EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalLearning Goal

To be able to define To be able to define

economics and economics and

business, and classify business, and classify

N/W, G/S, P/P.N/W, G/S, P/P.

EconomicsEconomicsThe study of how SOCIETY

chooses to use

RESOURCES to PRODUCE

and DISTRIBUTE GOODS

and SERVICES for

PEOPLE’S

CONSUMPTION.

BusinessBusiness

An activity that seeks

profitprofit by providing

goodsgoods and servicesservices

to consumersconsumers.

BusinessEvery Business Does 4 Every Business Does 4

Things:Things:

1. Organize – People & Equipment

2. Manage – Resources

3. Produce – The Product

4. Market – Sell the Product

Needs or Needs or Wants?Wants?

•How many needs and wants do you have?– UNLIMITED!!!UNLIMITED!!!

•What is the difference between a need and a want?– SURVIVAL!!!SURVIVAL!!!

• PublicPublic – Provided by the Government– Ex: Transportation, Education,

Welfare, etc.

• PrivatePrivate – People must purchase on their own wherever available– Ex: Clothes, Movies, Most

Food, Music, etc.

Public or Public or Private?Private?

Goods or Services?

• GoodsGoods – Physical

Products– Ex: Car CD Player

• ServicesServices – Task

Performed– Ex: Installation of the CD Player

ProfitProfit

The amount of money

left over after a

business has paid for

the cost of producing

its goods & services.

Sales

Costs

PROFITPROFIT

Pizza SalesDough $ .50Sauce $ .40Cheese $1.00Pepperoni $1.10

COST = $3.00COST = $3.00If the Pizza Sells for $15.00

Profit = $12.00Profit = $12.00

ProfitThe ONLYONLY way that a

business will make a

profit is by selling

goodsgoods and servicesservices

that people needneed or

wantwant!

CompetitionCompetitionThe contest between The contest between

businesses to win businesses to win customers.customers.

• People’s wants & needs change

• Businesses must change with them

• Somebody will sell them what they want!

Consumer

The person who

selects, purchases,

uses and disposes of

goods or services.

Learning GoalLearning Goal

To be able to define To be able to define

economics and economics and

business, and classify business, and classify

N/W, G/S, P/P.N/W, G/S, P/P.

EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalLearning Goal

To be able to To be able to

classify the classify the

resources available resources available

to every society.to every society.

scarcityThe shortage of The shortage of

resourcesresources• Are there enough resources

to satisfy society’s needs and wants?

• Society must choose how it will use it’s resources . . .

economicsThe study of how society

chooses to use RESOURCES to produce

and distribute goods and services for

people’s consumptions.

4 Types of Resources

1.1.Natural ResourcesNatural Resources2 Types of Natural Resources:2 Types of Natural Resources:

1.1. RenewableRenewable – continuous supply that recreates itselfEx: wheat, animals

2.2. Non-RenewableNon-Renewable – limited supply, nature does not replenishEx: oil, iron, coal, water

4 Types of Resources

2.2.Human ResourcesHuman Resources

• Knowledge

• Skills

• Strength

4 Types of Resources

3.3. Capital ResourcesCapital Resources• Things used to produce

goods and services• Ex: Delivery Trucks,

Buildings, Machines, Computers, People, Money

4 Types of Resources

4.4.Entrepreneurial Entrepreneurial • The initiative to improve

or create new goods and services (not tangible!)

• Ex: Henry Ford’s Assembly Line

• Key to dealing with Key to dealing with Scarcity!Scarcity!

Fuel Scarcity

What Entrepreneurial What Entrepreneurial

Resources are being Resources are being

developed to help developed to help

with fuel scarcity?with fuel scarcity?

Learning GoalLearning Goal

To be able to To be able to

classify the classify the

resources available resources available

to every society.to every society.

EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalTo be able to To be able to

analyze the analyze the

process of process of

choosing how to choosing how to

use society’s use society’s

resources.resources.

What We Know . . . 1. Every society has

resources2. No society has enough

resources to satisfy people’s needs and wants

So . . .So . . . 3. Every society must make

choices

3 Questions

1.1.What should be What should be

produced?produced?

• A resource can only

be used once!

3 Questions2.2. How should it be How should it be

produced?produced?A. Method of Production

• Human or Machine?• Depends on Capital

Resources!

B. Quality of Production• Depends on the Quality of the

Resources!

3 Questions3.3. Who will share in Who will share in

what is produced?what is produced?

• People can have as many goods and services as they can afford to buy.

Income = StuffIncome = Stuff

Learning GoalTo be able to To be able to

analyze the analyze the

process of process of

choosing how to choosing how to

use society’s use society’s

resources.resources.

EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalLearning Goal

To be able identify To be able identify

the government’s the government’s

role in our role in our

economy.economy.

Govt.’s Role in Economics

1.1. Protecting the Protecting the Public from BusinessPublic from Business

2.2. Protecting Protecting CompetitionCompetition

3.3. Providing for the Providing for the PublicPublic

Government’s Economic Jobs

1.1. Protecting the Public Protecting the Public Against:Against:

A. Oligopoly – Small # of companies control the market

B. Monopoly – 1 company controls the market

C. Trust – Rival companies agree not to compete

Government’s Economic Jobs

2.2.Protecting Protecting CompetitionCompetition

• The Interstate The Interstate Commerce ActCommerce Act

• Trade between States must NEVER be restricted!

Government’s Economic Jobs

3.3. Providing for the Providing for the PublicPublic

A.Public Servicesa)Public Protection

– Military, police, fire dept.

b)Social Development– Education, parks, libraries

c)Public Development– Roads, courts, post-office

Government’s Economic Jobs

(3. Providing for the (3. Providing for the Public)Public)

B.Work Assistancea)Largest Employer in U.S.

• (3 million people)• Post office, teachers, police

b)Unemployment Assistance• Welfare, Social Security, Job

Training/Assistance

Government’s Economic Jobs

(3. Providing for the (3. Providing for the Public)Public)

C.Business AssistanceA.Largest consumer of goods

and services• Schools, military, roads

B.Small Business LoansC.Large Loans

• Businesses and Small Countries

Government Funding

How does the How does the

government pay for government pay for

these programs?these programs?

TAXES!TAXES!

Learning GoalLearning Goal

To be able identify To be able identify

the government’s the government’s

role in our role in our

economy.economy.

EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalLearning Goal

To be able to analyze To be able to analyze

and create a Supply and create a Supply

& Demand Curve for & Demand Curve for

a product.a product.

SupplyThe amount of goods (or The amount of goods (or services) that services) that producersproducers

will will provideprovide at various at various prices.prices.

•Determined byDetermined by: Business Owners

•GoalGoal: As much profit as possible

•Ideal Price: $ infinity.00

DemandThe amount of goods (or The amount of goods (or

services) that services) that consumers consumers will will buybuy at various prices. at various prices.

•Determined byDetermined by: Consumers

•GoalGoal: As much as possible for as little as possible•Ideal Price: $0.00

Learning GoalLearning Goal

To be able to analyze To be able to analyze

and create a Supply and create a Supply

& Demand Curve for & Demand Curve for

a product.a product.

EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalLearning GoalTo be able to identify To be able to identify

the type of Economy the type of Economy

based on based on

government government

involvement and involvement and

supply and demand.supply and demand.

The Goal of every economy

To provide people with a To provide people with a

minimumminimum standard of standard of

livingliving or or quality of life.quality of life.

Market economy

• Economic decisions are made in the marketplacemarketplace according to the laws of Supply & DemandSupply & Demand.

• NONO Government Involvement!

– Remove hindrances to trade

MarketCharacteristicsCharacteristics::1. Privately Owned Resources2. Decisions Made by Business

Owners3. Higher Income = More Stuff

•Intense Competition•Owners Wealthy, Workers

Poor•Entrepreneurship Encouraged•NONO Public – ALLALL Private

Command economy

Key economic

decisions are

made by

GovernmentGovernment

Command economy

2 Types:2 Types:1. Strong = Communism

• Gov’t makes ALL decisions & controls ALL resources for the common good.

• EX: China, Cuba

Command economy

2 Types:2 Types:2. Moderate = Socialism

• Gov’t makes MOST decisions & controls MAJOR resources for common good

• EX: France & Sweden

CommandCharacteristics:Characteristics:• Gov’t provides job, house &

healthcare• Everyone makes the same

income! (standard of living)• Goods and Services

distributed evenly• Prices fixed by government

mixed economy• Anything in between a

Market and Command Economy

• No true Market Economy in existence now– U.S. is the closest– Gov’t provides defense

& education

Learning GoalLearning GoalTo be able to identify To be able to identify

the type of Economy the type of Economy

based on based on

government government

involvement and involvement and

supply and demand.supply and demand.

homeworkChoose a

Career:• Doctor• Worker• Business

Owner

Choose an Economy:

• Market• Command

1.What is life like for you?2.What is your income

level?3.What is your social

status?4.What is your spending

like?

EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalLearning Goal

To be able to To be able to

determine the determine the

state of the state of the

economy based on economy based on

specific indicators.specific indicators.

Economic Indicators

Statistics used to Statistics used to

measure how well measure how well

the economy is the economy is

doing.doing.

Gross domestic product (gdp)

The total value of all goods The total value of all goods and services produced in and services produced in a country in one year.a country in one year.

Includes products sold to:Includes products sold to:• businesses, government,

customers, and other countries.

Unemployment rate

The number of people The number of people

who are who are able to workable to work but but

don’t have a job don’t have a job for a for a

given period of timegiven period of time..

Unemployment rate

4 Types of 4 Types of

Unemployment:Unemployment:

1.1. TemporaryTemporary• Ex: recent graduate,

changing jobs

• Little effect on the Economy

Unemployment rate

4 Types of 4 Types of

Unemployment:Unemployment:

2.2. SeasonalSeasonal• Ex: harvesting crops, retail

work over the holidays

• Little effect on the Economy

Unemployment rate

4 Types of 4 Types of Unemployment:Unemployment:

3.3. Industry ChangesIndustry Changes• Technology replaces

human workers• Lasts long periods of time• Workers must be

retrained with new skills

Unemployment rate

4 Types of 4 Types of

Unemployment:Unemployment:

4.4. Slowing of the EconomySlowing of the Economy• Not enough work

• Affects millions of workers

• Lasts until the economy recovers (years and years)

Rate of Inflation

A general increase in A general increase in the cost of goods and the cost of goods and

services.services.

The Economy becomes too productive!

The Inflation Spiral!

People have People have more more

moneymoney

Businesses Businesses raise prices raise prices

to meet to meet demanddemand

Businesses raise Businesses raise prices again to prices again to afford to pay afford to pay higher wageshigher wages

People want People want higher wages higher wages to pay higher to pay higher

pricesprices

People People demand more demand more

productsproducts

EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalLearning Goal

To be able to To be able to

identify the source identify the source

of the National of the National

Debt.Debt.

National DebtThe total amount of The total amount of money a government money a government

owes.owes.• DeficitDeficit – Spending more on

programs than collecting in taxes

• SurplusSurplus – Collecting more in taxes than spending on programs

Inflation rates• July 2009 -2.10%• July 2008 5.60%• July 2007 2.36%• July 2006 4.15%• July 2005 3.17%• July 2004 2.99%• July 2003 2.11%• July 2002 1.07%• July 2001 2.72%• July 2000 3.66%Neatideas.com (Sept. 8, 2006) Inflation Data.com

Unemployment Rates

• 2009 Estimate 9.7%• Aug. 2008 Estimate

6.10%• 2006 Estimate

4.80%• 2005 Estimate

5.10%

Employment rates by state (as of July 2009)• 1 NORTH DAKOTA 4.2% • 2 NEBRASKA 4.9 % • 2 SOUTH DAKOTA 4.9%• 33 MISSOURI 9.3 %• 33 NEW JERSEY 9.3%• 47 CALIFORNIA 11.9% • 47 OREGON 11.9 %• 49 NEVADA 12.5 %• 50 RHODE ISLAND 12.7%• 51 MICHIGAN 15.0%

Gross Domestic Product

• GDP 2009 = $14.1 Trillion• GDP 2008 = $14.3 Trillion• GDP 2006 = $13.13

Trillion• GDP 2000 = $9.82

Trillion• GDP 1990 = $5.8

Trillion

National Debt Calculator

http://zfacts.com/p/461.html

National Debt per person!

http://www.brillig.com/debt_clock/

CUBACUBA

• UR 1.90%• GDP $45.1 Billion• Inflation 3.6%• Debt $35 Billion

($20 Billion owed to Russia)

France

• UR 8%• GDP $2.244 Trillion• Inflation 1.5%• Debt $4.396 Trillion

Iraq

• UR 18%• GDP $55.44 Billion• Inflation 4.7%• Debt $81.48

Billion

EconomicEconomicss

The Foundation The Foundation

of Businessof Business

Learning GoalLearning GoalTo be able to identify To be able to identify

the phases of the the phases of the

economic cycle, and economic cycle, and

determine what phase determine what phase

the economy is in.the economy is in.

Economic Economic CycleCycleA country’s status on A country’s status on

the economic cycle the economic cycle will effect:will effect:

• Number of Available Jobs• Levels of Incomes• Specific (or all) Industries• Other Countries’

Economies

Economic CycleProsperityProsperity

Recovery

RecoveryR

ecession

Recessio

n

DepressionDepression

ProsperityProsperityCharacteristics:

1. Low Unemployment

2. High Production of G & S

3. New Businesses Opening

4. Wages are High

RecessionRecessionCharacteristics:1. Less $$, Less Spending,

Less Demand, Less Production

2. More Unemployment3. GDP Declines4. All or one Industry

DepressionDepressionCharacteristics:

1. High Unemployment

2. Low Productivity

3. Begins in one country, and spreads to others

4. Large Depressions Rare

RecoveryRecoveryCharacteristics:

1. Wages raise, spending raises, production raises

2. New businesses beginning

3. Decline in unemployment

4. Growing GDP

Learning GoalLearning GoalTo be able to identify To be able to identify

the phases of the the phases of the

economic cycle, and economic cycle, and

determine what phase determine what phase

the economy is in.the economy is in.

EconomicEconomicss

The Foundation The Foundation

of Businessof Business