Below are some excerpts from The Economics of Business, an introductory macro and micro-economics textbook which I co-wrote and edited for McKinley College's online Associates degree program.
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excerpt 1 (from 'Real World Economics' section of Chapter 3)
Bette Nesmith Graham also faced a difficult situation. Shortly after Would War II she found herself a single mother with a young child. The child was Michael Nesmith, who would eventually gain fame and fortune as a member of the 1960ís TV band The Monkees. This was a long time before that, however, and it was not a time when there were a great many employment opportunities for women. But once again, where thereís a will, thereís a way. Ms. Graham found work as a secretary.
To correct the mistakes she made with her typewriter, Ms. Graham, who was also an amateur artist, came up with the idea of painting over them. She concocted a special blend of white paint in her kitchen. She began using this concoction at her office and soon many of her co-workers were hearing of it, and wanting to use it as well.
It was obvious that Ms. Graham had a potential hit on her hands, a product that was truly in demand. So she began bottling it in her kitchen and selling it. Before long she was selling her product, which would later be named Liquid Paper, full time. Her company grew steadily. In 1968, 1 million bottles of Liquid Paper were sold. By 1976, the figure was 25 million. In 1979 Ms. Graham sold her company for $47.5 million.
The stories of Mr. Bennett and Ms. Graham illustrate that it doesnít matter if you are talking about a small family farm or a multi-million dollar corporation; the key to success in business is spotting a demand, and figuring out a way to supply it.
excerpt 2 (from beginning of Chapter 11)
The economy is like a spiderís web, everything is connected. What that means is that when one part of the economy is bad, other parts are likely to be bad as well. When the economy is down, most everyone feels it. Business owners feel it in lower profits. Salespeople feel it in smaller commissions. Job seekers feel it in long periods of unemployment.
[DTP: Please insert picture of a spider web. Caption: An economy is interconnected in many ways.]
How the overall economy is connected together is the subject you begin to study in this chapter. This is the realm of macroeconomics. This chapter will provide an overview and preview of the subject. First youíll learn more about exactly what macroeconomics is, and how it differs from microeconomics. Then youíll learn about the key issues studied in macroeconomics. Finally there will be an overview of the systems and institutions that make up the macro-economy. The chapters that follow this one will cover these subjects in more detail.
[Header 1] Introduction to Macroeconomics
Microeconomics is what you have been studying so far in this course. The name itself can help you remember what it is. Micro-economics is like looking at the economy through a microscope. You analyze one small piece of the economy at a time. For instance, in chapters 6 & 7 you looked through the economic microscope at how an individual firm makes decisions. First you looked at firms operating in perfectly competitive markets. Then you looked at firms in other types of markets such as monopolies. In macroeconomics, you step back to look at the economy as a whole. You look at how all the pieces fit together and affect each other, and what the final result is. In a general sense, the macro-economy is just the aggregation, or putting together, of all the microeconomic pieces.
excerpt 3 (from 'Recession' section in Chapter 11)
Recessions are lulls in economic activity. There is disagreement about what causes them. There actually appear to be a variety of causes. Each recession is unique, and has its own set of circumstances which causes it to happen.
One thing all recessions, and expansions, have in common is a self-reinforcing aspect. When a recession starts, consumers cut back their spending. This causes businesses to lose money and lay people off. When people get laid off they have less money to spend. This causes businesses to lose more money and lay more people off, and so on.
This circle reverses itself when the economy enters the recovery phase. Businesses start hiring people. These people now have jobs and can spend more money. As they spend more money in the economy businesses make larger profits, which lets them hire more people, who can then spend more money in the economy, and so on.
There is also a psychological aspect to the business cycle. In a recession, people have a pessimistic view of the economy. When consumers have this kind of view, they donít spend money. When businesses have this kind of view, they donít expand their operations. They don't hire new workers. These actions, born from an expectation of poor economic conditions, actually create poor economic conditions.
The opposite is true in a boom. Consumers feel good about the economy, so they spend money on things such as new cars and new homes. Business owners feel good about the economy, so they take chances on building new factories and opening new stores. These actions create good economic conditions. The result is that the economic conditions become bad or good based on what people expected the economic conditions to be. When the expectation of something causes it to happen, it is called a self-fulfilling prophecy. This kind of thinking plays a large role in business cycles.
end of textbook excerpts