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Economy and Costs
 

Economy and Costs

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    Economy and Costs Economy and Costs Presentation Transcript

    • Economy and Costs Unit 2
    • Economics
      • How does working in a market economy affect the way that entrepreneurs run their business?
      • How does working in a command economy affect the way that entrepreneurs run their business?
      • Compare and contrast the role of government in a command and market economy and the affects on business owners.
      • How does supply and demand affect an entrepreneur’s product decision as well as the cost of their business?
    • Economies
      • The management of resources of a community or country with a view to its productivity.
      • All economies produce good and services.
    • Market Economy
      • Individuals decide what, how, and for whom goods and services are produced.
      • Decisions about production and consumption are made by millions, each acting alone.
    • Command Economy
      • The government determines what, how, and for whom products and services are produced.
      • The government is making the decisions, little choice is available for consumers.
    • Resources
      • Scarcity
        • When people’s needs and wants are unlimited and the resources to produce the goods and services to meet those needs and wants are limited.
        • Occurs in every economy.
      • Productivity
        • The level of output that an industry or company gets from each worker or each unit of input into its products and services.
    • Supply
      • Supply
        • How much of a good and service a producer is willing to produce at different prices.
        • Suppliers are willing to supply more of a product or service at a higher price.
    • Demand
      • An individual’s need or desire for a product or service at a given price.
      • Individuals are willing to consume more of a product or service at a lower price.
    • Equilibrium Point
      • The point at which the supply and demand curves.
      • This is the price at which supply equals demand.
    • Price Quantity Supply and Demand Curves $50 40 30 20 10 10 20 30 40 50 Equilibrium Price
    • Market Structure
      • Monopoly
        • When a company controls all of a market.
    • Functions of Business
      • Production
        • Creates or obtains products or services for sale.
      • Marketing
        • Marketing Mix
      • Management
        • Setting goals, determining how goals can be met, and how to respond to the actions of competitors
      • Finance
        • Plans and manages financial records and information related to businesses’ finances.
      • All functions are dependent on the others in order for the business to be effective.
    • Marketing
      • Product
      • Price
      • Place
      • Promotion
      • All businesses in a market economy need to complete marketing activities in order to make their products and services available to consumers.
    • Government Involvement
      • Purchases
        • Government purchases huge amounts of goods and services.
      • Taxes
        • Government taxes certain goods and services.
      • Subsidies
        • Government provides payments to produces of certain types of products.
    • Government’s Role
      • Regulator
        • Inspections
          • Provides inspection of certain goods and services to ensure conditions are safe for employees and consumers.
        • Licenses
          • Government requires some businesses to hold licenses.
    • Government as a Provider
      • Public Goods
        • A good from which everyone receives benefits, not just the individual consuming the good.
      • Social Programs
      • Redistributor of Income
    • Cost
      • Compare and contrast fixed and variable costs and explain how this affects the finances of a business.
      • How does opportunity cost affect the decision making process for entrepreneurs?
      • Compare and contrast the benefits of marginal cost and marginal benefit and its affects on the decision making process.
    • Costs
      • Fixed Costs:
        • Costs that must be paid regardless of how much of a good or service is produced.
        • Also known as Sunk Costs.
      • Variable Costs:
        • Costs that go up and down depending on the quantity of the good or service produced.
    • Other Costs
      • Marginal Benefit:
        • Measures the advantage of producing on additional unit of a good or service.
      • Marginal Cost:
        • Measures the disadvantages of producing one additional unit of a good or service.
      • Opportunity Cost:
        • The cost of choose one opportunity or investment over another.