NEED VS WANT Need an item that is

NEED VS. WANT Need ◦ an item that is necessary for survival Want ◦ an item that is not necessary for survival but adds pleasure or comfort to life ◦ What are some examples of needs and wants?

What do you think? ? ? Apartment/house Beeper/pager Cable TV/premium channels (e. g. , HBO) Call waiting Car Cell phone Coat Computer/Internet access Credit card Disposable diapers Garbage bags Lottery tickets Name brand athletic shoes Newspaper Paper towels Telephone Television Water

ESSENTIAL VS. LUXURY GOODS Essential Goods and Essential Services ◦ Things that we need for survival (i. e. food, clothing, shelter, heating, lighting, water) Luxury Goods and Luxury Services ◦ Enjoyable but not necessary for survival (i. e. home entertainment centers and swimming pools, limousine rides, visiting a spa)

MASLOW’S HIERARCHY OF NEEDS Ø Everyone starts at the bottom and works their way to the top of the pyramid as they attain what is at their current level. ØAccording to those who study needs and use this pyramid, less than 1% of us reach the top of this pyramid. ØMost people get as far as the self-esteem level and do not progress from there.

FACTORS THAT INFLUENCE BUYING 1. Income and Price Ø The amount of money consumers Ø What other factors do you look for in have to spend has a big influence on what they buy Ø Consumers want good value for their money Ø Consumers won’t spend more than what they believe an item is worth your purchase? *Quality *Convenience *Service *Variety *Warranty Income Groceries per Year Family #1 $30, 000 $4, 800 Family #2 $125, 000 $9, 600 Percent Spent on Groceries 16% 7. 7%

FACTORS THAT INFLUENCE BUYING 2. Status � Some people buy goods because neighbours or friends have � Some consumers purchase expensive items even when they can’t afford them � Conspicuous consumption: the desire to flaunt purchases to impress others

FACTORS THAT INFLUENCE BUYING 3. Current Trends � Usually applies to clothing � Clothing creates an image is often seen as an indicator of status or popularity � Peer Pressure: Being influenced by friends to buy something you don’t really want

FACTORS THAT INFLUENCE BUYING 4. Customs and Habits � Special occasions and holidays increase consumer spending � People may also buy things due to habit: Friday night dinner out, Saturday movie night, playing lottery, smoker vs. nonsmoker 5. Safety � Product safety has become a major issue to the public especially for cars, appliances, and children’s items (cribs) � The Canadian Standards Association (CSA) develops the standards for safety and certifies products

FACTORS THAT INFLUENCE BUYING 6. Promotion � Advertising and promotion are designed to influence consumer spending � Lifestyle advertising: showing an attractive, healthy, successful and appealing person using the product or service that is being promoted. � It is suggested that if you use the product your lifestyle will improve.

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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 isn’t enough of an economic resource? (i. e. Oil) ◦ The price of the good/service increases ◦ Alternatives must be found for the resource

DEMAND SUPPLY 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 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↑ 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 legwarmers or Mc. Hammer pants 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 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 that illustrate 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 Supply P R I C E Quantity Supplied

CONDITIONS THAT AFFECT SUPPLY �A change in the number of producers (more producers increases the supply of goods and usually decreases the price); E. g. Toshiba sold the first for $500 – how much are they now? � Price of related goods (if gas prices increase, people may buy more energy efficient cars) � Change in technology (VCR sales vs. DVD sales, blu-ray versus regular dvds) � Change in expectations � Change in cost of production ◦ if you provide a lawn cutting service and the price of mowers increases – continue only if can charge more!

SUPPLY AND DEMAND CURVES