Economy and Costs
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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.