Economics

Business and Society — Discussion Guide

Performance Indicator: Explain the role of business in society

Slide #2 Opening Discussion (Entry)

Slide #3-4 Business is an integral part of our society and our daily lives.

• Society can’t function without business…and vice versa!
• Where would businesses be if they had no customers?
  • They would be unable to make money.
  • They would be unable to stay in business, or get that all-important word-of-mouth advertising that only customers can provide.
• And what would you do without businesses?

Discussion #1: Ask students to imagine a world without businesses. What would it look like?

• You would be unable to purchase the goods and services you want and need.

KEY CONCEPTS

Slide #5 Types of businesses

• Businesses can be categorized as producers, trade industries, and service businesses.
  • Producers may be raw-goods producers, manufacturers, or builders.
  • Trade industries are either retailers or wholesalers. They differ based on a number of factors, including size, kinds and variety of products sold, ownership, amount of service provided, price, and even the existence of a business premises.
  • Service businesses provide intangible services (rather than goods) that satisfy the needs and wants of consumers and industrial users.

Discussion #2: Ask students to provide an example of each type of business.

Slide #6 How business impacts society

• All types of businesses play a leading role in our society.
• We interact with them on a daily basis.
• It just makes sense that they have the potential to make a big impact on the world around them—either positive or negative.

• Most businesses recognize that they have a social responsibility, or a duty to contribute to the well-being of society.
• Some people feel that the best way for companies to contribute to society’s well-being is by trying to maximize their profits.
• To do this, businesses must:
  • Offer quality products at competitive prices
  • Meet the needs of consumers
  • Minimize their costs and expenses

• Focus on ways to improve the business operation so that customers get the best products at the best prices.

Discussion #3: Ask students if they believe maximizing profits contributes to the well-being of society. Why or why not?

• A business can also exhibit social responsibility through contributions to public interests.
• These wide-ranging contributions help create goodwill and foster a positive image of the company.
  • Environmental efforts
  • Participation in or sponsorship of workshops, advisory councils, etc.
  • Financial support of art, education, or research

Slide #7 Who benefits from business?

• Product users
  • Every business has the responsibility of producing and/or offering safe, quality products.
  • Businesses are able to provide these products by conducting research to determine consumer desires, developing the desired products, and testing their quality and safety.
• The community
  • If you stop to think about it, many of the decisions that business owners make affect not only the business but the community in which the business exists.
  • The community is affected by a business’s decisions about production, employment, taxes, and pollution control.
  • It is also affected by a business’s contributions to educational, cultural, and training programs.

• Employees
  • To continue to exist, businesses must be socially responsible to their employees.
  • They must provide safe, secure working environments.
  • Businesses also need to consider whether or not the work environment is satisfying, challenging, and interesting to keep employees motivated.
• The company itself
  • The business is socially responsible for maximizing its profits so that the company can grow and prosper.
  • In this way, the company’s owners can make as much money as possible on their investments.

Discussion #4: Ask students to provide examples of ways that companies can benefit each of the groups of people.

Economic Goods and Services — Discussion Guide

Slide# 10-11 Opening Discussion (Entry)

Students will list three needs and three wants.

We all have wants—desires for things that we may or may not actually require.

• People’s wants are considered unlimited because when one want is satisfied, there is at least one other want waiting to take its place.

• Since each person is unique, wants can vary greatly from person to person.

• Wants are also considered competing because we may want more than one thing at a time.

• We often have to choose between our desires such as buying a new computer or taking a vacation.

KEY CONCEPTS

Slide #12 Economic goods and services

• • They must be useful in satisfying a human need.

• They are considered scarce since no one can freely have as much as they want.
• They also must be easy to transfer to others.
• Economic goods are physical (tangible) objects that consumers are able to feel, smell, taste, see, or hear such as clothing or food.
• Economic services are intangible activities such as haircuts.

Discussion #1: Give other examples of economic goods and services.

Slide #13 Impact of economic choices

• Since consumers do not have enough money to buy everything that they want, they have to choose whether or not to buy.

• • Consumers’ economic choices control what goods and services will be produced.

• Producers, likewise, have limited resources which motivates them to watch market activity to determine which products they should produce.
• The health of the economy is largely determined by consumers’ ability and willingness to buy.
  • When consumers fail to buy, the influence is felt throughout the economy from lower production levels and lost jobs.
  • Consumers who lose their jobs satisfy fewer wants which has additional negative impacts on the economy.

Discussion #2: Explain an economic decision you had to make because you couldn’t afford to buy everything you wanted.

Discussion #3: Explain a trend that is impacting what types and how many goods and services are produced in our economy.

Slide #15 Consumer goods and services

• Consumer goods and services are products purchased and used by the ultimate consumer.
• An ultimate consumer is the final user—the individual personally using a good or service to satisfy his/her own wants.

Industrial goods and services

• Industrial goods and services such as buildings, equipment, and supplies are purchased by producers to carry out their day-to-day business activities.
• Many producers must also purchase the raw materials and services they need to make their finished products.

Slide #16 Classifications of consumer products

• • Convenience products are purchased quickly by consumers without much thought.
  • Shopping products are chosen based on quality, price, and/or service.
  • Specialty products are items with special or unique characteristics that consumers are willing to pay higher prices for such as antiques and sports cars.
  • Unsought products such as coffins are purchased by consumers out of adversity instead of desire.

Slide #17 Classifications of industrial products

• • Materials are raw items like trees or processed materials like lumber that become part of a finished product after further processing.
  • Parts are items that will become part of a finished product, but they do not need any additional processing such as bolts or screws.
  • Installations are high-cost, long-lasting items that are used to produce other goods and services such as buildings and production machinery.
  • Equipment refers to products that are used in the operation of a business (but are not used in the actual production of a good or service) such as computers, vehicles, and telephones.
  • Supplies are products that are constantly being purchased and used up in the operation of a business such as paper, fuel, and shipping materials.

Economic Resources — Discussion Guide

Slide 19-20 Opening Discussion (Entry)

Lemonade Stand Resource List

Recently, Mindy and Jessica held a yard sale to get rid of old clothes, outgrown shoes, and other unwanted belongings.

• Since the weather that day was hot and humid, the sisters also decided to sell ice-cold, hand-squeezed lemonade.

• Before they could sell the lemonade, though, the girls had to gather and prepare some must-have items—also known as economic resources—for the lemonade stand.

  • They filled a large glass pitcher with water and lots of ice, added some sugar, and squeezed several fresh lemons for lemon juice.

  • Next, they stirred the mixture with a long-handled spoon and garnished it with a few lemon slices.

  • Finally, they put the lemonade and some cups on a small table in the yard and convinced their little brother Caleb to sell the lemonade to customers.

• Even though the lemonade stand was very small, it needed a variety of resources—including natural resources, human resources, and capital goods—to be successful.

KEY CONCEPTS

Slide #21 What are economic resources?

• Items that can be used to produce goods and services
• They enable businesses to operate.
• Without them, there would be no production.
• Three categories of economic resources:

• • Natural resource: Any resource that is found in nature and used to produce goods and services, such as land, water, wildlife, oil, and air
  • Human resource: People who work to produce goods and services
  • Capital good: Any manufactured or constructed item that is used to produce goods and services, such as equipment, tools, roads, trucks, and buildings

Discussion #1: Ask students if they know which of the lemonade stand’s economic resources fell into each category.

Discussion #2: Ask students to provide examples of each type of economic resource.

Slide #22 Economic resources are limited.

• There are not enough resources available for everyone to have as much of them as desired.
• In other words, people want more resources than what exists or can be produced easily at any one point in time.

• Natural resources, human resources, and capital goods are all limited for a number of reasons.

Slide #23 How businesses deal with limited resources

• Because economic resources are limited, businesses take a variety of steps to make up for the shortages.
  • Finding another source
  • Finding alternative resources
  • Conserving the resource
  • Paying a higher price for the resource
  • Maintaining the resource
  • Modifying the resource

Discussion #3: Ask students to provide examples of how businesses could use the steps to make up for shortages of natural resources, human resources, and capital goods.

Economics — Discussion Guide

Slide # 26-27 Opening Discussion (Entry)

Economics is the study of.... (student predictions)

If you were granted three wishes what would they be?

• Could you pick just three? Probably not.

No matter who you are, your wants are bound to be unlimited or endless.

• It’s human nature.

• Some might even say that it’s economics.

KEY CONCEPTS

Slide #28 Economics is the study of meeting unlimited, competing wants with limited resources.

• It is the process of deciding how to get the most with the least—obtaining the greatest satisfaction from the least amount of resources.
• Countries, businesses, and consumers must decide how to spend their resources or incomes to get the goods and services they want.

Slide #29 Economic wants

• Economic wants are desires for items that can only be obtained by spending money.
• Economic wants are considered unlimited, and they continually change.
• Wants are always competing because we must choose which wants to satisfy at any one time because our resources are limited.

Discussion #1: When you were a child, what were some of your wants? What are your wants now, and how will they change or compete with each other in the future?

Slide #30 Types of resources

• Resources include natural resources, human resources, and capital goods.
• Resources are limited because there aren’t enough to satisfy everyone.
• The gap between limited resources and people’s unlimited wants creates scarcity.

Discussion #2: Give an example of scarcity that has occurred in the economy and describe the effect it has had on individuals, businesses, and government.

Slide #31 Scarcity requires decision-making.

• Scarcity requires societies to use resources wisely through good decision-making.
  • Basic economic decisions include:

• What products and services to produce
• How to produce them
• How to divide or allocate them among individuals, businesses, and governments

• One way to deal with scarcity is economizing—deciding which goods and services to purchase or provide so the most satisfaction can be obtained.
• When a choice is made about the best use of resources, the alternative that is given up is called the opportunity cost of that choice.
• Scarcity also requires deciding between trade-offs. Sometimes one thing must be given up in order to get something else.

Discussion #3: Give an example of a trade-off made by you, your family, or your community to gain something else and explain what opportunities were lost by making the choice.

Slide #32 Economic activities

• Consumption is the activity of using goods and services.
• Production is the process of producing goods and services from natural, human, and capital resources.
• Exchange is when a payment is provided to acquire goods, natural resources, human resources, or to pay for capital goods to use for production.
• Distribution is the process of dividing income among resource owners and producers.
  • Resource owners use their income to buy more goods and services.
  • Producers use their income to buy more resources.

Slide #33-34 The impact of money values

• When a product is capable of higher productivity, such as a fast computer, it commands a higher price.
• A product’s price is also impacted by demand and supply levels.

Economic Utilities — Discussion Guide

Slide #36-37 Opening Discussion (Entry)

Hungry for a snack? What sounds good to you—a bowl of ice cream, some popcorn, or a candy bar?

• It depends on what you’re in the mood for, doesn’t it?

• If you’re hungry for something chocolaty, you might choose the candy bar.

• If you’d like something salty or more filling, though, you’d probably choose the popcorn.

• Or, if it’s almost time for dinner, you might avoid snacking completely.

• You’re likely to choose what best satisfies your needs and wants—the option that is most useful to you.

• You’re not the only one to base your decisions on what would bring you the most satisfaction.

• Just about every individual and business in our economy makes choices similar to yours many times a day.

• They base their actions and choices on what will maximize their satisfaction or, in economic terms, what will bring them the most utility.

KEY CONCEPTS

Slide #38 The concept of economic utility

• Goods and services have utility only if they bring satisfaction to the person or company wanting them.
• A product's utility varies from person to person, from business to business, and over time.
• Economists indirectly measure utility by comparing the levels of satisfaction that individuals and businesses receive from different products.

Discussion #1: Ask students to give an example of a time that they made a choice that brought them the most utility.

Slide #39 Types of economic utility

• Four types of utility:

• • Form utility: A business alters or changes the shape or form of a product to make it more useful or satisfying for consumers.
  • Time utility: Products are available at the time they are desired.
  • Place utility: Goods or services are available at the place where they are needed or wanted by customers.
  • Possession utility: The person or business who purchases the product finds it useful and satisfying only after assuming ownership of the product.

Discussion #2: Ask students to provide examples of each type of utility.

Slide #40 How do businesses create utility?

• Marketing—businesses should aim all activities toward satisfying the customer.
• Marketers can't create and enhance utility all by themselves.
• Other business functions are involved.
• Businesses have to provide all four types of utility for customers to be truly satisfied.

Discussion #3: Ask students to suggest ways that businesses could provide all four types of utility.

Supply and Demand — Discussion Guide

Slide # 42-43 Opening Discussion (Entry)

What do we currently know about Supply & Demand?

Coffee shops are so popular because there’s a demand for the products—coffee, tea, baked goods, etc.—that they sell.

• This means that consumers are ready to buy at a particular price at a particular time.

• Many customers are willing to pay the price to enjoy specialty coffee in the atmosphere of a coffee shop.

• This is an example of supply and demand.

• The economic principle of supply and demand determines what goods and services will be available and how much they will cost.

KEY CONCEPTS

Slide #44 What is demand?

• For demand to exist, consumers must have a desire for a good or service and the buying power to pay for the good or service.
• The law of demand states that the quantity of a good or service that consumers will buy varies inversely with the price of the good or service.
• Consumers usually will buy more at lower prices, and less at higher prices.

Discussion #1: Ask students to provide an example of a product that is in high demand.

Slide #45 What is supply?

• Supply is the quantity of a good or service that producers are able and willing to offer for sale at a specified price in a given period of time.
• According to the law of supply, the quantity of a good or service that will be offered for sale varies in direct relation to its selling price.
• The higher the price, the greater the quantity supplied because producers are able to earn more profit.

Slide #46 The law of supply and demand

• The supply of a good or service will increase when the demand is great and decrease when demand is low.
• When demand is great, prices usually increase, and the supply also increases.

• When demand is low, prices usually decrease, and the supply also decreases.
• Businesses are trying to balance supply and demand so they have the products that
  customers want.
• They want to achieve equilibrium—the point at which the quantity supplied is equal to the quantity demanded.

Discussion #2: Ask students to give an example of how the law of supply and demand works in the real world.

Slide #47 The relationship between supply and demand and price

• When a buyer's market exists, the price of a product is low because there is a large supply and a small demand.
• When the quantity demanded is much greater than the quantity supplied, prices are higher and a seller's market exists.

Slide #48 Elasticity

• Elasticity is an indication of how changes in price will affect changes in the amounts demanded and supplied.
• When demand is said to be elastic, demand changes when prices change.
  • When prices go up, consumers often cut back and buy less, which leads to a decrease in demand.
  • On the other hand, consumers often demand more when prices start to fall.

• Inelastic demand exists if the demand for a good or service is constant, even if the product's price changes.
  • Some products are considered necessities that consumers must purchase.
  • Demand for such products remains the same even when prices increase.

Discussion #3: Ask students to provide examples of products with elastic demand and inelastic demand.

Slide #49 Factors that affect demand

• Utility: If the product provides satisfaction—if it is useful or needed—there will be a demand for it.
• Buying power: If consumers do not have money to spend, they cannot buy products.
• Price of other goods and services: Depending on what product a customer is looking for, there are often lower priced substitute goods and services available.
• Consumers: The number of consumers, standard of living, and consumer expectations all affect demand.

Slide #50 Factors that affect supply

• Cost of production: If production costs are higher than the prices most consumers will be willing to pay, businesses will produce less.
• Number of producers: As more and more companies enter the market and provide similar products, the supply also increases.
• Future prices: If businesses expect prices to increase substantially, they might wait to sell.
• Disasters and emergencies: The weather and other natural disasters may influence supply.
• Government: Various governmental rules and regulations, such as taxes, restrictions on natural resources, and subsidies, have an effect on supply.
• Technology: Advances in technology tend to lower the cost of production and reduce prices, which increases supply. Technology has led to a decrease in the supply of some products and has even eliminated the supply of others.

Discussion #4: Ask students to give additional factors that could affect supply and demand of certain products.

Functions of Price — Discussion Guide

Slide# 52-53 Opening Discussion (Entry)

Describe how pricing impacts purchasing decisions.

Imagine you are planning a surprise birthday party for your best friend.

• You want to purchase a birthday cake and ice cream.

• You also want to provide a lunch buffet and decorations.

• You go to a supermarket to price everything you need for the party.

• But what if none of the items are priced?

• You won’t be able to decide what items or how much you can buy.

KEY CONCEPTS

Slide #54 The economics of price

• Price is the amount of money paid for a good, service, or resource.
• If consumers highly value items, they are often willing to pay more for them.
• Consumers pay less for items that they consider to be of little value.

Discussion #1: Give an example of an item that you value highly and would be willing to pay a high price to acquire.

Slide #55 Relative price

• Refers to the comparative prices consumers are willing to pay for different products
• Determines how basic economic questions are answered
  • What will be produced?
    • In the U.S. economy, producers typically produce products that are
      highly profitable.
  • How will products be produced?
    • Producers strive to combine the needed resources and technologies to produce goods and services at the lowest cost possible.
  • How will products be allocated?
    • Products are allocated to whoever is willing and able to pay the price.

Slide #56 Functions of relative prices

• Information is provided by relative prices between products which help consumers, producers, and resource owners make economic decisions: whether to buy, what to buy, and how much to buy.
• Incentives such as profits encourage producers to change and reallocate their resources.

• • For example, an increase in the price of wheat relative to the price of corn
    might cause a farmer to plant more wheat and less corn.

Discussion #2: Give an example of reallocated resources that has occurred in our economy.

• Rationing is used to allocate limited resources, goods, and services among consumers.

• Generally, the higher the price of anything, the less of it consumers will buy—and vice versa.

• For example, when producers raise the price of limited items like tickets to the World Cup, many potential buyers are rationed out by the excessive price.
• When interest in an event is low, prices are lowered to entice more people to attend.

Slide #57 Market effects on price

• Interactions between supply and demand determine prices.

• Demand in the marketplace motivates producers to provide products referred to as supply.
• Supply available within the marketplace affects the price consumers are willing to pay.
• The price buyers are willing to pay affects how willing producers are to meet or increase supply.

Slides #58-59 Buyer’s and seller’s markets

• Buyer’s and seller’s markets

• When supply is greater than demand, there is an excess supply, low demand, and low prices which creates a buyer’s market favorable to buyers.

• When an excess demand, low supply, and high prices occur, it creates a seller’s market that benefits producers.

• Producers respond to a seller’s market by increasing the supply.
• However, once the demand has been met or exceeded, the price decreases.
• Producers then respond by decreasing the supply because selling has become less profitable.

Discussion #3: Explain a time when you benefitted from a buyer’s or seller’s market.

Slide #60 Other market conditions

• Equilibrium

• An equilibrium price, or market-clearing price, is achieved:

• • When all suppliers are able to sell their supply at the prices they desire
  • And all buyers are able to demand the amounts they desire at prices they are willing to pay

• The equilibrium price is rarely achieved because the market is regularly impacted by opposing forces.

• Substitution effect

• Is caused by changes in relative prices within the market

• • If apples are priced high, buyers might purchase oranges instead.
  • This decreases the demand for apples and increases the demand for oranges instead.

Slide #61 Market price

• It is the actual price that prevails in a market at any particular time.
• It’s the price you actually pay for a good or service.
• Your cappuccino might cost $3.25 today and $2.75 tomorrow.
• All prices regularly fluctuate in response to the effect of supply and demand.