introduction to business -distinguish between wants and needs -define how wants and needs are...

Introduction to Business

-Distinguish between wants and needs

-Define how wants and needs are satisfied

-Group Activity

Wants and Needs

Wants are the things you wish you could have. Each person has wants.

Necessary wants are needs.

Satisfying Wants and Needs With Goods and Services

•Goods can be physically weighed or measured. (tangible)

•Goods satisfy your wants and needs for material things that you can see or touch.

Satisfying Wants and Needs With Goods and Services

•Services are tasks that people or machines perform. (intangible)

•Services also satisfy some of your wants for things you can’t see or touch.

Unlimited Wants, Limited Resources

•Most people have unlimited wants for goods and services.

•The more money you make, the more goods or services you want.


•A resource is anything that people can use to make or obtain what they need or want.

•What are some examples of resources???


•The problem of unlimited wants and limited resources affects individuals, companies, and nations.

WHY???


Resources limit the number of wants people can satisfy.

Deciding on Your Resources

The decision-making process has five essential steps: 1. Identify the problem.2. List the alternatives.3. Determine the pros and cons.4. Make the best decision.5. Evaluate your decision.

You have $100 as a resource to help you with your math class. Whatever action you choose will have to last you the entire school year. Apply the 5 step process above.


ILDME Ida Likes Decorating Many Elephants

Private Wants versus Public Wants

Wants are the things you wish you could have. Each person has wants.

A group of people may also share the same wants. Although these wants are shared, they are considered private wants.

Some wants are widely shared by many people.

These wants are no longer considered private but become public wants, such as highways, drinking water, and education.

For the most part local, state and federal governments satisfy public wants.

•Business is any activity that seeks profit by providing goods or services to others.

Businesses satisfy people’s basic needs all the way to their lavish wants.

Competition and profit motivate these businesses to continually strive for your business.

Examples of Service business???

Business Activities

These activities happen behind every product or service:

• Organizing• Managing• Producing• Marketing


•Profit is the amount of money left over after a business has paid for the cost of producing its goods and services.

•Profit is the motivation for taking the risk to start a business.

•Companies thrive on competition, or the contest between businesses to win customers.

•Competition is a direct response to consumers’ wants and needs.


Can you think of some competitors in the following categories?

•fast food

•pizza delivery

•electronic retailers

•commercial airlines

•luxury automobiles

•cable TV networks

•toothpastes

•A consumer is a person who selects, purchases, uses, or disposes of goods or services.

•Business is aware of your changing needs and wants.

Calculating Profit

Sue and Reggie need to raise $100 for their school choir trip. They plan to make and sell cookies at their school. They spend $22 on ingredients and price the cookies at 75 cents a piece. How many cookies do they need to sell

to make a $100 profit?

You may log into the computer and use the calculator tool to complete this problem.


Calculating Profit Solution

1. Add the cost of the materials ($22) to the amount they hope to fundraise ($1oo). Total is $122

2. They plan to sell the cookies for $0.75.

3. $122/$0.75= 162.6666666666666666666666666667

4. You must round this to a “whole cookie”

5. Answer= 163 cookies


Bernie Madoff ran what might be the biggest fraud of all time, defrauding investors as much as $50 billion. Some say that the investors who lost their money were too greedy and should have known that something was wrong. What do you think?


Self Interest vs. Greed

• One winter the weather is unusually cold, and a fuel-oil dealer finds that customers are ordering much more heating oil. If the dealer raises prices in response, is this an example of rational self-interest or greed?

Self Interest vs. Greed

• When driving on the freeway, Carl blows his horn repeatedly, tailgates cars and cuts in front of them if he can. Carl explains, “Other drivers are in my way, and I operate the way I do to get to my destination sooner.”

• What benefits does Carl receive from driving in this manner?

• What costs does he incur? • Is Carl showing rational self-interest or greed?

• Does Carl’s strategy always work?

•

• Has a store ever ran out of an item you wanted to buy? Did a store ever discontinue an item you liked? What did you do? Why was the store out of the item?

Gas coupon printed but not issued during the 1979 energy crisis


Factors of Production Factors of Production

A shortage of resources is called scarcity.

It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources.Like individual, governments and societies experience scarcity . . . .

A basic economic problem for any society is how to manage its resources.

Factors of Production Factors of Production To meet the wants and needs of its people, a society must produce goods and services.

The means to produce them are called economic resources, or factors of production.

Natural Resources Natural Resources The raw materials found in nature are called natural resources.

Natural resources become factors of production when we use them to produce goods.

Natural Resources Natural Resources Some resources, like wheat and cattle, are renewable. They can be reproduced.

Other resources are limited, or nonrenewable, like coal, iron, and oil.

Human Resources Human Resources The knowledge, efforts, and skills people bring to their work are called human resources, or labor.

Human Resources Human Resources Labor can be skilled or unskilled, physical or intellectual.

One of the biggest problems facing many nations today is not a shortage of labor but a shortage of WHAT???

Capital Resources Capital Resources

Capital resources are the things used to produce goods and services, like buildings, materials, and equipment.

As the wants and needs of people change, so do the needs for capital resources.

Entrepreneurial Resources Entrepreneurial Resources Meeting the changing wants and needs of people requires entrepreneurial resources.

Entrepreneurial Resources Entrepreneurial Resources Entrepreneurs improve on ways to use resources, or create and produce new ones.

A key to dealing with scarcity is to develop new resources and technologies.

Types of Economic Systems Types of Economic Systems

Economics is the study of how a society chooses to use resources to produce and distribute goods and services for people’s consumption.

Economic activity affects everyday life.

Types of Economic Systems Types of Economic Systems The two basic and opposing

economic systems that have been developed are:

• Market economy• Command economy

Market Economy Market Economy

In a market economy economic decisions are made in the marketplace according to the laws of supply and demand.

Price is the amount of money given or asked for when goods and services are bought or sold.

The Market and PricesThe Market and Prices

Demand is the amount or quantity of goods and services that consumers are willing to buy at various prices.

Supply is the amount of goods and services that producers will provide at various prices.

•Demand and supply work together.

•When the quantity demanded and the quantity supplied meet, the price is called the equilibrium price.

The Market and PricesThe Market and Prices

•Capitalism, or private enterprise, is a market economy system.

•In a capitalist system, resources are privately owned.

Economic SystemsEconomic Systems

Economic SystemsEconomic Systems

A market economy offers incentives.

EXAMPLESProfitCompetition

Problems with a market economy• Those who do not have

the wanted job skills do not get an income.

• One or two businesses control the market, thus leading to higher prices and lower quality products

Command EconomyCommand Economy

•In a command economy a central authority makes the key economic decisions.

•A command economy is also called a planned or managed economy.

TWO TYPES OF COMMAND ECONOMIES

Communism *strong command

economy * the state makes all

the economic decisions.

EX. China & Cuba

Socialism *moderate command economy *there is some form of private enterprise

EX. France & Sweden

COMMAND ECONOMY

ADVANTAGESThe primary advantage of

a command economy is that it guarantees everyone an equal standard of living.

The standard of living is the amount of goods and services the average citizen can buy.

DISADVANTAGESLittle choice of what to

buy.No incentive for

entrepreneurship when you can’t run your own business.

Mixed EconomyMixed Economy

•Most nations have a mixed economy, a combination of a market and command economy.

•The state takes care of people’s needs while the marketplace takes care of people’s wants.


An economy is the organized way a nation provides for the needs and wants of its people. A country’s resources determine economic activities such as:

• Manufacturing

• Buying

• Selling

• Transporting

• Investing


In a pure market economy , there is no government involvement in economic decisions. The market is free to answer:

• What: Consumers decide what should be produced in the market through which products they buy the most.

• How: Businesses decide how to produce goods and services by being competitive and out-selling their competitors.

• For whom: The people who have more money are able to buy goods and services. To make money, people are motivated to work and invest their income.


A command economy is a system in which a country’s government makes economic decisions and decides:

• What: One person (often a dictator) or a group of government officials decides what products are needed.

• How: The government owns all means of production, so it makes the decisions.

• For whom: Wealth is regulated by the government to equalize everyone. Everything from housing to education is subsidized by the government.


Because all economies in the world today are mixed, a meaningful classification depends on how much a government interferes with the free market.

Economic systems can be put on a continuum to compare their respective levels of government involvement. Economic freedom to the right of the center encourages competition while systems to the left are more regulated by their governments.

Capitalism is a political and economic philosophy characterized by marketplace competition and private ownership of business.

The political system most frequently associated with capitalism is democracy. Capitalist countries include:

• The United States

• Japan

Marketing Essentials Chapter 3, Section 3.1

Communism is a social, political, and economic philosophy in which the government controls the factors of production. There is no financial incentive for people to increase their productivity because the government regulates and assigns:

• Employment

• Medical care

• Education

• Housing

• Food

Marketing Essentials Chapter 3, Section 3.1

Examples of modern communist countries are:

• Cuba

• North Korea

• China

Socialist countries have an increased amount of government involvement in the economy, but the market is not completely controlled. The state will generally control noncompetitive companies in areas like:

• Telecommunications

• Natural resources (gas, water, and power)

• Transportation

• BankingModern countries with socialist elements in their economy include:

• Canada

• Germany

• Sweden

Economic indicators are figures used to measure economic performance.

•Economic indicators measure things like how much a country is producing, whether its economy is growing, and how it compares to other countries.

•One way of telling how well an economy is performing is to determine how many goods and services it produces during a certain period of time.

• Gross domestic product (GDP) - The total value of the goods and services produced in a country in a given year

•To calculate the GDP, economists compute the sum of goods and services.

• Consumer goods and services• Business goods and services• Government goods and services• Goods and services sold to other

countries

Economists include four main areas in calculating the GDP:

The United States produces so much more than other countries that is has a higher standard of living.

The standard of living is the amount of goods and services the average citizen can buy.

ConsumerConsumergoods goods

andandservicesservices

BusinessBusinessgoodsgoods


Govn’tGovn’tgoodsgoods


GoodsGoodsandand

servicesservicessold tosold tootherother

countriescountries

+ =++GrossGross

DomesticDomesticProductProduct

The GDP doesn’t include the goods and services that aren’t reported to the government.

GDP and Standard of Living Activity

The unemployment rate measures the number of people who are able to work but don’t have a job during a given period of time.

There are different reasons for being unemployed, including:

• Temporary• Seasonal• Changes in industry• Economic slowdown

Inflation is a general increase in the cost of goods and services.

Inflation can happen when an economy actually becomes too productive.

•As the demand for goods goes up, producers raise their prices.

•To pay the higher prices, workers demand higher wages.

•When wages go up, producers raise prices again to pay for the higher wages, and so on.

•This situation can spiral out of control and lead to hyperinflation.

Deflation is a general decrease in the cost of goods and services.

When an economy produces more goods than people want, it has to lower prices and cut production.

National Debt

• When the government spends more on programs than it collects in taxes, the difference in the amount is called the budget deficit.

• If a nation spends less than its income, it has a budget surplus.

• The government will probably use a surplus to:• cut taxes• reduce the national

debt• increase spending

for certain programs.

The total amount of money a government owes is its national debt.

If the debt gets too large, a nation can become dependent on other nations or unable to borrow any more money.

National Debt - Bureau of National Debt

Debt Clock

Inflation Activity

Use the internet to find the current price for the following items: Bread Gallon of Milk Dozen of eggs Pound of sugar

What were the prices for these items 5, 10, and 25 years ago?

Display your findings in chart.

The Business Cycle The Business Cycle Over long periods of time economic changes seem to form patterns.

The rise and fall of economic activity over time is called the business cycle.

The Business Cycle The Business Cycle The four phases of the business cycle are:

• Prosperity • Recession• Depression• Recovery

The Business Cycle The Business Cycle

The repeated rise and fall of economic activity over time is called a business cycle. What are the four phases of the cycle?

ProsperityProsperity

Prosperity is a peak of economic activity. Unemployment is low, production of goods and services is high, and new businesses open.

RecessionRecession

During a recession, economic activity slows down.

There is a general drop in the total production of goods and services, so the GDP declines.

The ripple effect is when a recession in one industry leads to a recession in other industries.

DepressionDepression •A deep recession that affects the entire economy and lasts for several years is called a depression.

•A depression can be limited to one country but usually spreads to related countries.


During a depression there is:

• high unemployment

• low production of goods and services

• excess capacity in manufacturing plants.

DepressionDepression

The stock market crash on October 29, 1929, or “Black Tuesday,” marked the beginning of the Great Depression. During the Great Depression, the number of people out of work rose nearly 800 percent.

RecoveryRecovery

During a recovery:• The new demand for goods and services

stimulates more production• The GDP grows• New businesses open• Production starts to increase• People start going back to work and have

money to spend again

•A rise in business activity after a recession or depression is called a recovery.

RecoveryRecovery A recovery can take a long time or it can happen quickly. During World War II, the United States recovered from the Great Depression much faster because of the demand for war production.

•The key phases of the business cycle are expansion, peak, recession, trough, and recovery. Economic business cycles affect businesses, consumers, and governments and they in turn affect business cycles, both domestically and globally.

The Business Cycle The Business Cycle

The repeated rise and fall of economic activity over time is called a business cycle. What are the four phases of the cycle?

Did You Ever Wonder?•What were your thoughts as you watched this video?

•What is the author’s point of view?

•Do you agree or do you think this is a little extreme?

•Does seeing something like this motivate you take action?

•What could you do?

•Will this make you think about a “green” career?

Genuine Progress Indicator (GPI)• Is a concept in green economics that has been suggested as a replacement metric for

gross domestic product (GDP).

• Measures whether or not a country's growth, increased production of goods, and expanding services have actually resulted in the improvement of the welfare of the people in the country.

• Example: the GPI will be zero if the increases in dollar costs of crime and pollution equal the total dollar rise in production of goods and services, all other factors being constant.

• Considers whether a country's economic activity over a year has left the country with a better or worse future possibility of repeating at least the same level of economic activity in the following years.

• Example: agricultural activity that uses replenishing water resources, such as river runoff, will score a higher GPI than the same level of agricultural activity that drastically lowers the water table by pumping irrigation water from wells.

• http://dieoff.org/page11.htm

http://www.econedlink.org/lessons/index.php?lesson=NN130


introduction to business -distinguish between wants and needs -define how wants and needs are...

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