Explain the Interactions of Business and Households in the Private Enterprise System.


SHARMIN JAMAL LACTURER DEPT. OF BBA SUBMITTED BY: S PROGRAM: BBA ID NO: BBA 027 BATCH: 27D/SPRING2005 DATE: CONTENTS Page 01 Definition of Business: Business means state of being busy in any work. A Business is an organization engaged in producing goods and services to make a profit. Business may be defined as human activities directed toward producing and distribution of wealth through buying and selling goods.

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Business includes all those human activities relating to the production and distribution of goods, services and ideas with a view to earning profit.The circular Flow Between Business and household: In the private enterprise system the factor of production are owned by individuals in household. Businesses must pay the member of the householders in order to acquire the factors of production. The householder members in turn receive various types of income to supply the factors of production.

Rent profit Wages interest Land labor capitalEntrepreneurship . Page 02 As a further illustration figure and the following step-by-step process provide an explanation of how the private enterprise system operates as given below: 1.Your business needs to hire two employees. -The factor of production, labor is to be found living in the householders. -The business purchases the labor by persuading the persons in the household to go to work for an agreed on wage. 2. The business then combines the labor of the employees with natural resources, capital and entrepreneurial skills to produce goods and services. -The individuals in the households need or want the goods produced by the business.

-Using the income received as wages. The individuals in the households go to the marketplace and purchase the goods and services produced by the company. 3.The business then takes money receives and uses it to purchase more factors of production. The result of the circular flow of resources and income: people seeking profit go into business, which creates jobs and income for households. With their incomes, households purchase goods and services, which in turn, support business and make it profitable. Page 03 Difference between capitalism, socialism and communism: Capitalism, Socialism and communism are related to each other.

But there are also some differences between them. There given as below: These are the difference between capitalism, socialism and communism.



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