business management agenda: 3.26.13
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Business Management Agenda: 3.26.13. Tuesday, March 26 th – Chapter 6.1 Notes & Activity Thursday, March 28 th – Chapter 6.2 Notes & Activity Tuesday, April 2 nd – Chapter 6 Review Thursday, April 4 th – Chapter 6 Test (Who will ace it?!). Chapter 7 – The Big One…. International Business - PowerPoint PPT PresentationTRANSCRIPT
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Business Management Agenda:3.26.13
• Tuesday, March 26th – Chapter 6.1 Notes & Activity
• Thursday, March 28th – Chapter 6.2 Notes & Activity
• Tuesday, April 2nd – Chapter 6 Review
• Thursday, April 4th – Chapter 6 Test (Who will ace it?!)
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Chapter 7 – The Big One…
• International Business– Your BIG project for this class!– Group project – You pick your group
(teams of 2-3)
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ECONOMICS
Chapter 6
Kind of dry…Very black and white...
Very important!!
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Objectives
• Explain the concepts of scarcity and opportunity cost.
• Recognize how supply and demand work to determine price.
• Understand why businesses contract and expand during different phases of the business cycle.
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Making Decisions in a Market Economy
Section 1
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Allocating Resources
• All societies have resources– Try to figure out how best to use them to
produce goods and services
• ECONOMICS – the study of how societies decide what to produce, how to produce it, and how to distribute what they produce.
• SCARCITY – too few resources are available for everyone in the world to consume as much as he or she would like.
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Opportunity Cost
• Producing one good means not producing another
• OPPORTUNITY COST – the loss associated with the best opportunity that is passed up– Businesses and individuals need to consider
opportunity cost whenever they choose one option over another
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Economic Systems
• COMMAND ECONOMY – government decides what goods and services are produced– Decisions made by command, not consumer
taste
• MARKET ECONOMY – private companies and individuals decide what to produce and what to consume– Government plays minor role in regulating– Based on competition
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Law of Supply and Demand
• How do you know what to produce?
• How do you know how much to produce?
• How do you know how much to charge?
• In a market economy, supply and demand determine the prices and quantities of the goods and services that are produced.
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Law of Demand
• DEMAND – the quantity of a good or service individuals are willing to purchase at various prices– Depends on individuals’ needs and wants, as
well as their income
• LAW OF DEMAND – as the price of a good increases, the quantity of the good demanded falls
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The Demand Curve
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The Law of Supply
• SUPPLY – price affects the amount of a good producers produce
• LAW OF SUPPLY – as the price of a good rises, producers are willing to supply more of a good.
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The Supply Curve
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Determining Price
• The law of supply and demand determines prices in a market economy.– The price of a good or service adjusts until the
amount producers are willing to produce equals the amount consumers are willing to consume
• EQUILIBRIUM PRICE – the price at which supply equals demand.
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Supply & Demand
• SURPLUS = Supply > Demand
• SHORTAGE = Demand > Supply
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Determining Profits
• Understanding supply and demand is important because it helps managers determine the prices they should charge!
• Setting prices correctly affects how much profit a business earns.
• PROFIT – the difference between what a business earns (revenue) and what it spends (costs).
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Estimating Revenue & CostsREVENUE• Forecast how many units of a good they will sell
try to gauge consumer demand– Test the product in small market
COSTS• FIXED COSTS – costs a business absorbs
regardless of the number of units produced• VARIABLE COSTS – costs that rise or fall
depending on how much of a good or service is produced
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Breakeven Analysis
• BREAKEVEN ANALYSIS – reveals how many units of a good or service a business needs to sell before it begins earning a profit
• BREAKEVEN POINT – the point at which revenue is sufficient to cover all costs
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Take out your homework…
• Check the board to see if your work is correct!
• What questions do you have?
• This handout goes in your Bus. Mgmt. binder.
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Opportunity Cost…
• One of the most important lessons we can learn.
• But WHY??
• Delayed Gratification
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Defining the Terms…
• Instant Gratification – An unwillingness to give up something now in return for something later
• Delayed Gratification – A willingness to give up something now in return for something later
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The Business Cycle
Section 2
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Phases of the Business Cycle
• Almost all businesses experience periods during which they grow and periods during which they contract.
• BUSINESS CYCLE – expansion and contraction by many industries at once– Consists of several phases, which occur
every few years– 2 major phases
• EXPANSIONARY PHASE• CONTRACTIONARY PHASE
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Expansionary Phase
• Occurs when consumer spending is strong and companies invest in new factories and equipment
• Unemployment usually declines• Wages, prices, and interest rates usually
rise• As expansion continues, prices rise so
much that both businesses and consumers cut back on purchases and companies stop expanding.
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Contractionary Phase
• Consumers reduce purchases and business investment slows
• Unemployment rises• Consumer spending falls companies reduce
production and employment even further• Economic growth declines
– RECESSION – growth falls for two three-month periods in a row
– DEPRESSION – business activity remains far below normal for years
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Business Cycle
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Economic Indicators
• Businesses want to predict then changes in the business cycle might occur.
• No one can predict with certainty, but managers can try to forecast these events.
• ECONOMIC INDICATORS – data that show how the economy is performing– Housing loans, bankruptcies
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Economic Indicators
• LEADING ECONOMIC INDICATORS – economic measures that rise or fall before other measures
• COINCIDENT INDICATORS – occur at the same time as changes in the business cycle.
• LAGGING INDICATORS – occur after changes in the business cycle
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Independent Practice
• Business Cycle Quick Lesson– Watch the Video– Take the Quiz