The Framework for business. Economics: The Framework for business.

WHAT IS TRADE?

What is Economics? BETTER DECISIONS = GREATER PROFITABILITY! The Study of how people, companies, and governments allocate resources. This studying offers vital insights regarding the forces that affect every business on a DAILY basis. By understanding the concept of economics you will be able to make better business decisions. BETTER DECISIONS = GREATER PROFITABILITY!

Managing the Economy Through Fiscal and Monetary Policy. The Federal Government and Federal Reserve can help shape performance. FISCAL POLICY- is the governments effort to influence the economy through taxation and spending decisions. MONETARY POLICY is a reference to the actions that shape the economy by influencing interests and the supply of money.

Capitalism: The Free Market System. To thrive in a free enterprise system companies must offer VALUE to their customers. As companies compete to attract the best resources and talent, quality goes up, prices remain reasonable, and choices multiply. This then raises the standard of living as a whole

Four Degrees of Competition. PURE COMPETITION: Has many competitors selling virtually identical products. Customers can’t (or won’t) distinguish one product from another, no single producer has any control over the price. New producers can easily enter and leave purely competitive markets.

Four Degrees of Competition. MONOPOLISTIC COMPETITION: Different From a monopoly Many competitors selling differentiated products. Can have some control over their own prices depending on the value of the good they are selling.

Four Degrees of Competition. OLIGOPOLY: Handful of competitors selling products that can be similar or different. Retail Gas, car manufacturers, and soft drink industry are all examples of Oligopolies. Breaking into this market is going to be tough because it requires a huge upfront investment.

Four Degrees of Competition. MONOPOLY: Single producer who is dominating the industry. No room for any other competitors. Patents and Copyrights granted by government encourage innovation.

Supply and Demand Supply: Refers to the quantity of a product a producer is willing to sell at different market prices. Demand: Refers to the quantity of products that consumers are willing to buy at different market prices.

SUPPLY Since businesses seek to make as much as possible they are likely to produce a product of higher value than one of lower value. EXAMPLE: You own a Pizza restaurant. You create pizzas for $5. The market price is $20. You will create pizzas more than anything. Market price drops to $6. You will then create items of higher value.

DEMAND Consumers generally seek to get the products they need (or want) at the lowest possible prices. Prefer to buy more for less and stay away from high priced items. EXAMPLE: Pizza and tacos are popular meals Cost of pizza is less than tacos Most people choose pizza.

Equilibrium Price The constant interactions between Supply and Demand create the market price in any given market. In THEORY, market prices adjust towards the intersection of the Supply and Demand curves. This intersection is where the supply and demand meet. This point will lead you to maximum profitability.

Planned Economies SOCIALISM: System based on government owning key enterprises such as healthcare, tele communications, and utilities. Tend to have corruption in the system which leads to inefficiencies. Tend to have higher taxes which distribute wealth more evenly.

Planned Economies COMMUNISM: Calls for public ownership of virtually all enterprises under direction of one strong central government. Most countries that adopted this have not thrived. With government authority people are unable to make basic choices as to what to buy or where to work. Without free market to establish what to produce, crippling shortages and surpluses developed.

Ways to Evaluate an Economy GDP: The total value of all goods and services produced within a nation’s physical boundaries over a given period of time. Unemployment Rate: The percentage of the labor force reflecting those who don’t have jobs and are actively seeking employment. Business Cycle: The periodic expansion and contraction that occur over time in virtually every economy. Inflation rate: The rate at which prices are rising across the economy. Productivity: The relationship between good and services that an economy produces and the inputs needed to produce them.

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