economics – day #2 business management. economic indicators objective we will identify basic...
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ECONOMICS – DAY #2BUSINESS MANAGEMENT
ECONOMIC INDICATORS
Objective
We will identify basic micro- and macro-economic concepts in order to understand economic indicators.
Essential Questions
What are economic indicators?
Explain the purpose of measuring economic indicators.
Identify examples of leading and lagging economic indicators.
HOW DO YOU MEASURE UP?
Student performance is measured by:
GPASATClass Rank
Baseball performance is measured by:
Batting AverageStrikeouts
ECONOMIC INDICATORSEconomic indicators are figures used
to measure a country’s economic performance.
We measure things like: how much (goods & services) a country
produces whether a country’s economy is growing how a country’s economy compares to
others
EXAMPLES OF ECONOMIC INDICATORS
RETAIL SALES INDEXMeasures goods
sold within the retail industry
Does not include money spent on services
Shows if consumers are spending or saving
GROSS DOMESTIC PRODUCTGDP is the total
market value of all goods & services produced within in a country in a given year.
Changes show whether the economy is growing or slowing
HOW DOES THE U.S. COMPARE?
GDP FUN FACTS
Released the last day of each quarter
Recently the U.S. economy has grown around 2.5 – 3 % per year.
INFLATION RATEInflation is a
general increase in the price of goods & services.
Indicates that the cost of living is getting more expensive!
Inflation Calculator
INFLATION FUN FACTSMeasured by the
Consumer Price Index (CPI) which samples prices at different stores
Occurs when supply is less than demand
Federal Reserve decides interest rates in order to adjust for inflation.
A LOOK AT INFLATION ACROSS U.S. HISTORYWORKSHEET ACTIVITY
UNEMPLOYMENT RATEMeasures number
of people who are willing & able to work but cannot find a job
Shows whether economy is picking up or slowing down
CLOSING TASK #11) What is the purpose of measuring
economic indicators?2) Explain the difference between
leading indicators and lagging indicators – include an example of each.
3) What does GDP tell us about the economy?
4) What does the inflation rate tell us?5) What does unemployment tell us?
THE BUSINESS CYCLE
Objective
We will identify basic micro- and macro-economic concepts in order to understand the business cycle.
Essential Questions
What is the business cycle?
What are the stages of the business cycle?
How is each stage of the business cycle characterized?
WHAT IS THE BUSINESS CYCLE?Economies naturally go through ups and
downs.The business cycle is the rise and fall of
economic activity over time.In the United States, some decades have
been characterized by a drop in economic activity & a rise in unemployment. 1930s, 1950s, 1970s, 2000s Slumps followed by new waves of increased
productivity and increased GDP
STAGES OF THE BUSINESS CYCLE
PROSPERITYAlso known as the
“peak”Higher wages, more
jobs available, higher demand for goods & services
Unemployment is low, GDP is high
People are spending!
RECESSIONEconomic activity
slows down – less production of goods, downturns in industry
GDP decreasing, unemployment increasing
People are starting to save!
DEPRESSION / TROUGHDeep recession that
lasts for years and affects the entire economy
Unemployment is high, GDP is low
Government starts trying to “stimulate” the economy
People are saving!
RECOVERY / EXPANSION
Rise in business activity after a recession or depression
Innovation occurs – businesses start bringing out new products & services
Unemployment decreasing, GDP increasing
ENTREPRENEURS WHO ROSE FROM THE ASHESMANY OF TODAY’S FORTUNE 500 COMPANIES CAME FROM HARD TIMES…
GENERAL MOTORSWilliam C. Durant
High school drop-out working as a Buick manager in Detroit
Acquired Oldsmobile, Cadillac & Pontiac
Launched Chevrolet (later joined GM)
The Panic of 1907
PLAYBOY ENTERPRISESHugh Hefner
Former employee of Esquire who quit when his boss refused to give him a $5 raise
Designed his own magazine with the help of his friends
Recession of 1953
SIRIUS SATELLITE RADIO
Robert Briskman
Former NASA engineer
COO at Geostart (satellite messaging company)
Figured out how to broadcast digital radio signals via satellite
Merged with XM Satellite Radio in 2008 to provide commercial-free radio 24 hours/day
Early 1990s Recession
CLOSING TASK #21) What is the business cycle?2) What are the stages of the business
cycle?3) Identify which stage of the business cycle
is characterized by the following indicators.− low GDP, high unemployment− declining GDP, rising unemployment− rising GDP, declining unemployment− high GDP, low unemployment
ECONOMIC CYCLES
Objective
We will identify basic micro- and macro-economic concepts in order to understand the effect of economic cycles.
Essential Questions
Which industries are particularly affected by shifts in economic cycles?
Describe durable goods and provide examples.
Explain the difference between inelastic and elastic demand.
SHIFTS IN ECONOMIC CYCLES
While the economy as a whole is negatively impacted by economic shifts, certain companies & industries are particularly sensitive to changes overall.
DURABLE GOODSConsumers tend to cut back on the
purchase of certain products if the ones they have already can last through the recession.
Manufacturers of durable goods like cars, appliances, and electronics are among the most impacted by economic shifts.
EXAMPLE: TRANSPORTATIONGM, Ford, Chrysler, and other car companiesConsumers put off buying new cars or they purchase less expensive models.
United Airlines & British AirwaysAirlines suffer in recessions because people travel less overall.
FedEx & UPSVolume in mailed packages declines during recessions.
EXAMPLE: MANUFACTURING
Whirlpool & SearsHome appliance manufacturers are subject to decline in demand during recessions.Demand for appliances is tightly linked to new home sales, which slows during a recession.
EXAMPLE: CONSTRUCTION
Home Depot & LowesPerformance of home improvement retailers is also correlated to the housing market.
OTHER INDUSTRIES…
Investment Services
HotelsLuxury Commodities
Advertising Firms
INELASTIC DEMANDCertain goods are relatively
protected from the impact of shifts in economic cycles.
Goods that have relatively inelastic demand with respect to income are generally shielded.
You still have to eat, drive to work, etc.
EXAMPLES OF INELASTIC DEMAND
Food Manufacturers & Retailers
Addictive Substances
Medicine & Medical Equipment
Utilities
CLOSING TASK #31) Describe durable goods.2) Provide an example of an industry
that is significantly impacted by economic shifts.
3) Describe inelastic demand.4) Provide an example of an industry
that is relatively unaffected by economic shifts.
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