OD1 Understand fundamental economic concepts to obtain a foundation for employment in business
OD2 Understand the nature of business to show its contributions to society
OD3 Understand economic systems to be able to recognize the environments in which businesses function
OD4 Acquire knowledge of the impact of government on business activities to make informed economic decisions
OD5 Analyze cost/profit relationships to guide business decision-making
OD6 Understand economic indicators to recognize economic trends and conditions
OD7 Understand global trade's impact to aid business decision-making
Patent: A legal document that gives an inventor the sole right to produce, use, and sell an invention. A patent lasts for 20 years. During this period, no business or individual can copy or sue the patented invention without the patent holder’s permission.
Copyright: Protects original works of an author. (e.g., music, books, computer software.) A copyright lasts for 70 years after the death of the author.
Trademark: Word, symbol, design, or combination of these that a business uses to identify itself or something
Economy - makes decisions to answer three basic economic questions What to produce, For whom, and how to produce it
Risk - potential loss
Consumer - uses the product
Customer - buys the product Competition - struggle for customers
Monopolies - illegal because they prevent competition
International trade: trading products with other countries
import - things we buy from other countries
exports – things that we sell to other countries
Trade surplus - export more than importing
Trade defect - import more than export
production of a product – china and silk
absolute advantage: country has all the natural resources and talents to trump all the other countries in the
Benefits of international trade: lower prices, allies, higher employment
tariff: tax on imports
quota: number limits
Embargo: ban
Profit = Revenue (sales)– Expenses (costs)
What is an industry? Collection of business in a category – food, car, fashion, tech, etc…
Buyer's Market - A good time to buy a large amount of of supplies for a good price
Capital Good - manufactured items used for goods and services
Consumer - The person that buys the goods
Consumer Good - the items the consumer is purchasing
Consumption - Process of using goods and services
Demand - The amount of a good or services that consumers are ready to purchase at any time
Distribution - The business that stores and transfers the good and services
Economic Resources - Human and natural resources also capital goods that are used to make goods and services
Economic Want - What the people want to spend their money on
Economics - How to get unlimited resources with the wants of limited resources
Economizing - Deciding with good and services will be purchased
Elastic Demand - The demand in products change with the demand price
Elasticity - indication on the price changes and how it will affect the demand
Equilibrium Price - The quantity of the good is equal to the price
Excess Demand - demand is greater than the supply
Excess Supply - The supply is greater the the demand
Exchange - Trading one item for another
Goods - tangible objects that can be manufactured
Human Resources - People who produce the goods and services
Industrial Goods -Items that are tangible that will be consumed by industrial users
Characteristics of Wants
1. Unlimited: Everyone always has wants - Individuals, Businesses, Governments
2. Changeable: Wants change, Your wants now compared to 10 years ago.
3. Competing: Everyone must choose, Not enough resources to satisfy all needs
Want - A desire for something that may or may not be required
Two types of Wants
1. Economic Want: Desires for items that can only be obtianed by spending money
2. Noneconomic Want: Desires for things that can be obtained without spending money.
Ex: Fresh air and Sunshine
Goods - Tangible objects that can be manufactured or produced for resale
Services - A desire for something that may or may not be required
Consumer Goods - Tangible items produced for personal use
Industrial Goods - Tangible items that will be consumed by industrial users
Factors of Production - Productive resources; human and natural resources and capital goods.
Economics - The study of how to meet unlimited, competing wants with limited resources
Scarcity - A condition resulting from the gap between unlimited wants for goods and services and limited resources
Economizing - The process of deciding which goods and services will be purchased or provided so that the most satisfaction can be obtained, deciding how scarce/resources will be used
Opportunity Cost - The benefit that is lost when you decide to use scarce resources for one purpose rather than for another
Trade-offs - Giving up all or a part of one thing in order to get something else
Major Economic Activities
1. Consumption
2. Production
3. Exchange
4. Distribution
Consumption - The process or activity of using goods and services
Consumer - Anyone who uses goods and services
Productions - The economic process or activity of producing goods and services
Producer - The people who make or provide goods and services
Exchange - The process of trading one good/service for another
Distribution -A marketing/business function that is responsible for moving, storing, locating, and/or transferring ownership of goods and services
Economic Resources - The human and natural resources and capital goods used to produce goods and services.
Land/Natural: Raw material from nature to produce goods. aka Natural Resources - Items that are found in nature that are used to produce goods and services Ex: Trees, Air, and Land
Labor: People who make goods/services for which they are paid. AKAHuman Resources - People. In economics, they are valued for the physical and mental work that they do to produce goods and services. They include anyone who works.
Capital: All of the manufactured or constructed items used to produce goods/services (buildings, equipt., materials) $$$$$
Entrepreneurial: Used by the people who recognize opportunities and start businesses. ideas hard work creativity
Economic System - The institutional framework of formal and informal rules that a society uses to determine what to produce, how to produce an dhow to distribute goods and services
Economy - The structural framework in which a nation undertakes the production and consumption decisions that allocate limited resources to satisfy unlimited wants and needs
the world’s economic systems fall into one of four main categories: traditional economy, market economy, command economy and mixed economy; however, there are unlimited variations of each type. An economic system must define what to produce, how to produce it and for whom to produced it. Depending on the products produced and the environment, certain economic strategies will be more successful than others.
Traditional - A traditional economic system is one in which each new generation retains the economic position of its parents and grandparents. Traditional economies rely on the historic success of social customs. South America, Asia and Africa support some traditional economies of thriving agricultural villages. Tradition decides what an individual does for his living, so industry, clothing and shelter are the same as in previous generations.
Market - Market economies are based on consumers and their buying decisions rather than under government control. Market trends and product popularity generate what businesses produce. The producers choose how to make products based on the most economically sound decision: that might mean machine labor to save costs or human labor for specific skills. The buyers decide who gets which products by what they are willing to pay for what they want.
Command - In a command economy, the government controls all economic activity. One example of a command economy is communism. In a government-directed economy, the market plays little to no role in production decisions. Command economies are less flexible than market economies and react slower to changes in consumer purchasing patterns and fluctuations in supply and demand.
Mixed- A mixed economy combines qualities of market and command systems into one. In many countries where neither the government nor the business entities can maintain the economy alone, both sectors are integral to economic success. Certain resources are allocated through the market and others through the state. Theoretically, this system should be able to combine the best policies of both systems, but in practice the proportion government controls and response to market forces varies. Some countries rely more on market emphasis and others on state planning.
Useful products make our lives better. They have utility—usefulness. Utility is about satisfying wants and needs. If customers are satisfied with what a product offers because it fulfills a desire, the product has utility.
UTILITY: amount of satisfaction a consumer receives from the consumption of a product or service. ADDED VALUE
Form utility: Usefulness provided by changing raw materials or assembling parts to create a useful good. EX - PUTTING BIKE TOGETHER FOR YOU AT WALMART
Place utility: Usefulness provided by having a product available where customers need it. BEING ABLE TO BUY BIKE AT STORE OR ONLINE
Time utility: Usefulness provided by having a product available when it is needed. HAVING BIKES AVAILABLE AT CHRISTMAS OR SUMMER
Possession utility: Usefulness provided by creating opportunities for the consumer to own the product. I CAN PAY FOR BIKE WITH CHECK, CREDIT CARD, LAYAWAY, ETC...
Information utility: Usefulness provided by communicating information about products. ADS, COMMERCIALS, FLYERS, SIGNS, DISPLAYS,ETC...
1. Which goods and services should be produced?
2. How should the goods and services be produced?
3. For whom should the goods and services be produced?
Expansion: The growth of the economy. The unemployment rate is low, spending is high, and consumer confidence is high. (peak: ending of the expansion/growth)
Recession: The economy starts to slow down. There are lay offs, the confidence in consumers are low, and the economy is headed for depression.
Trough: The depression state. The economy stops slowing. The recovery is near.
Recovery: The economy starts to get organized and starts to grow again. Jobs are created. This phase is known to last the longest.
Law of Supply and Demand - Economic principle which states that the supply of a good or service will increase when demand is great and decrease when demand
Buyer's Market - The best time for consumers to buy; characterized by large supply, small demand, and low price
Seller's Market - The best time for producers to sell; characterized by large demand, small supply, and high prices
Demand: The amount of goods consumers are willing and able to buy at a given price.
Elasticity: The degree to which changes in price affect the demand for a product.
Elastic demand: Changes in the price of the product result in changes in demand for that product.
Inelastic demand: Changes in the price of the product have very little effect on the demand for that product.
Demand? Affecting factors? relationship between quantity of a product consumers are willing and able to purchase and the price; wants and needs; availability; alternatives
Supply? Affecting factors? relationship between quantity of a product producers are willing and able to purchase and the price; profit possibility; competition amount; capability of developing/marketing
Law of Demand: When the price of a product is decreased, the demand for the product increases.
When the price of a product increases, the demand for the product decreases.
Law of Supply: When the price of a product is increased, more will be produced.
When the price of a product is decreased, less will be produced. The supply of a good or service:Increases when demand is great. Decreases when demand is low.
Market Price? Equilibrium...the interception of supply and demand
Equilibrium: Point at which consumers buy all of a product that is supplied, leaving neither a surplus nor a shortage
What is Supply? What is Demand? What is equilibirium?
Price goes up - demand goes down
Price goes down - demand goes up
Price goes up - supply goes up
Price goes down - supply goes down
Conditions required for demand to exist
Desire for a good or service
Buying power to pay for a good or service
Willingness to give up some buying power
Price - The amount of money that is paid for a good, service, or resource
Substitution effect - A phenomenon that occurs when changes in relative prices cause buyers to replace the purchase of one product with another
Rationing - A function of relative prices that determines who gets the goods and services produced; determining how scarce resources will be distributed
Equilibrium Price- Also referred to as the market-clearing price. The point at which the quantity of a good that buyers want to buy is equal to the quantity that sellers are willing to sell at a certain price
Supply is the relationship between the quantity of a product that producers are willing & able to provide & the price.
Demand is the relationship between the quantity of a product consumers are willing & able to purchase & the price.
Profit is also an important aspect since producers need to make money.
Profit: Money left after all the expenses of a business have been deducted from the income. Making a profit is a primary incentive of the free enterprise system. It is one way of measuring success in a free enterprise system.
Characteristics? - based on independent decisions by businesses and consumers with only a limited government role regulating those relationships
resources of production owned and controlled by individual producers
profit motive = use of resources to obtain the greatest the greatest profit
consumers decide what to purchase to satisfy their needs
value = individual view of worth of product and service; compare cost, alternative?
no government involved in exchanges between producers and consumers unless harmed by decisions
Pure Competition - A market situation in which no single company in an industry is large or powerful enough to influence or control prices. Many suppliers offer very similar products.
Monopoly - One supplier offers a unique product. no direct competitors
Oligopoly - Few businesses offer very similar products/services.
Monopolistic Competition - Many firms competing with products that are somewhat different.
Direct competition - coke and pepsi burger king and Mcdonalds.
Competition between two or more retailers that utilize the same type of business format.
Indirect competition - bath&body and CVS , KFC and Mcdonalds.
Competition between two or more retailers that employ different types of business
formats to sell the same type of goods.
Price competition - Competition focused on the selling price of a product. walmart
Non price competition - Competition based on factors that are not related to price. (quality, customer service, location, reputation, image, luxury, qualified salespeople)
Goals of a healthy economy: increase productivity, decrease unemployment, and maintain stable prices (no inflation)
Productivity: output per worker hour, measured over period of time.
Gross National Product: GNP. dollar value of goods or services produced by a nation
Gross Domestic Product: GDP. output of goods or services produced by labor and properly located within a country
Customer Price Index: CPI. measures change in price over a period of time of some specific retail goods or services.
Producer Price Index: PPI. measures wholesale price levels in the economy.
Standard of Living: quality of goods and services that a nation's people have
Unemployment Rate: rate at which people at a job are layed off or fired