Principles of Business, Marketing and Finance Supply and Demand in a Private Enterprise System Supply and Demand in a Private Enterprise System Copyright © Texas Education Agency, All rights reserved

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Needs and Wants Needs Needs are essential Wants Wants add to the quality of life Needs & Wants Needs and wants are unlimited Copyright © Texas Education Agency, All rights reserved 3

Goods and Services Business –Steel –Plastic –Gasoline –Computers –Electricity –Security –Accounting Copyright © Texas Education Agency, All rights reserved 4

Goods and Services Consumers –Watches –Televisions –Cell phones –Vacations –Service at an automobile dealership Copyright © Texas Education Agency, All rights reserved 5

U.S. Economy Largest producer of goods and services in the world. Americans consume more than any other country. America has twice as many shopping malls as it does high schools. Americans use credit to buy now, and pay later. High level of demand may stem from the quantity of goods and services available and the amount of money businesses spend to advertise. Copyright © Texas Education Agency, All rights reserved 6

Economic Resources Means through which goods and services are produced – however resources are limited NaturalHumanCapital Copyright © Texas Education Agency, All rights reserved 7

Basic Economic Problem Scarcity Choices are based on scarcity Economic decision making -a process of choosing which wants, among several options will be satisfied Trade-off -when you give up something to have something else Opportunity cost -the value of the next-best alternative that you did not choose Copyright © Texas Education Agency, All rights reserved 8

Questions Economies Must Answer What goods and services will be produced? How will the goods and services be produced? For whom will the goods and services be produced? Copyright © Texas Education Agency, All rights reserved 9

Economic Systems Controlled Economy -government makes decisions Free Economy (Market Economy) - - consumers influence decisions Mixed Economy -some goods and services are provided by the government and some by private enterprise Copyright © Texas Education Agency, All rights reserved 10

America’s Private Enterprise Economy Based upon independent decisions by businesses and consumers with limited government activity to regulate relationships. Stimulated by the profit motive. Resources of production are owned and controlled by individual producers. Copyright © Texas Education Agency, All rights reserved 11

America’s Private Enterprise Economy Individual consumers make decisions about what will be purchased to satisfy needs. Value determines what consumers will purchase. Government stays out of the exchange activities. Consumers - individuals who purchase products and services to satisfy needs Demand - a relationship between the quantity of a product consumers are willing and able to purchase and the price Producers - businesses that use their resources to develop products and services Copyright © Texas Education Agency, All rights reserved 12

America’s Private Enterprise Economy Supply-a relationship between the quantity of a product that producers are willing and able to provide and the price Government-allows consumers and producers to make decisions without any interference Copyright © Texas Education Agency, All rights reserved 13

Microeconomics and Consumer Demand Macroeconomics Microeconomics Copyright © Texas Education Agency, All rights reserved 14

Factors Affecting Demand Strength of the need or want Available supply of products and services to satisfy needs Availability of alternative products that consumers believe will satisfy their needs Demand Curves –Relationship between price and the quantity demanded –Rising prices result in lower demand All of the consumers who will purchase a particular product or service Copyright © Texas Education Agency, All rights reserved 15

Supplying the Product Possibility of profit Amount of competition Capability of developing and marketing products or services Economic resources Supply Curve –Graphs relationship between price and quantity supplied –Law of Supply-when price of a product goes down, fewer products will be produced Market Price - point where supply and demand for a product are e qual Copyright © Texas Education Agency, All rights reserved 16

The Decision-making Process Define the problem Identify the choice Choose one choice Act on your choice Evaluate advantages & disadvantages Review your decision Copyright © Texas Education Agency, All rights reserved 17