Why and How Businesses Operate and become Successful.

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Presentation transcript:

Why and How Businesses Operate and become Successful

 Because economic resources are limited, countries must answer 3 questions in order to determine how available resources will be used. 1. What goods and services will be produced? 2. How will the goods and services be produced? 3. What needs and wants will be satisfied with the goods and services produced?

 An economic system is the method a country uses to answer the three economic questions. 1. Command Economy- Resources owned and controlled by government 2. Market Economy- Resources are owned and controlled by the people of the country 3. Traditional Economy- Things are done as they have always been done 4. Mixed Economy- Combines elements of a command and market economy

 Cuba, China, North Korea, Burma, and the former Soviet Union. Another name for a command economy is planned economy.  Government officials answer the 3 economic questions. They decided what is produced, how much is produced, what and how much is used to produce it, and who gets to consume it.  Pros????  Cons????

 In a market economy, the 3 economic questions are answered totally by individuals through the buying and selling of goods and services in the marketplace.(supermarket, internet, business office)  Consumers and businesses make decisions in there own self interests.

 The original economic system used before other complex systems came into play.  Goods and services are produced and delivered the same way they always had.  The three economic questions are answered by tradition. (The same as their ancestors)  Use close, abundant natural resources in order to meet basin NEEDS

 This is the most common kind of economy today. It has elements of a Command Economy and a Market Economy.  There are different levels of mixed economies depending on the level of involvement by the government.  To Sum Up To Sum Up

 Get into your groups and discuss this question and post some comments to today meet:  Your team represents the citizens of a new country deciding on an economic system. You want to establish a successful economy that provides the greatest benefit to its citizens. What information about the country would you need in order to answer the three economic questions? What economic system could would you choose and why?

 Right to Private Property- You can own, use and dispose of anything you want within the confines of the law.  Freedom of choice- You independently make all economic decisions and must accept the consequences  Profit- All businesses operate for one purpose…to earn a profit  Competition- prices are determined by the competition of business

 Decision on what to buy are made by consumers- person who buys goods and services  These decision have a major impact on the market economy because consumers decided what to buy, where to buy, from whom to buy, and what price they are willing to pay.  Producers- Individuals and organizations that determine what product and services will be available for sale. They must make consumers happy.

What Else do Consumers Do? When consumers decided what goods and services to buy, they set the Demand- quantity of goods and services that consumers are willing and able to buy. This established the demand curve. Demand is necessary to make a profit.

What does demand have to do with Business??? Understanding demand helps companies determine what types and what quantities of product to SUPPLY. If consumers what more of product and are willing to pay a price that allows a business to make a profit, then the business will provide it.

 Why is a hotel room in Colorado more expensive in the Winter? Why is an iphone more expensive than other phones?  Prices are affected by the relationship between supply and demand, Plus other factors.

 If many consumers want (demand) a product, then its price will tend to increase.  When consumers see a number of products that they believe will satisfy a particular need or want, demand for any one of those products will not be as high. (Competition) Consumers can switch if one becomes too high.  If there is no competition, a product will have a higher demand. Then, even if the price goes up, consumers will pay it because there is no alternative.

 Supply also affects the price.  Competition- as the number of competitors increases, so does the supply, therefore options for the consumer.  Natural disasters can cause a dramatic drop in supply that can affect price  World conflicts

 Get into groups and discuss this question. Post to todaysmeet some of your thoughts:  The Price of some product change a great deal in a short time, while the prices for other products remain quite stable. Identify several products that experience regular price changes and several that do not. List the products and then discuss how supply and demand appear to affect the prices of each or the products.

 Supply, Demand, and Competition  The point where Supply=Demand is the market price or Equilibrium  Shifts in Demand and Supply Shifts in Demand and Supply  Price effects on S & D Price effects on S & D

 There are 3 basic economic questions.  Who answers those economic questions determines what economic system you have.  In the US we are most like a market economy  In a market economy the economic questions are answered by consumers and their interaction with producers.  This interaction creates supply and demand, and in turn dictates the market price.

 Supply and Demand Supply and Demand  Coffee Shop Coffee Shop