1. Analyze cost/profit relationships to guide business decision making.
Objective 5.05
Analyze cost/profit relationships to guide business decision making.

2. Topics Measuring Productivity Activities
Understand measures that help or hinder productivity

3. Measuring Productivity Activities

4. Gross Domestic Product (GDP)
Major categories of GDP
Individual spending
Business spending
Government spending
Exports minus imports
Name some products or services you have purchased or from which you have received benefits.
Which component of GDP would you classify the product or service you named?
Major categories of GDP
Individual spending includes food, clothing, housing, and other spending.
Business spending includes buildings, equipment, and inventory items.
Government spending includes paying employees and buying supplies and other goods and services.
Exports minus imports includes goods and services that are sold to other countries.
GDP is the highly used measurement to determine a country’s overall economic output. GDP is a country’s total dollar value of all final goods and services produced in one year.

5. GDP per capita GDP per capita – output per person
Total Population

6. Labor Activities Employment Productivity
How is employment included in measuring labor activities?
What is the national unemployment rate? What is the state unemployment rate?
Productivity
What can help you be more productive in a computer lab?
What can contribute to employees increasing their production?
How is employment included in measuring labor activities?
Unemployment rate includes the people of the labor force that are unemployed, are looking for work, willing to work, and unable to find work.
What is the national unemployment rate? What is the state unemployment rate?
Current answers will vary.
What can help you be more productive in a computer lab?
Answers will vary.
What can contribute to employees increasing their production?
The core responses should include equipment, technology, training, and management.

7. Consumer Spending Measurement of consumer spending: Personal Income
Retail Sales
Personal income includes the total wages and salaries plus investment income and government payments to individuals.
Retail Sales include the sales of goods and services purchased to indicate the spending patterns

8. Investment Activities
The money used for capital projects comes from three main sources:
Personal savings
The stock market
The bond market
How does each investment activity impact economic growth?
What are some examples of investment activities?
How does each investment activity impact economic growth?
Businesses use money deposited in personal saving accounts to buy equipment or products for their businesses. Savers earn interest on money used by companies and other individuals. The savings rate of a country is an important factor for economic growth.
Higher earnings for businesses increases their value, which causes a demand for people wanting to buy the businesses stock.
The bond market make available for businesses and government to borrow money. Bondholders earn interest on money loaned to businesses and government.
What are some examples of investment activities?
Teri has saved over $3,000 in her money market account.
Shane owns stock of an oil company.
A bond passed in a city to fund the expansion of three schools.

9. Borrowing Activities …by
Government
Businesses
How can government borrowing lead to a budget deficit?
How can using borrowed money wisely impact businesses?
How can government borrowing lead to a budget deficit?
Governments borrow money to finance projects like schools, public highways, and parks. If the government spend more money than it collects, then a budget deficit is resulted.
How can using borrowed money wisely impact businesses?
Companies may borrow money to start up or expand. Using borrowed fund efficiently can result in an increase in sales and profits.

10. Classification of
Economic Conditions

11. .

12. Economic Conditions Change
What is inflation?
What causes inflation?
What is deflation?
How do lower prices impact deflation?
What is inflation?
Inflation is an increase in the general level of prices.
What causes inflation?
During an inflation, the demand for products and services exceeds the supply, which may cause an increase in prices.
Inflation impacts buying power by decreasing the amount of power.
What is deflation?
Deflation is a decrease in the general level of prices.
How do lower prices impact deflation?
During deflation, the prices of products and services are lowered, but people have less money for purchases.

13. Economic Conditions Change
What is Consumer Price Index (CPI)?
How is CPI inflation rate calculate?
Change in price index
Inflation rate = –––––––––––––––––– X 100
Initial price index
What is Consumer Price Index (CPI)?
CPI (Consumer Price Index) is a number that compares prices in one year with some earlier base year.
How is CPI inflation rate calculate?
Demonstrate how to calculate the CPI rate of inflation formula:
Change in price index
Inflation rate = –––––––––––––––––– X 100
Initial price index
Example: 1. Interest rate=20%, Base price=$2.49
3. New Price=$2.99
4. Change in price
index=$.50
5. Initial price=2.49

14. Over a three-year period, how has the1 2 3
Income
Income percent change from year 1
$36,000
n/a
$38,000
5.6%
$21,000
-42%
Gallon of milk cost
Gallon of milk cost percent change from year 1
$2.49
$2.99
20%
$3.19
28%
Over a three-year period, how has the
income been impacted by the
cost of a gallon of milk?
This is an example of inflation.
Over a three-year period, how has the income been impacted by the cost of a gallon of milk?
Year two income increased as well as the cost of a gallon of milk during years two and three; but the income did not keep up with the rate of increases of the cost of a gallon of milk. Therefore the buying power for this income for years three was decreased.

15. Economic Conditions Change
What are interest rates?
How do interest rates impact businesses?
What are interest rates?
Interest rates represent the cost of borrowing money.
How do interest rates impact businesses?
Higher interest rates for businesses usually mean higher business cost. When borrowing increases, interest rates are likely to rise.

16. How is productivity measured in business?