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

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Scarcity Unlimited wants and needs Limited resources Choices must be made Basic Economic Problem Copyright © Texas Education Agency, All rights reserved 3

Questions Economies Must Answer  What goods and services will be produced?  How will they be produced?  For whom will they be produced? Copyright © Texas Education Agency, All rights reserved 4

Economic Systems Controlled Economy Mixed Economy Market Economy Copyright © Texas Education Agency, All rights reserved 5

America’s Private Enterprise System  Based on independent decisions by businesses and consumers with only a limited government role regulating those relationships Copyright © Texas Education Agency, All rights reserved 6

America’s Private Enterprise System  Characteristics of Private Enterprise –resources of production are owned and controlled by individual producers –Producers use the profit motive to decide what to produce-use of resources to obtain the greatest profit –Individual consumers make decisions about what will be purchased to satisfy needs –Consumers use value in deciding what to consume –Government stays out of exchange activities between producers and consumers unless it is clear that individuals or society are harmed by the decision Copyright © Texas Education Agency, All rights reserved 7

Consumers  Individuals who purchase products and services to satisfy needs Copyright © Texas Education Agency, All rights reserved 8

Demand  a relationship between the quantity of a product consumers are willing and able to purchase and the price Copyright © Texas Education Agency, All rights reserved 9

Producers  businesses that use their resources to develop products and services to consumers for profit –Supply-relationship between the quantity of a product that producers are willing and able to provide and the price –Determine the needs and demands of consumers Copyright © Texas Education Agency, All rights reserved 10

Government  least amount of involvement in free enterprise system  some regulations  use taxes for services Copyright © Texas Education Agency, All rights reserved 11

Business Customer Classifications  Producers-1.2 million businesses –farms and ranches –mining companies –oil refineries –manufacturers of business and consumer products –construction-largest production category-over 700,000 companies –small-less than $10,000 a year on purchases –large-employ several hundred thousand people worldwide and may easily spend $10 million in one day on purchases Copyright © Texas Education Agency, All rights reserved 12

Business Customer Classifications Resellers Service Businesses Government Non-Profit Organizations Copyright © Texas Education Agency, All rights reserved 13

Forms of Production  Extraction and cultivation - products are obtained from nature or grown using natural resources  Processing -changing and improving the form of another product  Manufacturing -combines raw materials and processed goods into finished product Copyright © Texas Education Agency, All rights reserved 14

Manufacturing Process Several manufacturers are part of the total activity needed to produce goods that are purchased by consumers or other businesses. Copyright © Texas Education Agency, All rights reserved 15

Types of Manufacturing Procedures  Mass Production - - assembly process that makes a large number of identical products using a continuous, efficient procedure  Custom Manufacturing - -building a specific and unique product to meet the needs of one customer Copyright © Texas Education Agency, All rights reserved 16

Types of Manufacturing Procedures Materials Processing changing the form of raw materials so they can be consumed or used to make other products Intermittent Processing uses short production runs to produce a precise amount of a variation of a product Continuous Processing raw materials constantly move through specially designed equipment changing them into a specific product useable for consumption Copyright © Texas Education Agency, All rights reserved 17