1. Business Management Agenda: 3.26.13 Tuesday, March 26 th – Chapter 6.1 Notes & Activity Thursday, March 28 th – Chapter 6.2 Notes & Activity Tuesday, April 2 nd – Chapter 6 Review Thursday, April 4 th – 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. ECONOMICS Chapter 6 Kind of dry… Very black and white... Very important!!

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. 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