MONEY – The basic problem It doesn’t grow on trees! Money Works: Money, customers and business

SCARCITY One world Scarce resources In this world, resources are scarce and people’s wants are greater than the resources available. Resources are not only scarce but distributed differently throughout the world, so in some parts of the world, people’s needs still remain unmet. Distributed differently around the world Many people have basic needs unmet Money Works: Money, customers and business

NEEDS Water Clothing Food Shelter Safety Once, individuals have met their basic needs of food, water, clothing, shelter and safety, they seek more things to improve their quality of life. Wants are things individuals want but are not essential for survival. Safety Money Works: Money, customers and business

WANTS Not essential for survival What do you want? What do you need? Are wants unlimited? What do you want? What do you need? Money Works: Money, customers and business

Choose between goods and services CHOICES Limited incomes Can’t have it all Choose between goods and services To buy or not to buy Best value Today, most individuals have limited incomes and every day make choices as to what goods and services they are going to buy or not buy, aiming to get the best value for their money. Businesses provide these goods and services and compete for customers on price and other aspects, such as customer service and quality. Businesses need to make a profit by getting the most they can for their goods and services and keeping their costs as low as possible. Countries also have to make choices and balance their income against the goods and services needed to run the kind of society they wish to have. This means making difficult decisions. (A) (B) Money Works: Money, customers and business

THINKING ABOUT CHOICES… Have you ever made a difficult choice? What influenced your decision? Do you always get value for money? How do you make your money go further? This slide can start discussion about students as consumers and thinking about having limited income and choices if can’t have all they want. It also starts students thinking about priorities for governments – particularly those difficult decisions such as medical treatments and which benefits – also brings in some consideration of ethics. Consider the following A choice you had to make between two items you wanted to buy. What influenced your decision? Do you always get the best value for your money? Do you shop around? If you have a part time job, how does the business attract customers to spend with them? How important is customer service to businesses? Identify examples of difficult choices that a Government may have to make as it is unable to meet the unlimited wants of its citizens. (There are frequently news stories of services that are not be funded or ceasing to be funded due to reductions in public spending). Governments have to make difficult decisions every day Can you think of examples? Money Works: Money, customers and business

BUSINESS & CHOICE Businesses make a profit by: Businesses provide goods and services. Compete with each other for customers. Compete on price and other factors, e.g. quality, customer service, brand, prestige. Businesses make a profit by: - getting the most revenue they can for their goods and services - keeping their costs as low as possible. Links to business – and an introduction to relationships between business objectives and those of customers. Money Works: Money, customers and business

MONEY – The basic problem It doesn’t grow on trees! Money Works: Money, customers and business

EARLY SOCIETIES Meeting basic needs making more than they need developing skills In early societies, humans sought to meet their basic needs and developed their own skills. These skills often led them to produce more than they and their immediate family could use. So if one farmer produced more wheat in a year, he could try to exchange the surplus with another farmer who may have a surplus of another commodity the first farmer wanted, such as cheese. So they would negotiate different items to trade. Money Works: Money, customers and business

TRADE - BARTER Farmer one produces too much wheat for his family. Farmer two produces too much cheese. Barter - what willing to exchange for what This was called barter. However, this only worked when the item one person had was something another person wanted - and they had to find each other. This proved just too difficult so societies began to look for something they could all agree had a value and they could use to exchange instead of the goods themselves. Money Works: Money, customers and business

PROBLEM? Do you want what I have? Have you got what I want? How can we find each other? Can we agree an exchange? Could someone give me a better exchange? I can’t find someone who wants to swap with me! Just too difficult!!! Money Works: Money, customers and business

WHAT WE NEED IS SOMETHING… That we can all use and recognise That is always worth the same That can be divided up so we know how many parts make up one whole That is easy to carry around That is hard-wearing, as we will pass it around Then we can use this to pay each other for goods and services! Money Works: Money, customers and business

MONEY!!! Medium of exchange Unit of account Store of wealth This was called money. Explain that the main use of money is to enable exchange. Now coins/banknotes are represented by ‘plastic’ cards. In early societies, a range of things that met criteria for money were used (e.g. shells, beads, cigarettes, feathers, salt, stones, tobacco). Once you have an agreed system of value represented by money, then it can be used to account for transactions and to keep track of trade. It can also be accumulated and become a store of wealth. Students can be asked to think of examples – e.g. prison dramas often use cigarettes as currency, saving is storing wealth. Medium of exchange Unit of account Store of wealth Money Works: Money, customers and business

He is now a producer of his goods and is a supplier to the market. DEVELOPING MARKETS A farmer takes his surplus wheat to the market. He sells this for money. He buys the other food he needs using the money – not just cheese! This meant farmer one could sell his wheat to people who would give him money for it, and he could use the money to buy a range of things – not just cheese! The farmer is now a producer and he is supplying customers. He is now a producer of his goods and is a supplier to the market. Money Works: Money, customers and business

DEVELOPING MARKETS The farmer makes very good quality wheat but can’t produce enough to meet the quantity his customers want and can pay for. As customers are demanding more than he can supply, he finds customers are prepared to pay more. The price goes up. The farmer produces very good quality wheat and lots of it but, even so, he can’t produce enough to meet the quantity his customers want when they meet at the market. As his customers demand more than he can supply, the farmer finds that customers are prepared to pay more for his wheat and the price goes up. Money Works: Money, customers and business

DEVELOPING MARKETS The farmer decides to specialise in producing more wheat, as he is particularly good at growing this. As he gets better he finds he can reduce how much it costs to produce his wheat. He is so successful and getting such a high price, other farmers decide it might be a good idea to look at producing more wheat too. The farmer also finds that as he is being given money for his wheat, he won’t need to grow all the food for his family, as he can buy food from other farmers. So he decides that, as he is really good at growing wheat, he will only produce wheat and specialise. He can then buy other things from other farmers specialising in other things. However, he is so successful at growing wheat and getting high prices, other farmers decide to start growing wheat too. Money Works: Money, customers and business

What will the farmer have to do DEVELOPING MARKETS Now several farmers bring their produce to the market. Customers have choice. What will the farmer have to do to keep his customers? Other farmers bring their wheat to the market and the farmer’s customers now have a choice. In order to keep his customers, the farmer has to reduce his price. Money Works: Money, customers and business

A SIMPLE MARKET Market – buyers and sellers come together Price – determined by demand and supply Demand – the amount buyers are willing and able to pay Supply – the quantity suppliers are willing to provide at a certain price This is the story of the start of a simple market economy, where buyers and sellers come together in the market and the price of a good is determined by demand (the amount buyers are willing and able to pay) and supply (the quantity suppliers are prepared to provide at a certain price). Discuss examples of markets – where buyers and sellers come together (e.g. ebay, stock markets, car boots, classified ads). What is the role of price comparison sites? Do they help the market? Do they benefit businesses or customers more? Examples of simple demand and supply and price – such as why do star footballers and film stars, music stars earn so much money? Equally top business people – one argument re banker remuneration is global marketplace for talent. Can also look at labour market – are salaries likely to go up or down during a recession with large numbers unemployed? Supply demand Money Works: Money, customers and business