-guh-nuh-zey-shuhn]
1.the act or process of organizing.
2.the state or manner of being organized.
3.something that is organized.
4.organic structure; composition: The organiz
ation of this painting isquite remarkable.
5.a group of persons organized for some end
or work; association:a nonprofit organization.

Basic forms of ownership

Two Sectors
The economy can be divided into two
sectors:
The Private Sector
The Public Sector

The Private Sector

Private individuals and firms that are
owned by private individuals
Forms of business ownership vary by
jurisdiction, there are several common
forms:
Sole proprietorship
Partnership
Corporation
Cooperative

Sole proprietorship
A sole proprietorship also known as a sole
trader, or simply proprietorship is a type
of business entity which is owned and run
by one individual and where there is no
legal distinction between the owner and
the business.
All profits and all losses accrue to the owner
(subject to taxation).
All assets of the business are owned by the
proprietor and all debts of the business are
their debts and they must pay them from
their personal resources.

This means that the owner has unlimited

liability. It is a "sole" proprietorship in the
sense that the owner has no partners
(partnership).
A sole proprietor may do business with a
trade name other than his or her legal
name.
This also allows the proprietor to open a
business account with banking institutions.

Partnership
A partnership is a type of business entity in
which partners (owners) share with each
other the profits or losses of the business.
Partnerships are often favoured over
corporations for taxation purposes, as the
partnership structure does not generally
incur a tax on profits before it is distributed
to the partners (i.e. there is no dividend tax
levied).

 However, depending on the partnership

structure and the jurisdiction in which it
operates, owners of a partnership may be
exposed to greater personal liability than
they would as a shareholder of a
corporation.

Corporation
A corporation is a legal entity separate
from the shareholders and employees.
In British tradition it is the term designating a
body corporate, where it can be either a
corporation sole (an office held by an
individual natural person, which is a legal
entity separate from that person) or a
corporation aggregate (involving more
persons).

 In American and, increasingly,

international usage, the term denotes a
body corporate formed to conduct
business.
Corporations exist as a product of corporate
law, and their rules balance the interests
of the management who operate the
corporation; creditors who loan it goods,
services or money;

 shareholders, typically in the secondary market, who

hold shares related to the original investment of
capital; the employees who contribute their labour;
and the clients they serve.
People work together in corporations to produce
value and generate income.
In modern times, corporations have become an
increasingly dominant part of economic life.
People rely on corporations for employment, for their
goods and services, for the value of the pensions, for
economic growth and cultural development.

Cooperative
A cooperative often referred to as a coop or coop) is defined by the
International Co-operative Alliances
Statement on the Co-operative Identity
as an autonomous association of persons
united voluntarily to meet their common
economic, social, and cultural needs and
aspirations through a jointly-owned and
democratically-controlled enterprise

It is a business organization owned and

operated by a group of individuals for their
mutual benefit.
A cooperative may also be defined as a
business owned and controlled equally by
the people who use its services or who
work at it.
Cooperative enterprises are the focus of
study in the field of cooperative
economics.

Also

Economic democracy
Franchising
Joint venture
Holding companies

Holding company
holding company is a company or firm that
owns other companies' outstanding stock.
It usually refers to a company which does
not produce goods or services itself, rather
its only purpose is owning shares of other
companies.
Holding companies allow the reduction of
risk for the owners and can allow the
ownership and control of a number of
different companies.

Economic democracy
Economic democracy is a socioeconomic
philosophy that suggests transfer of
decision-making authority from a small
minority of corporate shareholders to the
larger majority of public stakeholders.
While there is no single definition or
approach, all theories and real-world
examples of economic democracy are
based on a core set of fundamental
assumptions.

Proponents generally agree that modern

economic conditions tend to hinder or
prevent society from earning enough
income to purchase its output production.
Centralized corporate monopoly of common
resources typically forces conditions of
artificial scarcity upon the greater majority,
resulting in socio-economic imbalances
that restrict workers from access to
economic opportunity and diminish
consumer purchasing power.

Franchising
Franchising is the practice of using another
person's business model.
The franchisor grants the independent
operator the right to distribute its products,
techniques, and trademarks for a
percentage of gross monthly sales and a
royalty fee.

Various tangibles and intangibles such as

national or international advertising,
training, and other support services are
commonly made available by the
franchisor.
Agreements typically last from five to thirty
years, with premature cancellations or
terminations of most contracts bearing
serious consequences for franchisees.

Franchising has been around for many

centuries but did not come to prominence
until the 1930s in the United States, when
the establishment of electricity, vehicles,
and, in the 1950s, the Interstate Highway
system helped propel modern franchising,
most notably franchise-based food service
establishments.
According to the International Franchise
Association approximately 4% of all
businesses in the United States are
franchises.

Joint venture
A joint venture (often abbreviated JV) is an
entity formed between two or more parties
to undertake economic activity together.
The parties agree to create a new entity by
both contributing equity, and they then
share in the revenues, expenses, and
control of the enterprise.
The venture can be for one specific project
only, or a continuing business relationship
such as the Fuji Xerox joint venture.

This is in contrast to a strategic alliance,

which involves no equity stake by the
participants, and is a much less rigid
arrangement.
The phrase generally refers to the purpose
of the entity and not to a type of entity.
Therefore, a joint venture may be a
corporation, limited liability company,
partnership or other legal structure,
depending on a number of considerations
such as tax and civil liabilities.

The Public Sector

Made up of central government,
local government, and businesses
that are owned by government
In the last twenty years the number
of government-owned firms in the UK has
shrunk massively
Now, very few examples remain:
for instance, the Royal Mail

Private Sector Firms

One of the key differences is between:
Sole traders and partnerships
whose liability is unlimited
And
Private Limited and Public Limited
Companies, who have limited liability

Other Business Types

Co-operatives are owned by their staff,
who are members of the firm
Profits are shared
amongst the members
Losses too must be shared

Franchises
Many businesses today
are franchises
A business idea is licensed
to a franchisee
The owners of the brand receive
a license fee
The franchisee gains the right
to use the business brand

Not For Profit Businesses

Many charity-based business
organisations are run as not for profit
operations
They typically receive donations
or funds from groups or government
Any financial surplus is ploughed back into
the business
The organisation does not aim
to generate profits

Inflation
According to Parkin and Bade Inflation is
an upward movement in the average level
of prices. Its opposite is deflation, a
downward movement in the average level
of prices. The boundary between inflation
and deflation is price stability.

 Wage inflation is also called as demand

pull or excess demand inflation. This type
of inflation occurs when total demand for
goods and services in an economy
exceeds the supply of the same.

 Pricing Power Inflation is more often called

as administered price inflation. This type of
inflation occurs when the business houses
and industries decide to increase the price
of their respective goods and services to
increase their profit margins.

What is CPI?
CPI measures changes in the price level
of market basket of consumer goods and
services purchased by households

 The consumer Price Index market basket

is developed from detailed monthly
records kept by govt. officials who are
hired to track and record prices of
preselected items in stores. The important
role of CPI market basket is specifically to
measure inflation as experienced by
consumers in their day-to day living
expenses.