Businesses (big or small) are important to the Australian economy. They have the important roles of:
- Profit
- Providing employment
- Providing income
- Consumers choice to purchase goods and services
- Improve quality of life
Profit
- Profit is sales revenue, minus expenses.
- Revenue is the payment received for providing goods or services.
- Expenses are the costs of operating a business
Business owners take high risk of operating their businesses. Risk is the uncertainty and the possibility of incurring a loss of a business.
Owners could lose some or all of their business investment if risks cannot be managed properly.
Providing employment
- Business owners need to hire people to work for them.
- Hence, businesses provide jobs to people. This is called employment.
During the period where businesses are earning a high profit, they are likely to employ more people to work for them.
However, during downturns with less sales, they are less likely to employ more people.
Providing income
Business owners earn their income in the form of profit, as mentioned previously.
Consumers choice to purchase goods and services
- Consumers have choices to purchase goods and services.
- The more competition, the more choices are available.
This benefits the general society because businesses have to provide high quality goods and services at a cheap price, to compete with the rest of the market.
If there are a lack of competitors (or none), consumers have to pay a higher price, with possible poor quality of the goods and services. This is known as a monopoly.
Improve quality of life
- Quality of life refers to the living standards and wellbeing of an individual.
- This consists of material and non material benefits.
Examples
- Consumers can afford to buy more goods and services due to higher Income, to satisfy their needs and wants.
- When businesses are more socially responsible by being environmentally friendly in their production process, which reduces wastage and pollution.