Business Management Agenda: 3.26.13

1. 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?!)

2. Chapter 7 – The Big One… • International Business • Your BIG project for this class! • Group project – You pick your group (teams of 2-3)

3. Kind of dry… Very black and white... Very important!! ECONOMICS Chapter 6

4. 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.

5. Making Decisions in a Market Economy Section 1

6. 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.

7. 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

8. 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

9. 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.

10. 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

11. The Demand Curve

12. 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.

13. The Supply Curve

14. 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.

16. Supply & Demand • SURPLUS = Supply > Demand • SHORTAGE = Demand > Supply

17. 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).

18. Estimating Revenue & Costs REVENUE • 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

19. 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

20. 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.

21. Opportunity Cost… • One of the most important lessons we can learn. • But WHY?? • Delayed Gratification

22. 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

23. The Business Cycle Section 2

24. 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

25. 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.

26. 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

27. Prosperity Prosperity Recovery Recession Depression Business Cycle

28. 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

29. 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

30. Independent Practice • Business Cycle Quick Lesson • Watch the Video • Take the Quiz