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Copyright Goodheart-Willcox Co., Inc.
Chapter 1 Introduction to Business and Economics
Business Creates Markets
Think about a typical day, and consider all
of the individual goods and services you use.
Getting each of those products to you involved
business activities that take place in a market.
A market, or marketplace, does not have to be a
physical place, like a shopping mall or a grocery
store. Instead, a market is anywhere buyers and
sellers meet to buy and sell goods and services.
When buying back-to-school supplies at an
office supply store or other retail store, you are
shopping in a physical market. Downloading apps
for your smartphone is an example of shopping
in an online market. A community rummage sale
can even be a marketplace. Anywhere a business
exchange takes place is a market.
Business Generates Economic
Benefi ts
Economic benefits are gains that are measured in
terms of money. The main reason businesses operate
is to earn a profit. Profit is the difference between
the income earned and expenses incurred by a
business during a specific period of time. It is income
generated from sales after the costs of producing
and selling products are subtracted. By earning a
profit, a business can continue to operate. It can also
contribute to the economy by employing workers
and paying taxes that help fund the economy.
One of the economic benefits businesses
provide is employment. People are employed by a
business in exchange for wages. Wages are money
earned in exchange for work. People use their
wages to buy goods and services, such as groceries,
car repairs, and clothing. Local businesses that hire
people within the community benefit because the
people who earn money, in turn, buy more goods
and services from local businesses.
Consumers also enjoy the economic benefits
of business. Businesses create products that allow
consumers to determine their standard of living.
Standard of living is a level of material comfort
measured by the goods, services, and luxuries
available. Businesses provide goods and services
that give customers choices.
Another economic benefit of business is
taxes. The profits of a business are taxed by local,
state, and federal governments. The taxes help
pay for services that benefit the community.
Businesses must also pay real estate taxes if
they own their business location. Employees of
the business pay payroll taxes, which also fund
government activities.
Functions of Business
In the process of satisfying customers and
making a profit, businesses perform many
activities, or functions. Function is a general
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A market is anywhere buyers and sellers come together to participate in business transactions.