1. UNIT C THE BUSINESS OF FASHION 3.02 Explain the economics of fashion.

2. Economics terminology n Economics: A study of how to meet the unlimited wants of a society with its limited resources. n Goods: Items physically made by manufacturers; tangible products. n Services: Acts performed for the consumer; intangible products. n Consumers: People who use products. n Customers: People who buy products.

3. Economic resources Land, labor, and capital resources that can be used to produce the goods and services that people consume; also known as the factors of production. Natural resources Human resources Capital Entrepreneurship

4. Natural resources Everything contained in the earth or found in the sea.

5. Human resources All the people who work in the economy.

6. Capital The money needed to start and operate a business and the goods used in the production of other goods.

7. Entrepreneurship The skills of people who are willing to take the risk of starting their own business; entrepreneurs organize the other economic resources in order to create goods and services needed and desired in an economy.

8. YOU DECIDE For each of the following items, decide whether it is a Land resource, Human resource, Capital resource, or if it represents Entrepreneurship. _______1. Road _______2. Salesperson _______3. Boutique owner _______4. Coal _______5. Cotton field _______6. Atlantic Ocean _______7. Computer _______8. Weaving machine _______9. Cash register _______10. Fashion journalist _______11. Independent jewelry designer _______12. Screen printing machine _______13. Truck _______14. Assistant manager _______15. Oil

9. YOU DECIDE For each of the following items, decide whether it is a Land resource, Human resource, Capital resource, or if it represents Entrepreneurship. _______1. Road _______2. Salesperson _______3. Boutique owner _______4. Coal _______5. Cotton field _______6. Atlantic Ocean _______7. Computer _______8. Weaving machine _______9. Cash register _______10. Fashion journalist _______11. Independent jewelry designer _______12. Screen printing machine _______13. Truck _______14. Assistant manager _______15. Oil Capital Land Human Entrepreneur

10. Supply & Demand n Supply: The amount of goods producers are willing to produce and sell at a given price. n Demand: The amount of goods consumers are willing and able to buy at a given price. –Elasticity: The degree to which changes in price affect the demand for a product. –Elastic demand: Changes in the price of the product result in changes in demand for that product. –Inelastic demand: Changes in the price of the product have very little effect on the demand for that product.

11. The law of supply and demand The economic principle which states that the supply of a good or service will increase when demand is great and decrease when demand is low.

12. The interaction of supply & demand… n People will pay more for goods in short supply. n Companies that produce and sell an item in limited supply can charge a higher price for the goods and, in turn, make more profit. However, other companies may begin to produce the product, increasing supply and causing the price to decrease. n When products are readily available, prices are lower, resulting in lower profits.

13. The interaction of supply & demand… (cont.) n When supply of a product is high, many producers stop making the product and begin producing products that have less supply, increasing the chance of profit. n When a product is in high demand, people will pay higher prices. n When demand decreases, price will decrease.

14. n Scarcity: A condition in which more goods and services are desired than are available. n Opportunity cost: The value of what is given up when an economic choice is made. n Utility: Usefulness of a good or service in satisfying wants and needs.

15. Theories of Supply & Demand LAW OF SUPPLY $ Quantity Supplied = $ Quantity Supplied = LAW OF DEMAND $ Quantity Demanded = $ Quantity Demanded = LAW OF SUPPLY & DEMAND $ Quantity Supplied = Quantity Demanded + $ Quantity Supplied = Quantity Demanded + *Please write these theories in your notes *Your warm-up in on the stool in the front of the class. 7 question VoCats. You can write on the sheet.

16. ELASTICITY Indicate whether demand for the following products would be considered Elastic (E) or Inelastic (I). ______1.Diamond ring ______2.Contact lens solution ______3.Armani suit ______4.Pantyhose ______5.Shampoo ______6.Manicure ______7.Calvin Klein jeans ______8.Toothpaste ______9.Dooney & Bourke handbag ______10.Health spa membership ______11.Eyeglasses

17. ELASTICITY Indicate whether demand for the following products would be considered Elastic (E) or Inelastic (I). __E____1.Diamond ring __I____2.Contact lens solution __E____3.Armani suit __I____4.Pantyhose __I____5.Shampoo __E____6.Manicure __E____7.Calvin Klein jeans __I____8.Toothpaste __E___9.Dooney & Bourke handbag __E___10.Health spa membership __I___11.Eyeglasses

18. Economic utilities n Form utility n Place utility n Time utility n Possession utility n Information utility

19. n Form utility: Usefulness provided by changing raw materials or assembling parts to create a useful good. n Place utility: Usefulness provided by having a product available where customers need it. n Time utility: Usefulness provided by having a product available when it is needed. n Possession utility: Usefulness provided by creating opportunities for the consumer to own the product. n Information utility: Usefulness provided by communicating information about products.

20. NAME THAT UTILITY For each of the following, identify the type of utility created. (Form, place, time, possession, or information) ______1. Selling bathing suits at a beach resort ______2. Using cotton to make fabric ______3. Charging a dress on a credit card ______4. Communicating information to a customer on the care of a new leather coat ______5. Having prom dresses in the stores during the spring months ______6. Altering the length of a new pair of slacks ______7. Selling ski wear at a ski resort ______8. Allowing mothers to utilize lay away for children’s school clothes ______9. Selling jewelry cleaner in a jewelry store ______10. Keeping stores open later on the weekends ______11. Explaining to a customer the many ways to wear their new scarf ______12. Making holiday sweaters available during the month of December ______13. Providing payment plans for expensive jewelry purchases ______14. Sizing a new ring ______15. Selling DECA blazers at the national conference

21. NAME THAT UTILITY For each of the following, identify the type of utility created. (Form, place, time, possession, or information) PL1. Selling bathing suits at a beach resort F2. Using cotton to make fabric PO3. Charging a dress on a credit card I 4. Communicating information to a customer on the care of a new leather coat T5. Having prom dresses in the stores during the spring months F6. Altering the length of a new pair of slacks PL7. Selling ski wear at a ski resort PO8. Allowing mothers to utilize lay away for children’s school clothes PL9. Selling jewelry cleaner in a jewelry store T10. Keeping stores open later on the weekends I11. Explaining to a customer the many ways to wear their new scarf T12. Making holiday sweaters available during the month of December PO13. Providing payment plans for expensive jewelry purchases F14. Sizing a new ring PL15. Selling DECA blazers at the national conference

22. Goods: Items physically made by manufacturers; tangible products. n Consumer goods: Products useful to consumers. n Industrial goods: Products used by businesses in producing goods and services.

23. Consumer goods n Convenience goods: Emergency items, impulse items, or staple goods usually purchased in small quantities at frequent intervals with a minimum of comparison shopping.

24. Consumer goods (cont.) n Specialty goods: Goods for which the consumer has a preference due to quality, uniqueness, brand identification, or other specific characteristics. Price is rarely a deciding factor in the purchase decision, and the consumer is unlikely to accept substitutes.

25. Consumer goods (cont.) n Shopping goods: Merchandise purchased by the consumer only after comparison shopping. These are often expensive items and comparison or price and quality is important.

26. Services: Acts performed for the consumer; intangible products. n Consumer services: Acts performed for the consumer for a fee. n Industrial services: Acts performed for businesses for a fee.

27. GOODS OR SERVICES? Identify the following as either Consumer Goods (CG), Industrial Goods (IG), Consumer Services (CS), Industrial Services (IS), Convenience Goods (ConG), Specialty Goods (SG), or Shopping Good (SpG). More than one identification may apply. 1.Commercial sewing machine 2.Suit alteration 3.Mascara 4.Commercial clothes steamer 5.Tommy Hilfiger jacket 6.Vogue 7.Cash register repair 8.Contact lens solution 9.Pantyhose 10. Haircut 11. Color analysis 12. Versace gown 13. Nail polish 14. 14k gold watch 15. Computerized inventory system 16. Jewelry display case 17. Commercial carpet cleaning 18. Calvin Klein eyeglasses 19. Louis Vuitton luggage 20. Manicure

28. Free-market system An economic system in which individuals, not the government, make important economic decisions. Consumers decide how to spend their money. Consumer choices determine which products are offered for sale. Sellers may charge any price they desire.

29. Profit The money left over after costs, expenses, and taxes have been deducted from sales. The driving force behind the free-market system Determines whether or not a business will succeed

30. Competition A rivalry between two or more businesses to gain as much of the total market sales or customer acceptance as possible. Helps maintain reasonable prices Provides consumers with new and improved products Provides wide selection of products

31. Competition n Pure competition n Oligopoly n Monopoly n Direct competition n Indirect competition n Price competition n Nonprice competition

32. Pure competition A market situation in which no single company in an industry is large or powerful enough to influence or control prices. Many buyers and sellers No single buyer or seller controls prices or number of units sold. All products sold are very similar to each other. Companies may enter or exit the industry without pressure or restraints; the industry is insignificantly affected when a company enters or exits.

33. Oligopoly A market structure in which a few large, competitive firms dominate the market. Firms react to the actions of their competitors. Laws prevent oligopolies from price setting among themselves. Government may prevent mergers that would reduce competition. Difficult for new firms to enter the industry or for established firms to leave the industry

34. Monopoly A market in which there are no direct competitors; only one company offers goods or services for sale and has total control over products and prices. U.S. has no textile/apparel monopolies. The government does allow some utilities to operate as monopolies in industries where it would be inefficient to have more than one firm.

35. Direct competition Competition between two or more retailers that utilize the same type of business format.

36. Indirect competition Competition between two or more retailers that employ different types of business formats to sell the same type of goods.

37. Price competition Competition focused on the selling price of a product. *Consumers prefer to buy the products that are lowest in price.

38. Nonprice competition Competition based on factors that are not related to price. Quality Customer services Business location Business reputation Qualified salespeople

39. Business cycle The fluctuations in the economy over periods of several years. Prosperity Recession Depression Recovery

40. Prosperity Highest period of economic growth Low unemployment High output of goods and services High consumer spending Consumers willing to spend on fashion products

41. Recession Fewer goods and services being produced Worker layoffs Retail sales decrease Necessary products such as food, housing, and transportation take priority over fashion products. Period of economic slowdown Rising unemployment Decrease in consumer spending

42. Depression Prolonged recession Extremely low consumer spending High unemployment Drastic decrease in production of products Poverty can result. Fashion products are not being purchased.

43. Recovery Renewed economic growth and an increase in output of goods and services Reduced unemployment Increased consumer spending Moderate business expansion Gradual increase in sale of fashion products