1. Business and Marketing
Unit 2: Economics
Business and Marketing

2. Good Morning  Pickup handout and textbook
Complete transition, follow handout
Complete transition in groups of 4, on Word
Be prepared to discuss and share
Save as: Marketing-Transition 3-1-Lastname

3. Transition 3-1
What does “Economy” mean to you?
List a range of words and ideas around the term, “economy”.
We will discuss and review in class
On a new Word Document save as: Marketing-Trans-3-1-lastnames

4. The State of the Economy

5. Business & Marketing Unit 2: Economics
Chapter 3: Political and Economic Analysis
Chapter 4: Global Analysis

6. California State Standards Business and Marketing Unit 2
B5.0 Students understand the key economic concepts that affect small business ownership:
B5.1 Understand the role and importance of entrepreneurship and the small business in the economy.
B5.2 Understand common ways in which fiscal and monetary policies affect the economy (e.g., the availability of money and credit and business decisions).

7. California State Standards Business and Marketing Unit 2
B5.3 Understand the role of government in the free enterprise system and its impact on small businesses.
B5.4 Understand the relationship between supply and demand and pricing and production.
B5.5 Know how scarcity and allocation affect small businesses.
B5.6 Understand the importance of economic measurement and the factors used to calculate it.

8. Chapter 3: Political and Economic Analysis
Section 3.1: What is an Economy?

9. What is an Economy? -- Ch 3 Sec. 1
What you’ll learn . . .
What is meant by the term economy
The factors of production
The concept of scarcity
The difference between a traditional, a market, a command, and a mixed economy

10. Economy The way in which a nation makes economic choices.
Also called an Economic System

11. Resources = Factors of Production
Resources are all the things used in producing goods and services.
The technical term for it is factors of production.

12. Resources = Factors of Production
Factors of Productions comprise four categories:
Land
Labor
Capital
Entrepreneurship

13. Resources = Factors of Production
Land -- everything on the earth that is in its natural state, or the Earth’s natural resources.

14. Resources = Factors of Production
Labor -- all the people who work in the economy

15. Resources = Factors of Production
Capital -- includes money needed to start and operate a business.
It also includes the goods used in the production process.
Factories, office buildings, computers, and tools are all capital resources.

16. Resources = Factors of Production
Entrepreneurship -- the skills of people who are willing to risk their time and money to run a business.

17. Economic Systems are needed because:
Scarcity is the difference between wants and needs and available resources.
No one country has enough resources to supply everything that is needed or wanted which creates scarcity.
Scarcity forces nations to make economic choices.

18. Three Economic Questions
Nations must answer three basic questions when deciding how to use their limited resources.
What goods and services will be produced?
How should goods and services be produced?
For whom should the goods and services be produced?

19. Types of Economic Systems
Traditional Economy – Traditions and rituals answer the basic questions. Answers are often based on cultural or religious practices and ideals that have been passed down for generations.
Market Economy – In a pure market economy there is no government involvement in economic decisions.
Command Economy – A system in which the government controls the factors of production and makes all decisions about their use.
Mixed Economies –All economies in the world today (including the Free Enterprise System in the U.S.) are mixed with varying degrees of government regulation

20. Types of Mixed Economies
Capitalism -- Characterized by private ownership of businesses and marketplace competition.

21. Political Foundations of Capitalism
The political system most frequently associated with capitalism is democracy.

22. Types of Mixed Economies
Socialism – there is increased government involvement in people’s lives and the economy.
Tend to have more social services to ensure a certain standard of living for everyone
Government runs key industries and makes economic decisions

23. Types of Mixed Economies
Communism – Countries have a totalitarian form of government, which means that the government runs everything.
All who are able to work are assigned jobs
Housing and schooling are decided by the government

24. Types of Mixed Economies
Economies in Transition – the breakup of the former Soviet Union probably provides the best examples of societies making the difficult change from command to market economies.

25. Command Economy
Market Economy
Communism
Socialism
Capitalism
If you place economic systems on a continuum, they would look something like this.

26. Save to your folder as: Marketing CW 3-1-filastname
Class Work 3-1
Textbook:
Page 59, answer 1 – 4
Page 69, answer
Save to your folder as: Marketing CW 3-1-filastname
Next Class: Understanding the Economy

27. Chapter 3 Political and Economic Analysis
What Is an Economy?
Section 3.1 What Is an Economy?
Section 3.2 Understanding the Economy

28. Marketing Transition 3-2
With a partner answer the following:
What do you think constitutes a healthy economy?
What is state of our economy today?
How can the economy be fixed?
Save to your folder as: Marketing-Transition 3-2-filastname

29. What Makes a Healthy Economy?
Low unemployment
Fair and stable prices
Good productivity
Good sales

30. Chapter 3 Political and Economic Analysis
What Is an Economy?
Section 3.1 What Is an Economy?
Section 3.2 Understanding the Economy

31. Understanding the Economy
Objectives
List the goals of a healthy economy
Explain how an economy is measured
Analyze the four key phases of the business cycle
Marketing Essentials Chapter 3, Section 3.2

32. The Economy and Marketing
If you are a marketer and you want to perform a useful SWOT (Strength, Weakness, Opportunities, Threats) analysis, you need to consider the economic factors that will influence your marketing planning such as:
Economy
Consumers
Businesses
Government
Marketing Essentials Chapter 3, Section 3.2

33. When Is an Economy Successful?
A healthy economy has three goals:
Increase productivity
Decrease unemployment
Maintain stable prices
Marketing Essentials Chapter 3, Section 3.2

34. When Is an Economy Successful?
By analyzing their economies, nations keep track of how well they are doing.
The key economic measurements used to determine economic strength are:
Labor productivity
Gross domestic product (GDP)
Gross national product (GNP)
Standard of living
Inflation rate
Unemployment rate
Marketing Essentials Chapter 3, Section 3.2

35. Understanding the Economy
Productivity is output per worker hour that is measured over a defined period of time, such as a week, month, or a year.
Businesses can increase productivity by:
Investing in new equipment or facilities for higher efficiency
Providing additional training or financial incentives for workers
Reduce their work force and increase the responsibilities of those who remain
Marketing Essentials Chapter 3, Section 3.2

36. Understanding the Economy
Two key concepts related to increasing productivity are:
Specialization
Division of labor
One example of specialization and division of labor is an assembly line, where each part of a finished product is completed by a different person.
Marketing Essentials Chapter 3, Section 3.2

37. Understanding the Economy
Gross domestic product (GDP) is the output of goods and services produced by labor and property located within a country.
The GDP is made up of:
Private investment
Government spending
Personal spending
Net exports of goods and services
Change in business inventories
Marketing Essentials Chapter 3, Section 3.2

38. Understanding the Economy
Here is the calculation for GDP
Add private investment, government spending, and personal spending
Add a trade surplus or subtract a trade deficit
Add expanding inventories or subtract shrinking inventories
Marketing Essentials Chapter 3, Section 3.2

39. Understanding the Economy
Gross national product (GNP) is the total dollar value of goods and services produced by a nation, including the goods and services produced abroad by U.S. citizens and companies.
Notice that with the GNP, it is not where the production takes place but who is responsible for it.
The U.S. used to measure its economy by the GNP, but switched to using the GDP in 1991.
Marketing Essentials Chapter 3, Section 3.2

40. Understanding the Economy
A country’s standard of living is a measurement of the amount and quality of goods and services that a nation’s people have.
To calculate the standard of living:
Divide the a country’s GDP or GNP by its population to get the per capita GDP or GNP
Marketing Essentials Chapter 3, Section 3.2

41. Understanding the Economy
Inflation refers to rising prices.
A low inflation rate (one to five percent) is good because it shows that an economy is stable.
A double-digit inflation rate devastates an economy.
The higher the inflation rate, the less that country’s money is worth.
To combat inflation, governments raise interest rates to discourage borrowing money and slow economic growth.
Marketing Essentials Chapter 3, Section 3.2

42. Other Economic Indicators & Trends
Other indicators are:
Wages
New payroll jobs
Marketing Essentials Chapter 3, Section 3.2

43. The Business Cycle
The cycle of economic growth and decline is called the business cycle.
The business cycle consists of four phases:
Expansion
Recession
Trough
Recovery
Marketing Essentials Chapter 3, Section 3.2

44. The Business Cycle
Expansion is a time when the economy is flourishing, characterized by:
Low unemployment
High output of goods and services
High consumer spending
Marketing Essentials Chapter 3, Section 3.2

45. The Business Cycle
Recession is a period of economic slowdown that lasts for at least six months. This time is characterized by:
Reduced workforces and higher unemployment
Lower consumer spending
Low production of goods and services
A trough is when the economy reaches its lowest point, then begins to rise.
Marketing Essentials Chapter 3, Section 3.2

46. The Business Cycle A depression is a period of prolonged recession.
Businesses shut down
Consumer spending is very low
Production of goods and services is down significantly
Marketing Essentials Chapter 3, Section 3.2

47. The Business Cycle
Recovery is the term used to signify a period of renewed economic growth following a recession or depression. This time is characterized by:
Increasing GDP
Increasing sales
Decreasing unemployment
Increased consumer spending
Marketing Essentials Chapter 3, Section 3.2

48. The Business Cycle
The business cycle can be affected by the actions of:
Businesses
Consumers
Government
These things are, in turn, affected by the business cycle.
Marketing Essentials Chapter 3, Section 3.2

49. Save to your folder as: Marketing-CW 3-2-filastname
Class Work 3-2
Textbook:
page 67, # 1 – 4
Page 69, # 24 – 25
Workbook, page 19 – 20
Save to your folder as: Marketing-CW 3-2-filastname