Unit 2 CHAPTER 4 In your notebook write

Unit 2 CHAPTER 4

In your notebook: write and answer the following question What devices has the seller used in the ad to stimulate demand for the product? Pay attention to ways they seller may have mad the product easier to buy.

Demand §The desire and willingness to buy a product or service §Law of Demand- quantity demanded of a product varies inversely with its price

Demand Schedule §Various amounts wanted for a particular product §Price is usually an incentive (motive) DEMAND CURVE Demand curve & schedule both show much a consumer wants at each price

Marginal Utility §The EXTRA usefulness or additional satisfaction a person gets from acquiring a product/service §People don’t usually pay as much for 2 nd, 3 rd, 4 th as they do for 1 st product §BOGO half-off gives incentive

Assignment Create a cartoon about diminishing marginal utility Divide your paper into 4 squares and create a storyboard describing a specific instance (not an example I have already provided) that shows the relationship. 15 minutes to complete then turn into basket; if not complete do for homework

Factors that Change Demand §Price §Income (minimum wage, unemployment…) §Substitution effect §Complements-new goods related to original product §Number of consumers

Elasticity §Demand elasticity-when consumers react to change in price by changing the quantity they want §Inelastic demand-change in price causes small change in quantity demanded §Unit elastic-change in price causes proportional change in quantity demanded (price increases 10%, demand decreases 10%) §What Makes a Specific Good Elastic or Inelastic? § Can the purchase be delayed? § Are substitutes available? § Does the purchase use a large portion of income?

Write a paragraph (5 -7 sentences) answering the following question NOTEBOOK CHECK WHILE YOU ARE WRITING Have ready when I come to your desk: 1. “Free Lunch” writing assignment 2. Notes on “Circular Flow of Economic Activity” 3. Notes on Roles in Free Enterprise Economy 4. Comic strip illustrating diminishing marginal utility Should it be legal to raise prices on basic items needed for survival during natural disasters or other emergencies?

Unit 2 CHAPTER 5

Supply Law of Supply-Producers increase supply of an item as its price rises • Affected by price and competition

Important Supply Terms • Supply schedule- a listing of various products supplied at all possible prices in the market • Supply curve-graph that shows those quantities available in market at any one time • Market supply curve-show the quantities offered at various prices by all producers that offer a specific product on the market

Supply & Demand Relationship If demand increases then supply and price increase If demand decreases then supply and price decrease Law of supply has a direct relationship with price Law of demand has an inverse relationship with price

Change in Supply • Quantity supplied-amount offered for sale at a given price point on supply curve • Factors that can cause a change in supply: • • Cost of resources Productivity Technology Taxes Subsidies Government regulation Number of sellers expectations

Production Function Graph showing how change in single variable affects total goods produced Short run-short production period where only labor can be changed Long run-production period long enough to change variable and inputs used in products

Classwork/Homework Write all answers in your notebook: Look at page 134, Elasticity of Supply, and answer the critical thinking question, Which factors determine whether a firm’s supply curve is elastic or inelastic? In complete sentences: Answer questions 3 & 4 on page 135 Answer question 1 on page 139

Stages of Production 1. Increasing marginal returns-each new workers contributes more to total output 2. Decreasing marginal returns-total production keeps growing but by small amounts with each new worker 3. Negative marginal returns-workers begin interfering with production and production falls

Finding Marginal Cost 1. fixed costs-costs that happen even if there is little or no activity, the total is called overhead costs 2. variable costs-costs that change with rate of operation or output 3. total costs-sum of fixed and variable costs 4. marginal costs-the most useful measure of cost; any extra cost incurred in production of one unit Marginal cost= additional cost of each worker divided by the additional output the worker generates

Gasoline Prices • Video • How do gas prices affect small businesses? • Consider challenges that a moving company would face when a variable cost, such as gas price increase occurs.

Finding Marginal Revenue §Average revenue-avg price every unit of output sells §Total revenue-all money that a business receives §Marginal revenue- extra revenue received from additional units produced formula: change in total revenue divided by change in total output §Profit maximization- volume of production where marginal cost and marginal revenue are equal

Break-Even Analysis §Break-even point- level of production that makes just enough money to cover total operating costs § Makes zero profit but covers cost of production and labor §E-commerce- electronic business, doesn’t need large amounts of money so has lower break-even point

Unit 2 CHAPTER 6

Prices §Price-monetary value of product § Supply affects price § Demand affects price REAL WORLD EXAMPLE: 1973 President Nixon abandoned gold standard (certain dollar amount=set gold amount). Dollar value went down and angered OPEC (control oil reserves in Middle East) so they imposed oil embargo on U. S. Caused oil shortage and dramatically increased oil rpices. U. S. had to ration gasoline to consumers

Problems with Rationing §Perceived fairness- ex: small towns should have more gas coupons in shortage b/c they don’t have complex public transportation §Administrative expenses- printing and distributing coupons/vouchers §Distorted incentives- programs take place of supply/demand so new products that could help problem aren’t produced §Abuse & misuse-coupons can be stolen, sold, or counterfeited

Unit 3 CHAPTER 7

Market Structures §Nature and degree of competitions between same industries §Monopoly-one company has exclusive possession or control of the supply or trade §Oligopoly-industry is dominated by a small number of sellers

Market Failures §Whenever a flaw in the market system prevents an efficient distribution of resources §Causes: Not enough competition, not enough information, resources that can’t/won’t move, too few public goods, unintended side effects

Competition, Consumer Protection, & Regulation Transparency- info & actions aren’t hidden Public disclosure- requirement that businesses reveal certain info to public Consumer Financial Protection Bureau (CFPB)- est. 2011 after Great Recession to guide financial industries

In your notes… Answer all questions in complete sentences. You do not need to write the questions. P. 166 #3 P. 189 # 1 & 5 P. 203 # 1, 3, 4

Notebook Check & Question to write in your notes Do you think a total laissez-faire approach to our present-day complex markets would work? Why or why not? HAVE READY FOR YOUR NOTEBOOK CHECK 1. “Important Supply Terms” notes 3. Pg. 135 questions 3 & 4 2. Pg. 134 critical thinking question 4. Gasoline Prices question 5. “Market Failures” notes

Ensuring Competition • The government maintains competitive markets by breaking up monopolies, expanding laws against them, or regulating their activities. • The Sherman Act of 1890 first American law against monopolies. • In 1914, the Clayton Antitrust Act outlawed price discrimination, and Federal Trade Commission Act set up the Federal Trade Commission to help stop unfair business practices. • Some monopolies, such as public utilities, are beneficial and should not be broken up.

Modified Free Enterprise • U. S. economy is a modified free enterprise economy b/c of increased government intervention in economy • Almost everything people do and buy is affected by one or more federal agencies • Over the years, govt’s role in economy evolved from consumer protection to promotion of economic competition and efficiency

Unit 3 CHAPTER 8

Sole Proprietorships • Sole proprietorships-smallest form of business, owned and operated by one person • easy to start b/c almost no requirements except for occasional business licenses & fees • Advantages: easy to start, simple to manage, keep all the profits, no separate business income taxes, satisfaction of owning a business, &easy to end • Disadvantages: unlimited liability, difficult to raise financial capital, inefficiency if enough personnel are not hired or inventory stocked, possibly limited managerial experience, difficulty attracting qualified employees, and limited life

Partnerships • Partnerships-owned by two or more people • Partnerships- easy to start; start-up usually consists of drawing up papers to specify the arrangement between the partners. • Advantages of partnerships: easy to start, easy to manage, lack of special taxes, financial capital attracted more easily than proprietorships, and operations are more efficient due to slightly larger size. • Disadvantages of general partnerships: each partner responsible for acts of all other partners, limited partners may lose initial investment if the business fails, limited life, and the potential for conflict between partners.

Corporations • Corporations- separate legal entities with all the rights of an individual • Corporations file for permission to form from gov’t then a charter specifies number of shares of stock that may be sold • Advantages: ease of raising financial capital, limited liability for owners, directors can hire professional managers to run the company, unlimited life, and ease of transfer of ownership • Disadvantages: double taxation, difficulty and expense of getting a charter, shareholders (owners) have little say in how the business is run, and more government regulation

Franchises • In a franchise, the franchisee rents or leases the name & way of doing business from the owner • Advantages to franchisee: national advertising, instant access to a successful product line, and professional advice when needed • Advantages to franchisor: ability to expand the business without excess financial risk or liabilities, income brought in by initial franchise payment & monthly royalty fees, & franchisee who is highly motivated to make the franchise work

Growth through Reinvestment • income statement- a report that shows a business’s sales, expenses, net income, & cash flow for a period of time • Depreciation- noncash charge for the general wear and tear on capital goods • cash flow- a comprehensive measure of company’s profits by representing total amount of after-tax income made • Reinvesting cash flow into a business allows business to produce new products, which may generate additional sales and even larger cash flow.

Mergers • Merging- a combination of two or more businesses to form a single firm • The two types of mergers are horizontal (same product) and vertical mergers (different stages). • Reasons to merge: faster growth, economies of scale, diversification, elimination of rivals, or changing or losing a corporate identity that is associated with errors or problems. • Conglomerates are firms that have at least four businesses that make unrelated products, none of which is responsible for a majority of sales. • Multinational corporations can move resources, goods, services, and financial capital across

Entrepreneurial Funding §Venture capitalist- investment provider to new or unproven business §Angel investor- fund start-ups of family, friends with business potential but can’t obtain other funds §Crowd funding- aka crowdsourcing, appeal through social platforms to interested investors (Kickstarter, Fundable, etc. )

Nonprofit Organizations §Community organizations- schools, churches, hospitals, welfare groups, & adoption agencies §Cooperatives- aka co-op, voluntary org carries on activity to benefit members in some way § Consumer co-op- buys bulk goods and sold to members at lower prices § Service co-op- provides service such as child care, insurance, or credit (ex: credit union) § Producer co-op- mostly made up of farmers to promote/sell produce to markets, some sell to consumers (ex: Ocean Spray cranberry)

Labor, Professional, & Business Org Labor Union- workers formed to represent members’ interests, uses collective bargaining to negotiate Professional associations- people in specialized jobs that work to improve conditions Business associations- groups of businesses organize to promote their welfare (ex: chamber of commerce, Better Business Bureau)