Transcript Economic wants - Teacher Pages

Chapter 3
Economic Environment
of Business
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Lesson 3.1 Economic Wants
Goals
Describe economic concepts that
apply to satisfying economic wants.
Explain the role of capital formation in
an economy.
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Economics
Economics — body of knowledge that
relates to producing and using goods
and services that satisfy human wants
Economic wants — desire for scarce
material goods and services
Noneconomic wants — desire for
nonmaterial things that are not
scarce, such as air, sunshine, and
friendship
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Which of the following are economic
wants?
A.
B.
C.
D.
Golf clubs
Income tax help
A peaceful walk in the park
Lunch at DiMaio’s
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A
B
D
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Which of the following are producers?
A.
B.
C.
D.
A travel agency
A private trash collection
A house painter
A toy manufacturer
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ALL!
Which ones are service
businesses?
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1. Economic Wants
Satisfying our economic wants
Utility —
Form – created by changes in the form or shape of a
product to make it useful (applies to goods, not
services)
– Ie: swimsuits available in fabrics, styles, etc.
Place – having a good or service at the place where it
is needed or wanted
– Ie: is a swimsuit in a nearby store
Time – is it available when needed?
– Ie: Is the store open when you are ready to buy and
use a swimsuit
Possession – when ownership of a good or service is
transferred from one person to another (can occur
through renting and borrowing)
– Ie: Is the swimsuit available at a price you can afford
and are willing to pay?
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Which type of utility applies to the
following situations?
A. You are playing Ping-Pong with a friend
in the game room of your home at 10:30
on a Saturday night and your paddle
breaks.
B. You enter a convenience store one
evening to buy two size D flashlight
batteries. You have to find a ring that you
dropped near your car, which is parked a
block away. However, the store is out of
stock.
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A. Time utility – stores will be closed!
B. Place utility
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Factors of production
Natural resources
– Fertile soil, minerals, water and timber resources,
climate
Labor
– Which is more important in recent years, mental or
physical efforts?
Capital goods
– Ie: buildings, tools, machines, robots (does not directly
satisfy a human want, but contributes to satisfying one)
– Allows the production of goods in large quantities,
which should decrease production costs and increase
productivity of labor
Entrepreneurship
– Uses above 3 factors, assumes the risk of planning,
starting, and managing a business
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Identify the factors of production of an
orange!
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2. Capital Formation
A country is capable of producing a
fixed quantity of goods and services
at any one time
Total production is divided between
capital goods and consumer goods
and services
Inverse relationship between them
Read this section, p. 55
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Has capital formation occurred…
A. When a firm acquires a new truck so
that more goods can be shipped to
customers?
B. When a business builds a new
factory to increase production?
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BOTH
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Which of the following are
examples of capital goods?
A plumber buys a device that aids in
replacing broken well pumps for rural
customers.
A manufacturer buys robots that will
help it make cars faster.
A salesperson buys a new suit to
wear when selling his firm’s
manufactured products.
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A and B
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Checkpoint!
Goals
Describe economic concepts that
apply to satisfying economic wants.
Explain the role of capital formation in
an economy.
Finish 3.1 Assessment
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Lesson 3.2 Economic Systems
Goals
Discuss three economic systems and
three economic-political systems.
Explain why a business considers the
economic-political system of a
country.
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3.2 Economic Systems
Economic system — organized way
for a country to decide how to use its
productive resources; that is, to
decide what, how, and for whom
goods and services will be produced
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1. Types of Economic Systems
A.
B.
C.
Market economy
1. Individual citizens, rather than the
gov., own most factors of production
2. Best examples – US, Canada, Germany
Command economy
1. Often found in countries with dictators
2. Gov. decides how factors of production will be used
3. Ie: N. Korea, Cambodia, Vietnam, Cuba
Mixed economy
1. Combo of 2 other types of economies
2. Gov. usually own post offices, phone systems, schools,
health care facilities, and public utilities
3. *No country purely has a market or command economy
4. More countries are moving towards a market economy
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D. How does privatization occur?
1. Selling gov.-run operations to
private businesses or individuals
2. Gov. incentive – decreases costs
for taypayers and increases
efficiency
3. What is the US trying to privatize
now?
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2. Types of Economic-Political Systems
Refer to Chart on page 59
A. Capitalism
1. AKA free enterprise system - US
2. Operates in a democracy
3. Also includes the right to own
property
4. In US, gov. assumes larger role
recently because of certain abuses
taking place (Pollution / Pesticides)
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B. Socialism
1. Usually associated with mixed
economies
2. Degree to how much the gov. owns
resources is debated by the type of
socialist country
3. Disliked in the US because it limits
the rights of an individual to own
property for production
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C. Communism
1. Referred to as extreme socialism
2. How to divide results of
production are made by the gov, too!
3. Associated with command economies
4. Often have a shortage of consumer
goods b/c of a focus on capital
formation
5. Does not permit ownership of
property
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Checkpoint!
Discuss three economic systems and
three economic-political systems.
Explain why a business considers the
economic-political system of a
country.
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Lesson 3.3
Fundamentals of Capitalism
Goals
Describe why private property is
important to capitalism.
Describe how prices are set in a
capitalistic system.
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3.3 Fundamentals of Capitalism
1. Private property – individuals can
own land,
hire labor, own capital goods, use
resources to
produce goods and services, own
the products,
sell them and keep the profits
Profit – often overstated by society
Average profit is 5% of total receipts
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If a motel had yearly receipts of
$500,000, and the profits amount to
5%, what was the profit for the
business?
.05 x 500,000 =
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2. Price setting
Demand – NOT the same as a WANT
b. Relationship between price and
demand (Usually – the lower the price,
the higher the demand)
c. Supply – Relationship between price
and demand (When supply is low, the
price is higher)
d. Read examples on page 64
a.
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SUPPLY AND DEMAND
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3. Competition
a. Benefits to society and country:
1. Improved quality
2. Development of new products
3. Efficient operations (keeps prices low)
b. Price competition – a firm takes business away
from its competitors by lowering prices for
identical goods
c. Nonprice competition – competing on factors
OTHER THAN price
1. Quality of products
2. Selection of products
3. Customer service
4. Advertising
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When iPods were first released, what
color were they made in?
When Apple started producing them in
a variety of colors and sold them at
the same price, is this an example of
non-price competition?
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Can a competitor maintain quality and
lower a product’s price if it:
A. Manufactured the product in a thirdworld country?
B. Used higher-quality materials?
C. Changed the product color?
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4. Income distribution
a. In a free enterprise system, the share of
goods an individual receives depends
on the amount of money he/she has
b. People receive income by contributing
their labor to the production of goods
and services
c. Amount of wages paid for a kind of labor
is affected by the supply of and demand
for that kind of labor
1. Unskilled workers
2. Brain surgeon
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Think about professional athletes. Are
they paid too much? Would you set a
limit on a single player’s salary for a
season?
Think about professional athletes in
terms of supply and demand. Do
better players bring in more money for
the team?
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Checkpoint!
Describe why private property is
important to capitalism.
Describe how prices are set in a
capitalistic system.
Complete Assessment 3.3 on page 67
and Focus On… on page 68
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Lesson 3.4 Managing the
Economy
Goals
Explain how economic growth can be
promoted and measured.
List basic economic problems that
exist and state what government can
do to correct the problems.
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3.4 Managing the Economy
1.Promoting economic growth – when a
country’s output exceeds its population
growth
Increase # of ppl in the labor force
Increase productivity by improving human capital
through education & training
Increase supply of capital goods
Improve technology
Redesign work processes to improve efficiency
Increase sales to foreign countries
Decrease buying from foreign countries
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2. Measuring Economic Growth
Gross domestic product (GDP) – total of
goods and services produced
Consumer Price Index (CPI) – inflation at the
retail level
Index of leading economic indicators – the
economy’s strength for the next six to nine
months
Employment – the jobless rate and # jobs
available
Retail sales – consumer spending
Personal income and consumption – growth
in personal income and consumer spending
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Which indicator would provide…
1. Unemployment statistics?
2. Amount of goods sole by stores in a
region of a country?
3. The business outlook for later this
year?
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3. Identifying economic problems
A. Recession – decline in GDP for 6+
months, demand is less than supply
B. Inflation – consumers want to buy
goods that are not readily available –
prices INCREASE QUICKLY
- inversely related to purchasing power
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4. Correcting economic problems
A.Business cycles – last about 5 years
and pass through 4 phases:
Expansion – modest rise in GDP, profits,
and employment
Peak – growth reaches its highest level
Contraction – growth begins to decline
Trough – Lowest point in the cycle with
increased unemployment
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B. Corrective Actions
1. Recession / Inflation period (expansion /
contraction)
a. Taxes – raised to slow growth, lowered
to encourage growth
b. Gov. spending – increase to stimulate
a slow economy, reduce to slow down
the growth
c. Interest rates – lower rates encourage
more people to borrow
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2. In free enterprise, keep interventions
to a minimum
3. Results cannot be seen in short run
4. No set time for how long control
mechanisms should be in place
5. Depression – destructive runaway
inflationary period (affects foreign
countries, too!)
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Think about it…
Why should retirees have pension
funds and other investments earning
interest as great as or greater than
the inflation rate?
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Checkpoint!
Explain how economic growth can be
promoted and measured.
List basic economic problems that
exist and state what government can
do to correct the problems.
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