2-3 Other Measures of Business Activity

Goals Discuss investment activities that promote economic growth. Explain borrowing activities by government, business, and consumers. Describe future concerns of economic growth.

Economic Utility Economic utility is the amount of satisfaction, or value, a consumer receives from the consumption of a particular product or service. Businesses use economic utility to increase the chances that consumers will buy their products or services. The four types of utility: Form Utility, Time Utility, Place Utility and Possession Utility.

Economic Utility  Form utility is the type of utility created when the product or service is physically changed or improved.  Taking a movie and changing its format to 3D is an example of form utility. Customers will pay more to see it in the new format. Video: Finding Nemo 3D

Economic Utility  Time utility is created when a product or service is available when it is needed or wanted by consumers.  Allowing customers to watch movies at any time using VOD (video on demand) is an example of time utility.

 Place utility is created by having a good or service at the location where it is needed or wanted.  Allowing customers to watch movies or sporting events at home using pay-per view services is an example of place utility. Customers will pay for the convenience of this service. The 2015 Mayweather Vs. Pacquiao fight was the highest grossing pay-per view event in history with $410 million in revenue. Economic Utility Read the Article Here

 Possession utility is created when ownership of a good or service is transferred from one person to another, but it may also occur through renting or borrowing.  Allowing customers to rent video games or movies rather than buying them is an example of possession utility. Economic Utility

 Allowing customers to more easily purchase products using their credit or debit cards is also an example of providing possession utility. Economic Utility

Investment Activities Capital Spending – refers to the money spent by a business for an item that will be used over a long period. Capital Projects – involved spending by businesses for items such as land, buildings, equipment, and new products The money for capital projects comes from 3 sources: Personal savings, stock investments and bonds

Personal Savings –A major source of investment funds –It’s the money you deposit in a bank –You receive interest Savings rate for the country is an important factor for economic growth –It is, unfortunately, decreasing! –Below 1%

Saving by Nation

The Stock Market –Invest by becoming a part owner of a corporation –Stock represents ownership or equity –Value of stock affected by: Supply and demand Earnings of the company

The Bond Market –A Bond represents debt for a company/government –If you purchase a bond you are a creditor (you have lent $ to the company or govt. –In return, you get interest

Borrowing Government Debt –The government uses borrowing to finance projects such as new schools or highways. –Budget surplus – when a government spends less than it makes. –Budget deficit - when a government spends more than it makes.

Borrowing (cont.) Business Debt –Loans, bonds, and mortgages are common borrowing methods businesses use. –Debt can positively help a business or negatively. Consumer Debt –The use of credit cards can cause debt and trouble for individuals. (

Future Economic Challenges The ability for an economy to produce output determines its growth. The U.S government strives to develop solutions to problems and new technologies.

Key Terms Capital project StockBond Budget Surplus Budget Deficit National Debt

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