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

2. Economics terminology
Economics: Study of:
meeting the unlimited wants of a society with limited resources
Goods: tangible products.
Services: intangible products.
Consumers: users of products.
Customers: buyers of products.

3. Economic resources Factors of production:
Land, labor, and capital resources
Used to produce the goods and services that people consume
Natural resources
Human resources
Capital
Entrepreneurship

4. Natural resources
Contained in the earth
Found in the sea

5. Human resources
People who work
Employees

6. Capital Money needed to start and operate a business
Goods used in the production of other goods
Ex:
- Raw Materials
- Machinery

7. Entrepreneurship Entrepreneurs: Willing to take a risk
Recognize wants and needs
Start own business
Organize economic resources
Create goods and services

8. Supply & Demand
Supply: The amount of goods producers are willing to produce and sell at a given price.
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.

9. The law of supply and demand
(Economic Principle)
The supply of a good or service:
Increases when demand is great.
Decreases when demand is low.

10. The interaction of supply & demand…
People will pay more for goods in short supply.
Companies that produce and sell an item in limited supply can charge a higher price for the goods.
making more profit
Other companies may begin to produce the product
increases supply
causes the price to decrease
When products are readily available, prices are lower, resulting in lower profits.

11. The interaction of supply & demand… (cont.)
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.
When demand decreases, price will decrease.

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

13. Economic utilities Form utility Place utility Time utility
Possession utility
Information utility

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

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

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

17. Consumer goods (cont.)
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.

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

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

20. 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.

21. 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

22. 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

23. Competition Pure competition Oligopoly Monopoly Direct competition
Indirect competition
Price competition
Nonprice competition

24. 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.

25. 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

26. 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.

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

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

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

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

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

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

33. 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

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

35. 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