Economic Basics

1. Economic Basics The World of Business Chapter 1

2. Intro Activity • Read Pita Pit profile article 1. How was Pita Pit able to match the needs and wants of its customers? • Convenience: • Accessibility: • Service: • Atmosphere: • Taste:

3. Pita Pit 2. How does Pita Pit feel they’re gaining a competitive edge on their competition?

4. Discussion • What is a business?

5. Definition of a Business • A business is an organization set up to produce and/or sell goods and/or services to satisfy the needs, wants, and demands of consumers with the purpose of making a profit. • Examples – lemonade stand to Nike

6. Discussion • What does non-profit, not-for-profit and for-profit business mean?

7. Non-Profit Businesses • Non-profit businesses are set up to raise money for a charity. • Example: the Canadian Breast Cancer Foundation exists to raise money to advance cancer research, education, diagnosis, and treatment. (CIBC run for the cure) • Do you have a favourite charity? For every dollar donated how much do you think is donated to the cause? ~ Reading

8. Not-for-Profit Businesses • Not-for-profit businesses put any money they receive back into the organization. Example: housing or child care centers.

9. For-Profit Businesses • For-profit businesses are organizations that produce goods or sells good or services to satisfy the needs, wants, and demands of consumers for the purpose of making a profit.

10. Question • What is profit?

11. Profit • Profit is the income that is left after expenses are paid.

12. Question • What are expenses?

13. Expenses • Expenses are those expenditures that are involved in running a business, such as wages, as well as those assets that get “used up” in the process, such as paper and toner.

14. Example • A company makes sunglasses and sells them for $75. To make those sunglasses their expenses are $25. What would their profit be? • Revenue – Expenses = Profit • $75 – $25 = $50

15. Revenue • Based on the last example what do you think revenue is?

16. Revenue • Revenue is the money a business receives for the production and/or service it sells. • It’s the money the company gets when someone buys something from them. • Example: you go to Wal-Mart to buy a video game. The price you pay for that game ($75) is the revenue that Wal-Mart gets from you.

17. Revenue vs. Profit • What is the difference between revenue and profit?

18. Revenue vs. Profit • Revenue is the price the consumer pays for the product/service • Profit is the amount of money the company gets after it pays off the expenses and costs that it had to make that product or be able to provide the service.

19. Profit • The amount they get back in profit (money they make) can be used to make better/ different/ or more products to sell, the owner of the company could take it out and use it for personal use, or they could open up a new location, etc. • Risk vs. Reward with additional locations…

20. Solvent vs. Insolvent • When a business can pay their debts it’s called solvent. • Insolvent means the company can not pay its debts and this is why some companies close.

21. Forms of Businesses Ownership • Please write down this title and then record the diagram on the next slide

23. Activity • Describe a business you are familiar with. In your own words tell me about its purpose (profit or non-profit), its industry it falls under, its size, how its owned, the goods or services it provides, how it delivers its goods or services, its role in the community, and the kinds of jobs it provides.

24. The Role of the Consumer • Producers are the businesses that make goods or provide services. • Example: Future Shop sells computers (product) while geeksquad is a computer repair shop (service).

25. Consumers • Consumers are the people who buy the computers as well as those who have their computer serviced.

26. Producers and consumers • Producers and consumers operate together to create a marketplace. • This is any location where producers and consumers come together to buy or sell goods or services.

27. “The Customer is Always Right” Talk to the person next to you about the following: • What do you think of this? Do you agree? • Do businesses actually function in this way? • Name some that do? • Name some that don’t? • What is the difference between the two?

28. A Long Time Ago • Many years ago consumers had little choice in what they could buy. • When cars were first produced there was one model and they were black. • So you could either buy it or not buy it. • Why do you think things have changed?

29. Competition Happened • Businesses were not concerned with meeting the needs and wants of the consumer because if they weren’t another business would and they would lose the sale. • They had what is called ‘Pricing Power’ meaning they could get away with charging high prices and raise prices again when costs go up • Ex. NS pays highest power rates than any other province!

30. Things Companies Need to Keep in Mind • Consumers also influence price. • If the similar thing is offered at different prices, usually consumers will buy the less expensive one.

31. Things Companies Need to Keep in Mind • Companies need to take into consideration what they believe a consumer will pay for their product when they determine the price of it. • If it’s too high the company won’t sell many and if the price is too low they will sell a lot but their profit would not be as high as it could be. • Renting a house discussion..

32. Consumers • Consumers have the power to choose where they will buy goods and services, and how much they will pay for them. This is called consumer ‘purchasing power’.

33. Discuss these Questions: • How can consumers influence what businesses produce? • What are examples of obsolete goods or services? • Why is competition good for both consumers and businesses?