1. Business Principles A Mrs. Sorrell

2.  Shortage of resources  Basic economic problem for any society is how to manage its resources  The world has several resources that are scarce because of the demand of the population  Here are the top six:  Water  Oil  Natural Gas  Phosphorus  Coal  17 Rare earth elements

3.  All of the components necessary to produce a society’s goods and services  Wheat growing in the ground  Tractor that harvests it  Labor that turns it into flour  Natural Resources  Human Resources  Capital Resources  Entrepreneurial Resources

4.  Raw material found in nature  Trees make paper  Fish harvested for food  Basic elements that can be combined in various ways to create goods  Economy of a country is often based on its natural resources  Oil production—Saudi Arabia  Coffee crops—Latin American countries  Renewable/nonrenewable  Renewable=Products that can be reproduced  Wheat and cattle  Nonrenewable=limited resources  Coal, iron and oil  Amount of natural resources available to a society has a direct effect on its economy

5.  Producing goods and services requires many people  Knowledge  Efforts  Skills  Labor can be  skilled or unskilled  Physical or intellectual  Labor unions  Created because workers believed that big business did not treat them fairly  Negotiate with management for better pay, hours and working conditions in a process known as collective bargaining  Common in manufacturing sector: steel, automobiles, and tires

6.  NOT the same as capital/money  Things used to produce goods and services  Buildings: supermarkets  Materials: medical supplies  Equipment: delivery trucks, cash registers, computers, tractors 

7.  Entrepreneurs  Recognize the need for new goods and services  Improve on ways to use resources  Create and produce new products  Henry Ford perfected the factory assembly line method of mass production  Key to dealing with scarcity—develop new resources and technologies

8.  Basic economic questions  What should be produced?  Resources used for one purpose cannot be used for something else  Land used for growing wheat cannot grow corn  How should it be produced?  Methods of production?  Number of people required?  Quality of items produced?  Quantity of available resources?  Who should share in what is produced?  Choosing how to distribute probably interests people most  People can usually have as many goods and services as they can afford  How do societies determine the income earned by each individual in that society?

9.  Economics=how society chooses to use resources to produce and distribute goods and services for people’s consumption  Primary goal: to provide people with a minimum standard of living, or quality of life  There are two basic and opposing economic systems  Market economy  Command economy

10.  Economic decisions are made in the market place according to the laws of supply and demand  Price plays an important role in the market economy  Will consumers pay more?  Can they earn a profit at this price?  Should we cease to produce this product?  Demand is determined by consumers  Defined: the amount or quantity of goods and services that consumers are willing to buy at various prices  The higher the price the fewer the customers  The lower the price the more consumers will buy

11.  Supply is determined by the producer  Defined: amount of goods and services that producers will provide at various prices  Demand and supply work together  When the quantity demanded and the quantity supplied meet, this is called equilibrium price  Capitalism—the private enterprise system  Characteristics of capitalism  Resources are privately owned  Start your own business  Minimal government control over the market

12.  Profit motive—the desire to make more money  Competition—businesses compete for customers by producing better and cheaper products  Problem with a market economy  Owners and producers reap the most rewards  Unskilled workers and older adults are often unable to afford basic needs such as health care  US CEO’s make almost 500 times as much as the average blue-collar worker

13.  Defined: a central authority makes the key economic decisions; usually the government or state  AKA planned or managed economy  Two types  Communism is a strong command economy  State makes all the economic decisions  Controls all resources for common good  State decides what to produce, how much, and how to distribute  China, Cuba, and Latin American countries  Socialism is a moderate command economy  Some form of private enterprise  State owns major resources, such as airlines and steel, and makes key economic decisions  Individuals may own some businesses  France and Sweden are examples

14.  Advantages  Guarantees everyone an equal standard of living  State provides you with a job  State provides you a place to live  State provides you with health care  State takes care of utilities, transportation, and defense  Disadvantages  Managers get the blame when things go wrong  Managers are targets for criticism  Mistakes of managers can be more costly  Managers’ decisions affect many workers