Transcript 2-3 Other Measures of Business Activity

2-3 Other Measures of
Business Activity
Goals
Discuss investment activities that promote
economic growth.
Explain borrowing activities by
government, business, and consumers.
Describe future concerns of economic
growth.
Economic Utility
Economic utility is the amount of satisfaction,
or value, a consumer receives from the
consumption of a particular product or service.
Businesses use economic utility to increase the
chances that consumers will buy their products
or services.
The four types of utility: Form Utility, Time
Utility, Place Utility and Possession Utility.
Economic Utility
 Form utility is the type of utility created when the
product or service is physically changed or
improved.
 Taking a movie
and changing
its format to 3D
is an example
of form utility.
Customers will
pay more to
see it in the
new format.
Video: Finding Nemo 3D
Economic Utility
 Time utility is created when a product or service is
available when it is needed or wanted by
consumers.
 Allowing customers to watch movies at any time using
VOD (video on demand) is an example of time utility.
Economic Utility
 Place utility is created by having a good or service
at the location where it is needed or wanted.
 Allowing customers to watch movies or sporting events at
home using pay-per view services is an example of place utility.
Customers will pay for the convenience of this service.
The 2015 Mayweather
Vs. Pacquiao fight was
the highest grossing
pay-per view event in
history with $410
million in revenue.
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Article Here
Economic Utility
 Possession utility is created when ownership of
a good or service is transferred from one person
to another, but it may also occur through renting
or borrowing.
 Allowing customers to rent video games or movies
rather than buying them is an example of possession
utility.
Economic Utility
 Allowing customers to more easily purchase products
using their credit or debit cards is also an example of
providing possession utility.
Investment Activities
Capital Spending – refers to the money spent by
a business for an item that will be used over a
long period.
Capital Projects – involved spending by
businesses for items such as land, buildings,
equipment, and new products
The money for capital projects comes from 3
sources: Personal savings, stock investments
and bonds
Personal Savings
– A major source of investment funds
– It’s the money you deposit in a bank
– You receive interest
Savings rate for the country is an
important factor for economic growth
– It is, unfortunately, decreasing!
– Below 1%
Saving by Nation
The Stock Market
– Invest by becoming a part owner of a
corporation
– Stock represents ownership or equity
www.yahoo.com
– Value of stock affected by:
Supply and demand
Earnings of the company
The Bond Market
– A Bond represents debt for a
company/government
– If you purchase a bond you are a creditor (you
have lent $ to the company or govt.
– In return, you get interest
Borrowing
Government Debt
– The government uses borrowing to finance projects
such as new schools or highways.
– Budget surplus – when a government spends less
than it makes.
– Budget deficit - when a government spends more
than it makes.
Borrowing (cont.)
Business Debt
– Loans, bonds, and mortgages are common borrowing
methods businesses use.
– Debt can positively help a business or negatively.
Consumer Debt
– The use of credit cards can cause debt and trouble
for individuals. (www.chasecreditcards.com)
Future Economic Challenges
The ability for an economy to produce
output determines its growth.
The U.S government strives to develop
solutions to problems and new
technologies.
Key Terms
Capital project
Stock
Bond
Budget Surplus
Budget Deficit
National Debt
Now it’s time to……….
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