Introduction to Business Intro to Supply and DemandBBI2O

Economic Resources (factors of production) Definition: Resources needed to provide goods/services to consumers Natural Resources: raw materials that come from the earth, water and air. (e.g. soil, iron ore, gold, oil, trees, wildlife, agricultural products, fish, oxygen) Human Resources the people who work to create the goods and services (e.g. farmers, factory workers, construction workers, website designers, teachers, nurses, pilots) Capital Resources: resources that last for a long period of time and require investment on the part of the business (e.g. buildings, equipment, tools, trucks and factories)

Economic Resources In most cases, it takes a combination of all 3 economic resources to create the goods and services that businesses provide What happens if there is not enough of an economic resource? (i.e. Oil) The price of the good/service increase Alternatives must be found for the resource

Demand and Supply I am selling my I-Pod I am selling my I-Pod Who would like to buy it? What will you pay for it? Demand: the quantity of goods or service that consumers are willing and able to buy at a particular price.

Demand and Supply Law of Demand Usually consumers will increase the demand of a good or service as price decreases (which goods might this not apply to?) Demand↑ Price↓ Demand↑ as Price↓

What Creates Demand? 1. Consumer is aware of or interested in the good or service (business do this by advertising) 2. Ample supply of the good/service 3. Price is reasonable and competitive 4. The good/service must be accessible.

What Affects Demand? 1. Change in consumers’ income (increase in income usually means more goods/services are purchased, however it could mean less) 2. Change in consumers’ tastes (why don’t people buy neon pink headbands anymore?) 3. Changes in what we expect in the future (e.g. if we think the price will decrease, we’ll wait to buy) 4. Change in population (why was this school built? why are more retirement homes being built?)

Discussion Questions 2012 – Electronic Trends 1. Think of the things that you and your friends buy or would like to buy. What products are in high demand among your age group? Why are they in demand? Think of examples from the Fast food industry… Entertainment industry… Travel industry… Automotive industry… Recreation/sports industry… 2. Explain how a change in prices of related (complementary) goods affects demand?

Supply Definition: the quantity of a good or service that businesses are willing and able to provide within a range of prices that people would be willing to pay Law of Supply : ↑S as ↑P Usually as prices increase, producers will increase the quantity of goods they provide Quantity Supplied PRICEPRICE

Conditions that Affect Supply A change in the number of producers (more producers increases the supply of goods and usually decreases the price) Eg. Sony sold the first CD Player in 1982 for a retail price of over $900. How much are they now?

Conditions that Affect Supply Price of related goods (if gas prices increase, people may buy more energy efficient cars) Change in Price (If price decreases, production may too) Change in technology (VCR sales vs. DVD sales) Change in expectations Change in cost of production (if you provide a lawn cutting service and the price of mowers increases – continue only if you can charge more!)