Business and Economic Systems - Introduction To Business - ثاني ثانوي

siness, Management & Administration PLANNING A CAREER IN ... BUSINESS ECONOMICS Economists have a significant role in the business world. They gather and analyze information to try to anticipate what economic changes are coming. This is an important task, as businesses and government officials and even consumers use these predictions to make decisions. Most economists work in government agencies, for businesses and business associations, or as researchers and professors in colleges and universities. Related Job Titles Urban and Regional Planner • Budget Analyst • Economics Teacher or Professor • Investment Analyst ⚫Business Development Advisor Field Researcher Economists working for corporations forecast the size of markets, changes in consumer demand, and changes in sales and costs the businesses are likely to face. They analyze competitors and market share and advise their company on how to plan. Economists pay attention to international markets and business conditions in countries where the company currently operates or plans to expand. Analyze Career Opportunities in ... BUSINESS ECONOMICS Use library and Internet resources to learn more about careers in corporate economics. Choose one of the job titles listed in the box above and answer the following questions. 1. Identify the minimum educational requirements for the job. Explain other training or education that might be needed for advancement. 2. Is this a career that interests you? Describe how you might use your talents, abilities, and skills in this career. What it's like to work as a... Company Economist Sarah is on her way to the office at 4 a.m. each morning. As an associate analyst, she helps prepare a morning briefing. She is responsible for tracking changes in the Saudi economy along with the GCC alliance. Heading into the city by taxi, Sarah checks online to get the latest information about major stock markets. Then she checks the international news services for important stories that might affect the Saudi economy and GCC members. She updates forecast charts and enters notes so she will be ready for the team meeting as soon as she arrives at the office. Her office work is usually finished by 2 p.m. each day, but Sarah continues to check economic information even as she works out at the gym or participates in other leisure activities. What about you? What do you like and dislike about Sarah's schedule and activities? What do you think happens in the team meetings as Sarah and her colleagues prepare the morning briefing? Why might creative decision making be an important skill for a business economist? How can you improve your creative decision- making ability? وزارة التعليم Ministry of Education 2024-1446 Exploring the World of Business and Economics | 23

1.1 Business and Economic Systems Link to digital lesson www.ien.edu.sa Learning Outcomes Once you have completed this lesson, you should be able to: 1.1.1 Identify and compare types of economic systems. 1.1.2 Identify methods to measure economic performance. Key Terms Scarcity Economic Resources Economic System Command Economy Gross Domestic Product (GDP) GDP per Capita Unemployment Rate Productivity Market Economy Personal Income Traditional Economy Retail Sales Mixed Economy Stock Focus on REAL LIFE Ali remembers what it was like to grow up overseas in a farming community in the countryside. "The farmers still work the land with the same methods they have used for generations, and the government tells them what they can and cannot grow," Ali explains to a colleague. His colleague asks, "What does your family think about you living in the city and working for a multinational company?" Ali smiles and responds, "My parents were surprised when I told them that the company decides how many of each of our products we will produce each year and then sets the selling price for each of our markets." Ali has experienced two very different economic systems. LO 1.1.1 ECONOMIC SYSTEMS Each day, business activities provide your needs, things required to live, such as food, water, clothing, and shelter. Other needs may include education, a career, transportation, and healthcare. In contrast, consumers also demand wants, things that add comfort and pleasure to life. These may include technology, a large apartment, or a luxury car. The Basic Economic Problem Needs and wants are unlimited while resources are limited. This difference is the basic economic problem, which results from scarcity. Scarcity means not having enough resources to satisfy every need. Countries with few In what ways have bridges, roads, and railways helped to make the Saudi economy stronger? natural resources or a poor education system may not be able to produce enough products and services for their citizens. If roads, bridges, and railways are not well maintained, people may not be able to easily obtain the variety of products and services found in other areas. Economic Resources How are the goods and services you need and want produced? Economic resources, also known as factors of production, are the things used to produce goods and services. 24 Chapter 1 | Exploring the Worldof Business and Economics وزارة التعليم Ministry of Education 2024-1446 GE44.PATHWAYS.G02.ITB.SB.PP1.indb 24 08/05/2024 09:13

There are three types of economic resources: natural resources, human resources, and capital resources. Raw materials from nature are natural resources. These include oil, minerals, and nutrients in soil. In addition to oil reserves, Saudi Arabia has many natural resources such as gold, iron ore, and copper. Every product that is manufactured requires natural resources of some sort or another. The people who produce goods and services are human resources, for example, farmers, factory workers, managers, truck drivers, salespeople, and store employees. Another vital human resource is NET KNOWLEDGE Q Knowledge makes you a more informed consumer, worker, and citizen. If you can compare quality and prices of products and services, you will make the best use of your money. Go online to identify three websites that help consumers compare competing products and services. Use the information to prepare a table that reports at least four factors that are important for making the best decision. the entrepreneur who uses resources to create a new product or service. The tools and equipment needed to convert natural resources into products are capital resources. These include buildings, equipment, and supplies as well as the money needed to build a factory, buy vehicles, or purchase computers. The Three Economic Questions To determine how available resources will be used to meet needs and wants, every country must answer: (1) What goods and services will be produced? (2) How will the goods and services be produced? (3) What needs and wants will be satisfied with the goods and services produced? Types of Economic Systems Every country makes decisions in different ways. An economic system is the method a country uses to answer the three basic economic questions. Government involvement levels in business are one of the major differences among the four types of economic systems. 1. In a command economy, resources are owned and controlled by the government, who decides the production, distribution, and consumption levels of goods. They decide how much of the resources will be used to produce goods and services, such as food, schools, and homes. Personal economic choices are usually limited in a command economic system. 2. With a market economy, resources are owned and controlled by the people. The three economic questions are answered by individuals through buying and selling in the marketplace, the place where goods and services are exchanged, such as a supermarket, the Internet, or a business office. No one directs consumers to make a particular purchase or tells businesses what they must produce in this type of economy where individuals and businesses enjoy the freedom of exchanging goods and services. The government has limited involvement in a market economy. 3. Throughout history, many simple التعليم economies operated according to tradition or custom. In a traditional economy, goods and services are produced the same way as in the past. Traditional economies are usually found in countries that are less developed and are not yet active in the global economy. The traditional economy is usually centered on meeting the basic needs of people, such as food, clothing, and shelter. Ministry of Education ein FYI Oil, natural gas, and even water, one of the most common substances on our planet, are all examples of natural resources under severe pressure from current consumption rates. Another natural resource facing scarcity is sand, which seems infinite in deserts. However, the natural process of making sand is slow, and its rate of production cannot keep up with its consumption by industries such as construction. This may pose a challenge for developing regions like East Africa, where the population is expected to double in the next 30 years. 1.1 Business and Economic Systems | 25 2024-1446

4. Modern economic systems can take a variety of forms (including command and market economies). However, the most common in developed nations today is a mixed economy, combining elements of the command and market economies with varied degrees of government involvement in the marketplace. The Saudi Economy The structure and guiding principles of the Saudi economy are based on Islamic law and Shariah compliance. Saudi Arabia is a mixed economy. The government's role in the economy appears through a number of giant investment initiatives led by the Public Investment Fund and leading companies. Equally, the government is supporting local economic diversification, improving the investment environment to attract foreign investors and reducing dependence on oil, raising the contribution of the private sector, encouraging small and medium enterprises, and enabling the third sector, in order to reach a diversified and sustainable economy. *i* Work as a TEAM Your team represents the citizens of a new country deciding on an economic system. You want to establish a successful economy that provides the greatest benefit to its citizens. What information about the country would you need to answer the three economic questions? CHECKPOINT What are the main differences among the four main economic systems? LO 1.1.2 METHODS TO MEASURE ECONOMIC PERFORMANCE Economic growth refers to an increase in the production of goods and services in an economic system. Different methods can be used to measure the growth of an economy. Gross Domestic Product Gross domestic product or GDP is the total value of all final goods and services produced in a country for one year. Figure 1-1, compares the GDP of the major trading partners of Saudi Arabia in 2020. GDP includes four major categories of economic activity: 1. Consumer spending for food, clothing, housing, and other goods and services. 2. Business spending for buildings, equipment, and inventory items. 3. Government spending to pay employees and to buy goods and services. 4. The exports of a country less the imports into the country (net trade balance). Some goods and services are not included. For example, GDP does not include the value of the work you do for yourself, such as redecorating your home. However, if you were to hire a decoration service, it would be included. Only final goods, such as cars, are counted when measuring GDP. Intermediate goods used in manufacturing, such as steel, fabrics, plastic, and glass are not included. If intermediate goods were counted, the value of them would be counted twice. GDP increases from year to year usually signals that an economy is growing and is healthy. ليم 26 Chapter 1 | Exploring the World of Business and Economics Ministry of Education 2024-1446

Comparing GDP The more goods and services produced, the healthier an economy is considered to be. Just referring to the total monetary value of GDP as a measure of economic growth does not tell the whole story. Another way to measure economic growth is GDP per capita, or output per person. GDP per capita is calculated by dividing GDP by the total population (see Figure 1-1). For example, suppose that there is no change in GDP this year compared to last year; however, the population of the country increases. The same output would have to be divided among more people. An increase in GDP per capita means that an economy is growing. A decrease usually means that an economy is less productive. Labor Activities COMPARISON OF TOTAL GDP AND GDP PER CAPITA IN SELECTED COUNTRIES (2020) COUNTRY TOTAL GDP (SAR) GDP PER CAPITA (SAR) Saudi Arabia China 5.79 trillion 166,125 86.29 trillion 61,500 United States 74.43 trillion 225,750 India 31.66 trillion 22,875 Japan 19.59 trillion 155,250 Germany 15.90 trillion 190,875 France 10.62 trillion 157,500 Turkey 8.98 trillion 106,500 8.71 trillion 146,250 Egypt 4.59 trillion 45,000 United Arab Emirates 2.46 trillion 251,625 Singapore 1.991 trillion 350,250 787.5 billion 187,125 262.5 billion 153,375 Source: CIA World Factbook Italy Kuwait Bahrain FIGURE 1-1 Workers contribute to an economy in several ways. First, their labor activities create goods and services. Additionally, the wages earned are then spent, creating a demand for various products. As of 2021, more than 16 million people work in Saudi Arabia (source: World Bank). These members of the labor force are employed in thousands of different jobs. Which country has the highest GDP per capita? The lowest? One economic statistic of concern is the unemployment rate. The unemployment rate is the portion of people in the labor force who are not working. Unemployment rates vary from year to year and in different areas of the country. One of the causes of unemployment is reduced demand for the goods and services provided by various workers. If fewer people travel by plane, for example, airlines will need fewer workers. In many countries, an accurate measurement of the labor force is difficult to obtain. Poor economic conditions may require family members of all ages to work on farms or in home factories to provide an income to cover basic living expenses. ** Work as a TEAM The GDP of a country presents information about the economic output of that country. Work as a team to prepare a list of drawbacks resulting from only looking at GDP when evaluating the economic progress of a nation. What aspects of economic growth may not be reflected in the GDP of a country? وزارة التعليم Which industries do you think have high employment rates in Saudi Arabia? 1.1 Business and Economic Systems | 27 Ministry of Education 2024-1446

Productivity A vital source of economic growth is productivity, the production output in relation to a unit of input, such as a worker. The increase of output vs. the input is a sign of effective productivity. Improvements in capital resources (equipment and technology), worker training, and management techniques can result in more output per worker. NET KNOWLEDGE Q Online sources provide data on economic activities. Conduct a search for a topic, such as GDP, unemployment, or productivity. Obtain recent information for this economic statistic. Prepare a brief written summary of your findings and describe how this information might affect consumers or businesses in Saudi Arabia. Over time, the growth rate for labor productivity varies. Increases in productivity occur in some years. Sometimes, productivity may decrease due to situations such as a pandemic. When productivity increases, workers improve the standard of living in a nation while improving their life situation. Technology and increased efficiency can improve productivity. Specialization of labor is the training of workers to do a specific task. This strategy allows for division of labor, in which workers are assigned specific elements of a work process to improve efficiency and productivity. Expanded use of new technology usually requires advanced job training and new skills. Saudi Vision 2030 aims to increase productivity in Saudi Arabia by: (1) strengthening the education system for improved business skills, and (2) attracting highly skilled workers from around the world. Consumer Spending FYI Technology continues to change the way work is done. Today's jobs require less than 1% of the total muscle power used before the Industrial Revolution; however, much greater levels of education and mental skills are necessary. The money you earn and spend is an important factor for economic growth. Each day, people receive money from their participation in production. Personal income refers to salaries and wages, as well as investment income and government payments to individuals. These funds are used to buy needed goods and services. Measured each month, retail sales are the goods and services bought by consumers. Retail sales are an indicator of consumer spending patterns in the economy. Increasing retail sales usually points toward economic growth. The main items whose sales are measured for estimating retail sales include automobiles, building materials, furniture, gasoline, and clothing, as well as purchases from restaurants and stores. Investment Activities Investing for the future takes many different forms. An individual's time in school is an investment for their future. When companies buy buildings and equipment, they are also investing in their future. Capital spending refers to money spent by a business for an item that will be used over a long period. Capital projects involve spending by businesses for items such as land, buildings, equipment, and new product development. The money for capital projects 28 Chapter 1 | Exploring the World of Business and Economics Ministry of Education 2024-1446

comes from four main sources: personal savings, stock investments, bonds and sukuk in Saudi Arabia. One of the major sources of investment funds is personal savings. Companies use money deposited in a bank or other financial institution. These funds provide the money necessary for buying equipment or creating new products. Using this part of individuals' and families' income, which is not allocated for consumption and is saved in a bank, is a main element in financing an investment. The savings rate of a country is an important factor for economic growth. A low savings rate for a country can cause concerns for the future business activities and the economic situation in general because of the greater reliance/dependency on external financing. Corporations are a type of business organization. Many people invest by becoming part owners. Stock represents ownership in a company or governmental entity. Stock ownership is commonly called equity. The value of shares of stock is affected by many factors. For example, if a company has higher earnings, more people will want to buy its stock. This will usually cause the value to increase. Another investment activity involves sukuk and bonds in which money is borrowed by a company or governmental entity. Sukuk are Shariah-compliant financial certificates with which investors get partial ownership until the maturity date, and the money is repaid. These investment options will help to diversify the Saudi economy with expanded global business activities and increasing employment opportunities. Life-Span Plan Calculate your savings rate (percent of your current income that you save). Do you believe you save enough of your income? Explain how saving is related to people achieving their life- span goals. Set a short-term saving goal that you could achieve now to help you eventually reach future life-span goals. CHECKPOINT How can productivity be increased? 1.1 ASSESSMENT Key Concepts Determine the best answer. 1. An example of a natural resource is a. sunlight b. a computer programmer c. a fishing net d. money 2. In which of the following economic systems is the government's role greatest? a. mixed b. traditional c. market d. command 3. Which of the following would not be included in GDP? a. exports to other countries b. purchases of computers by government ⚫⚫c. automobiles purchased • d. dinner preparation for your family وزارة التعليم Ministry of Education 2024-1446 1.1 Business and Economic Systems | 29

4. Productivity would likely increase because of a. higher taxes b. expanded production technology c. decreased training programs d. lower interest rates Make Academic Connections 5. Economics List the three types of economic resources. Choose a product from a local or global company and describe how each type of economic resource is needed and used in its production. 6. Writing Locate an article that illustrates the concepts of unlimited wants and needs and limited resources. Write a two-paragraph summary of the article that incorporates several of the key terms from the lesson. 7. Visual Art Create a collage or photo essay to illustrate how specialization of labor and division of labor can increase productivity. ليم 30 Chapter 1 | Exploring the World of Business and Economics Ministry of Education 2024-1446

LIFE/WORK SKILLS INFORMATION LITERACY Your abilities are more than a collection of your experiences. Whether the goal is to improve a business or your own performance, you need to make sound decisions based on the best information available. Research skills are needed for effective decision making. Research is a systematic, objective study to establish facts and principles. The research process begins with a question or problem and results in a possible answer that may become further research. Use these steps when conducting research. Formulate a research question. What is the problem you are facing or what is the issue you are trying to resolve? The question should be as specific as possible and relate to an important personal or business issue. Gather and review information related to the question. Determine if others have studied the same problem and if they have reported on the results of their study. This step usually involves a careful search of online resources and library information. Separate fact from opinion. Effective research relies on objective data. Opinions may provide interesting ideas to consider but should not be relied on for answers to your question. Consider if the sources of information are credible and if the information provided is factual. Propose a hypothesis. A hypothesis is a prediction about the answer to your research question. The hypothesis can be based on the information gathered, your experience, or your beliefs. You will conduct a study to gather information that will either support the hypothesis or determine that it is wrong. Collect data to test the hypothesis. Researchers carefully design studies to gather information related to the research question and hypothesis. The common methods of collecting data are surveys, observations, and experiments. Analyze the data. After data has been collected, organize and analyze it using statistical procedures. Careful review of the results of the data analysis will provide evidence to support or disprove the hypothesis. Report the results. Document and report the results of your research. A well-organized and carefully written report will help others understand the research and will provide evidence that the research was objective. Put the results into practice. You began the research process to answer a question or solve a problem. You need to apply what you learned and determine if what you learned makes a difference. No matter the results, you will want to continue to conduct research and study the research of others. This action will help you make sound decisions and give you confidence in your knowledge and abilities. Think Critically 1. Why should you try to avoid basing your actions on opinions rather than facts? 2. Do you believe some questions can be answered by just gathering and reviewing existing information rather than collecting new data? Why or why not? 3. Describe work situations that would require research skills. وزارة التعليم Ministry of Education 2024-1446 1.1 Business and Economic Systems | 31