1. 3.02 Fashion Economics

2. Economics vocabulary n Economics: 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. (might not use it)

3. 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. Entrepreneurs People who are willing risk of starting their own business **Opening a boutique

8. 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.

9. The law of supply and demand The more people want a certain product, the more producers are willing to make of that product

10. The interaction of supply & demand… n People will pay more for goods if they are rare n Companies that produce and sell an only a few items can charge a higher price for the goods and make more profit. However, other companies may begin to produce the product, increasing supply and causing the price to drop. n ***When supply is high, price is low (like bread, or t-shirts)

11. n **When product is in high demand, –price increases** –people will pay higher prices. n When demand decreases (people don’t want it), price will decrease (things go on sale). n When price increases, people buy less (demand less**)

12. n Scarcity: people want products and can’t get them n Opportunity cost: The value of what is given up when an economic choice is made. (if you buy that shirt today, you won’t have the money to buy lunch tomorrow) n Utility: Usefulness of a good or service

13. Economic Utilities (Usefulness) (don’t write down) n Form utility n Place utility n Time utility n Possession utility n Information utility

14. n Form utility: Changing materials or assembling parts to create a useful good. (**having a jacket sleeve altered) n Place: product available where customers need it. n Time: product available when it is needed. n Possession: making it easy for the consumer to own the product. (**how to pay for it) n Information: communicating information about products. (**Mary Kay shows customers how to use the products)

15. Goods: Items physically made by manufacturers; tangible products. n Consumer goods: Products useful to consumers. (**shoes, clothing) n Industrial goods: Products used by businesses in producing goods and services.

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

17. n Specialty goods: Goods for which the consumer has a preference due to quality, uniqueness, brand identification, or other specific characteristics. **like brand name clothing

18. n Shopping goods: Merchandise purchased by the consumer only after comparison shopping. Often expensive items and price and quality is important.

19. Services: Acts performed for the consumer; intangible products. n Consumer services: Acts performed for the consumer for a fee. (**manicure) n Industrial services: Acts performed for businesses for a fee.

20. Free-market system Individuals, not the government, make important economic decisions. decide how to spend their money. 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 businesses to gain as much of the total sales as possible. Helps maintain reasonable prices Provides consumers with new and improved products Provides wide selection of products

23. Types of Competition n Pure competition n Oligopoly n Monopoly n Direct competition n Indirect competition n Price competition n Nonprice competition

24. Pure competition No single company in an industry is large or powerful enough to influence or control prices. **t- shirts 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 few large, competitive firms dominate the market. **jeans 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 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 Retailers that utilize the same type of business format.

28. Indirect competition Retailers that employ different types of business formats to sell the same type of goods.

29. 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 **Location **Reputation **Salespeople

31. Business Cycle The fluctuations in the economy over periods of several years. (don’t write down) Prosperity Recession Depression Recovery

32. Prosperity Highest 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. Economic slowdown** Rising unemployment** Decrease in consumer spending

34. Depression 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**