Factors of Production Businesses need four main things to PRODUCE an item that we WANT or NEED. You have 20 minutes to create a foldable on the FACTORS OF PRODUCTION (p. 517) You must include • The four terms and their definitions • An example of each term in the real world •An image to go along with each example
Sort ‘em Teachers * Tablecloth * ATMs * Wood * Tables * Shipping Containers* Restaurant Owner* Computers * Electricity * Truck driver * Assembly Line * Supervisor * Glass * Counselors * Superintendent * Dishwasher * Coal* Cash Register* Air* Copy machine* White Board* Napkins* Television * Factory * Sports fields * Uranium Create chart with columns Land, Labor, Capital, Entrepreneurs Put the following terms in the correct column
Fixed Costs Fixed costs are the same no matter how much a business produces. Examples: property tax, mortgage payment
Variable Costs Variable costs are expenses that change with the number of items produced Examples: wages, raw materials
Revenue v. Profit Revenue is like a business’ income. It is the money they earn from selling products. Revenue – Costs = Profit Goal of a business is to maximize profit.
Cost/Benefit Analysis A cost/benefit analysis is the act of weighing the costs and benefits of a decision. If the costs outweigh the benefits, you need to re-think your strategy. Businesses use cost/benefit analyses to maximize profits
Circular Flow Notes The circular flow diagram shows us how economic decision making in the market works Market = place where goods and services are exchanged Factor Market = where Land, Labor, Capital, Entrepreneurship (LLCP) are sold Households (regular people) own factors Product Market = where goods and services are sold Businesses own products
Supply and Dance 1.When cane-seller's notice that people want their product, what do they do? 2.When people stop wanting canes, what happens then? 3.What is it called when the price is just right? https://www.youtube.com/watch?v= gDYvwUQ8e6w
Demand - p. __ Law of Demand: People demand more of a good when the price is low Quantity demanded: amount of a good people want at a particular price Ex: As a consumer you will want to buy more sneakers if they cost $10 rather than if they cost $100. (1, $100) (3, $10) P (price) Q (quantity)
Supply Law of Supply: Businesses produce more of a product when they know they can sell them at a higher price Quantity supplied: amount of a good that is supplied at a particular price Ex: If you know you can sell your sneakers for $100 a pair you will want to make more sneakers than if you could only sell them for $10. (1, $10) (3, $100) P (price) Q (quantity)
Equilibrium! Where the 2 lines intersect is the price the good will be sold. Equilibrium price: the price where supply and demand are equal The highest price a good can be sold at and not have a shortage (not enough) or surplus (too much). 1 2 3
Surplus and Shortage What happens to the price if we have too much supply and no demand for a good? SURPLUS: Supply > Demand = lower price SALES are usually the result of a surplus. What happens to the price if we have a lot of demand but not enough supply of a good? SHORTAGE: Demand > Supply = higher price GAS PRICES go up during gas shortages.
Supply and Demand Practice On paper, draw a supply and demand graph Label parts of graph Estimate the equilibrium price and quantity Price Units Demanded Units Supplied $5 10 60 $4 18 51 $3 28 41 $2 38 29 $1 52
Pages 568-572, for extra help with Demand Curve Shift.
Demand Review Demand curves show demand schedules in graph form. As price changes, we move along demand curve to a different quantity Always downward sloping - why? Law of Demand - as the price for a good increases, quantity demanded falls Demand schedules show the quantity demanded over a range of prices
Demand Shifts Review Substitutes - two goods that are bought in place of each other. EX: hot dogs and hamburgers Complements - two goods that go hand in hand. EX: hot dogs and buns If something besides the price of a good changes, we need to draw a new curve. Can be supply or demand, depending on the FACTOR involved
Illustration of Demand Shift Increase in Demand = curve shifts to the right Decrease in Demand = curve shifts to the left. Price Price D1 D2 D2 D1 Quantity Quantity
Fast Food Foldable You will create a foldable on the six determinants of demand, which are Changes in Population Changes in Income Changes in Tastes Changes in Expectations Changes in Substitutes Changes in Complements Your foldable should include Type of Change (on outside) Description of what the change means (on inside) Example of this change for your fast food chain (on inside) and drawing of shift