Transcript 07. Market Economyx

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Different countries have different economic
systems
These systems affect how an item is produced
How it is distributed
And the demand for the item
Or whether an item is even available
You must always consider market structure,
including supply, demand and price when
starting a business
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The Government determines what, how and
for whom goods and services are produced
Very little choice for consumers
Usually, no more than 1 choice for an item
Cuba, China, North Korea, North Vietnam,
Myanmar
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Markets are FREE
Individuals decide what, how much and for
whom they will produce their goods/services
Individual choice creates the market
Millions of people make the decisions
Acting as individuals
Many items available
Plenty of choice
Supply and Demand dictates the price
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How much of a good or service a provider is
willing to produce at different prices
Usually, as the price of a good increases, the
supply would increase as well
Due to the simple fact that suppliers would be
more willing to produce these goods if they see
that consumers are willing to pay more for
them and so suppliers would earn more profit
E.g. Cell phones
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An individuals need or desire for a good or
service at a given price
As the price of a good decreases, an individual
is willing to buy more
As the price of a good increases, an individual
is usually inclined to buy less
E.g. Pizza slice
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The forces of supply and demand work
together in a market economy
These forces are FREE to work together
The point at which supply and demand curves
meet, is the point of equilibrium price and
quantity
This is the point where supply = demand
Above the equilibrium price, fewer consumers
Below the equilibrium price, fewer supply
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In every economy, there are limited resources
Individuals have unlimited needs and wants
Scarcity occurs when unlimited needs and
wants well surpass limited resources to
produce goods and services
Scarcity occurs in every economy
Not all needs and wants can always be met
That’s what makes every economy different
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The level of output that a company gets from
each worker and machine used to produce
goods and services
In order for productivity to increase, either a
new product has to be produced or an existing
product has to be produced more efficiently
Efficiency: How quickly and how well a product
is produced in a given period of time with as
little resource and energy as possible
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In a Free Competitive Market, many suppliers
compete for business
Buyers shop around for the best deal they can
find.
Prices are determined due to competition
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Not all markets are competitive
Think of the Railway
VIA Rail is really Canada’s only passenger
railway company
Can they charge whatever they want?
This is called a Monopoly
Where a company controls the market because
of little or weak competition
E.g. Microsoft (weak competition)
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In a market economy, a business is free to
produce and offer to consumers any legal
product or service.
A knowledge of business activities will help
entrepreneurs satisfy customers and make
profit
These activities are known as the FUNCTIONS
OF BUSINESS
1.
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Production
Creates or obtains products or services for sale
The main reason of a business is to provide a
product or service to make a profit
2. Marketing
All businesses need to conduct Market Research
and Analysis in order to make decisions on
what types of products or services to offer their
customers
These activities make up the Marketing Mix
 Product
 Distribution
 Price
 Promotion
3. Management
Their role is to:
 Solve Problems
 Manage to work of employees
 Evaluate the activities of the business
 Fully understand the business
 Develop and implement plans and activities
 Setting goals
 Determining how to meet these goals
4. FINANCE
 Deal with financial records
 Deal with financial information
 Dealing with the understanding of CAPITAL
and how much is needed in the future to grow
the business
 ACCOUNTING