1. Producers and Consumers Chapter 5.2

2. Businesses in a Market Economy are driven by Profit Motive. (the desire to make money Producers—Make goods and provide services. Maximizing profit—In a market economy, producers of goods and services are motivated by the desire to make money.

3. Items that do not make a profit will not be produced. Everyone wants to make a profit. Profit is the earnings that are received after all the cost of production are paid out to the suppliers, and workers.

4. Factors of Production Land—In economies, land refers to other natural resources. It includes not only the actual land or bodies of water but the plants, animals an other raw material found in/ and on them. Labor– The contributions of all workers in the society. Capital—refers to money, machines and technology used in the production of goods and services. Entrepreneurship—The application of devices, machines, and techniques used for manufacturing. Technology-- the development of devices, machines, and inventions.

5. Productivity Productivity --is a measure of the efficiency with which goods and services can be produced. Specialization—This is the specific item that people focus on producing or a particular service that they are able to produce well.

6. Business Organization Businesses bring together factors of production to create goods and services in order to make a profit. By law there are three types of business organizations in the U.S. ◦Individual Partnership—This type of business is owned and controlled by one person. ◦Partnership—This type of firm is owned and controlled by two or more people, who share in decision making, profits and risk. ◦Corporation—Is an organization that is owned by many people but treated by law as a single entity separate from its owner.

7. Production Cost (Affected by supply and Demand) Demand—is the quantity of a particular good or service that consumers are willing and able to buy at a given price. Law of demand– When the price of a product goes down, demand for that product will go up. Supply—is the quantity of a particular product that producers are able and willing to make available for sale. Law of Supply—when the price of a product goes up, the supply will generally go down. When the price of product goes down, the supply will generally go up.

8. Product cost—the price of an item is affected by the cost of producing it. Therefore, changes in the cost of production change the cost of the product. Labor cost—The cost of employing individuals help to create the product. This is a large cost of production Competition—is rivalry or competition between two or more businesses that offer similar goods or services.