Chapter 6

The first part of chapter 6 seems boring and unnecessary, but there is one thing in it you should know about: The relationship between supply and demand.

Every business creates a “supply of a product or service.”

That supply is directly proportional to the demand society has for it.

If they have too little of their product they are losing money.

If they have too much they are wasting money on something they won’t sell.

If people want more of a product or service (online media) the company can expand their services. (Netflix)

If there is little, or no demand a product, company or industry shrinks (CDs), or sometimes even disappears (cassette tapes)

What can cause changes in demand for a product?

Can you think of situations where supply of a product becomes a problem?

What happens if there is demand, but no supply?

Almost all businesses experience periods of growth and contraction.

Good business decisions may allow a business to expand.

Miscalculations will cause them to contract.

What are some examples of this?

This also happens on a larger scale where many businesses expand or contract at once. We call this the “business cycle.”

We call it a cycle because it repeats itself, up and down, all the time.

The business cycle can look different in different industries but they all contain two major phases, expansion and contraction.

Key Terms: Boom: noun – a period of great prosperity.

Recession: noun – A period of temporary economic decline.

This occurs when consumer spending is strong and companies invest in new factories/equipment.

Unemployment usually declines. Wages, prices and interest rates

usually rise. (there is more money floating around.)

People just don’t know when to quit….

Expansion continues, prices continue to rise and people start to cut back on their spending.

Companies aren’t getting as much income if people aren’t buying their products so they cut back on THEIR spending too; no more expansion.

People reduce their purchases and investments.

Business slows

If the businesses are bringing in less money they don’t need/can’t afford so many workers. People get laid off, or just not hired.

If economic growth falls for two three month periods (or “quarters”) in a row we say the economy is in a “recession.”

If it stays that way for years we say it is in a “depression.”

What can cause many businesses to expand at once?

What can cause many businesses to contract at once?

Think about what you might be hearing/reading in the news.

Go to any, or a few of these newspapers

www.thechronicleherald.ca/business

http://www.theglobeandmail.com/report-on-business/

http://www.financialpost.com/

Try and figure out what stage of the business cycle Canada is in. Browse through many different articles to get an idea of how we are doing.

Give examples!• Three regional articles• Three national articles

What you found are bits and pieces of data that get compiled and averaged out in different categories (business performance, innovation, housing markets, etc.)

We call these ECONOMIC INDICATORS. They can help people guess if the market will be going up or down in the near future.