Principles of Business, Marketing and Finance Supply and Demand in a Private Enterprise System Supply and Demand in a Private Enterprise System Copyright

Principles of Business, Marketing and Finance

Supply and Demand in a Private Enterprise System

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Needs and Wants

Needs

• Needs are essential

Wants

• Wants add to the quality of life

Needs & Wan

ts

• Needs and wants are unlimited

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Goods and ServicesGoods and Services

• Business– Steel– Plastic– Gasoline– Computers– Electricity– Security– Accounting


Goods and ServicesGoods and Services

• Consumers– Watches– Televisions– Cell phones– Vacations– Service at an

automobile dealership


U.S. EconomyU.S. Economy

• Largest producer of goods and services in the world.

• Americans consume more than any other country.

• America has twice as many shopping malls as it does high schools.

• Americans use credit to buy now, and pay later.• High level of demand may stem from the

quantity of goods and services available and the amount of money businesses spend to advertise.


Economic Resources

• Means through which goods and services are produced – however resources are limited

Natural Human Capital

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7

Basic Economic ProblemBasic Economic Problem

• Scarcity• Choices are based on scarcity• Economic decision making -a process of choosing which wants, among several

options will be satisfied• Trade-off -when you give up something to have something else• Opportunity cost -the value of the next-best alternative that you did not

choose


Questions Economies Must AnswerQuestions Economies Must Answer

What goods and services will be produced?

How will the goods and services be produced?

For whom will the goods and services be produced?


Economic SystemsEconomic Systems

• Controlled Economy -government makes decisions

• Free Economy (Market Economy)

-consumers influence decisions

• Mixed Economy

-some goods and services are provided by the government and some by private enterprise


America’s Private Enterprise Economy


• Based upon independent decisions by businesses and consumers with limited government activity to regulate relationships.

• Stimulated by the profit motive.

• Resources of production are owned and controlled by individual producers.




• Individual consumers make decisions about what will be purchased to satisfy needs.

• Value determines what consumers will purchase.• Government stays out of the exchange activities.• Consumers - individuals who purchase products and

services to satisfy needs• Demand - a relationship between the quantity of a

product consumers are willing and able to purchase and the price

• Producers - businesses that use their resources to develop products and services




• Supply-a relationship between the quantity of a product that producers are willing and able to provide and the price

• Government-allows consumers and producers to make decisions without any interference


Microeconomics and Consumer Demand

Macroeconomics

Microeconomics


Factors Affecting DemandFactors Affecting Demand

• Strength of the need or want• Available supply of products and services to

satisfy needs• Availability of alternative products that

consumers believe will satisfy their needs• Demand Curves

– Relationship between price and the quantity demanded

– Rising prices result in lower demand

• All of the consumers who will purchase a particular product or service


Supplying the ProductSupplying the Product

• Possibility of profit• Amount of competition• Capability of developing and marketing products or

services• Economic resources• Supply Curve

– Graphs relationship between price and quantity supplied– Law of Supply-when price of a product goes down, fewer

products will be produced• Market Price -point where supply and demand for a product are equal


The Decision-making Process

Define the problem

Identify the choice

Choose one choice

Act on your choice

Evaluate advantages & disadvantages

Review your decision


Documents

Principles of Business, Marketing and Finance Supply and Demand in a Private Enterprise System Supply and Demand in a Private Enterprise System Copyright