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Published byTodd Hunter Modified over 8 years ago
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Building your business Unit 2-part 1
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Needs vs Wants Needs-things you must have in order to survive ex food, water, air Wants-things you think you must have in order to be satisfied ex. Computers, jewelry, designer clothes
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Maslow’s Hierarchy of Needs 5 areas of needs Lowest-physiological-sleep, food, water shelter, air Security-physical safety and economic security Social-friends, love, well-being Esteem-respect and recognition Highest-self actualization-to realize your potential
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Economic resources Factors of Production Natural resources-raw materials Human resources-laborers and entrepreneurs Capital resources-assets invested in the production of goods(factories, equipment) Scarcity-the conflict between unlimited wants and limited resources
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Role of Entrepreneurs Supply and Demand-meeting people’s needs and wants Capital investment and job creation- investing in local community by providing jobs and utilizing or enhancing community resources(ex-leasing a building, buying equipment Change agents-creating products that change the way people live and do business
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Economic decision making Choosing which needs and wants to satisfy using available resources Two factors: Scarcity Opportunity cost-the value of the next best alternative(the one you pass up)
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Functions of Business Production-creating or obtaining products or services for sale Marketing-attracting as many customers as possible Marketing mix-price, product, place and promotion Management-developing, implementing, and evaluating plans and activities Finance-obtaining capital and planning and managing the financial records
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Supply and Demand Supply-how much a producer is willing to make or sell Demand-how much a consumer is willing to buy The intersection is the equilibrium point where supply equals demand.
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Example
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Cost of Doing Business Fixed costs(sunk costs)-costs that must be paid no matter how much is produced(ex: lease or mortgage, salaries) Variable costs-costs that vary with the amount of production ex: raw materials, hourly employees Marginal benefit-measures the advantage of producing one additional item Marginal cost-disadvantage of producing one additional good
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Market structure Perfect competition-consists of a large number of producers making nearly identical products with many buyers, price is deciding factor(ex: gasoline, wheat, corn) Monopolistic competition-large number of businesses with somewhat different products, differentiating becomes important(ex: computers, jeans) Oligopoly-small number of businesses, usually high cost of entry(ex: airlines, automobiles)
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