Business Economics

1. Business Economics Mrs. Tobe

2. Review of Economics • Economics – is the social science that studies the production, distribution, and consumption of goods and services. • Scarcity – Ever-present situation in all markets whereby either fewer goods are available than the demand for them, or only too little money is available to their potential buyers for making the purchase. This universal phenomenon leads to the definition of economics as the "science of allocation of scarce resources.” Individuals, families, businesses, and government all face this basic economic problem. • Economizing – practicing economics; that is, avoiding waste or reducing expenditures. For example, your mother buys the larger, more concentrated laundry detergent in order to economize. • Opportunity cost – the best alternative that is forgone because a particular course of action is pursued. For example, buying an expensive iPod Nano means you'll have less money to spend on fun weekend activities.

3. Review of Economics • Trade-off – an exchange of one thing in return for another, especially relinquishment of one benefit or advantage for another regarded as more desirable. For example, you want both a new outfit and a new and a class ring. You forgo the outfit for something that will last longer. • Consumption – Expenditure during particular period on goods and services used in satisfaction of needs and wants. • Production – Processes and methods employed in transformation of tangible inputs (raw materials, semi-finished goods, or subassemblies) and intangible inputs (ideas, information, know how) into goods or services. • Producer – someone who produces or manufactures something. • Exchange – reciprocal transfer of goods or services from one entity to another. • Distribution – in economics, the movement of goods from manufacturer, or a way in which wealth is shared in any particular economic system.

4. Review of Economics • Explain why wants are considered unlimited. • People have unlimited amounts of items and things they want • People seem to want more then they have or can afford

5. Review of Economics • Discuss why scarcity exists. • Fundamental economic problem that forces consumers and producers to use resources wisely • Forces people and business to make choices • Limited resources to satisfy unlimited wants and needs

6. Review of Economics • Describe the three economic questions that all societies must answer. • WHAT to produce • HOW to produce • FOR WHOM to produce

7. Review of Economics • Explain the importance of decision making in economics. • Helps make good choices • Helps to identify and consider various alternatives and their consequences before making a final decision. • Competition among businesses is intense • Need to decide how best to use and conserve resources

8. Review of Economics • Describe economic activities. • Production and distribution of goods • Ways to measure economic activity • Gross Domestic Product (GDP) • Standard of Living • Unemployment Rate • Rate of Inflation • National Debt

9. Review of Economics • Discuss the three factors that affect the value of money payments in a market economy. • Scarcity, Utility, Wealth • Example – Water and diamonds • Diamonds are scarce and have utility, they posses a value stated in monetary terms. Water has utility but is not scare enough. Less expensive, has a less monetary value than diamonds