Principles of Business, Marketing and Finance Lesson Twelve Supply and Demand in a Private...

Principles of Business, Marketing and Principles of Business, Marketing and FinanceFinanceLesson TwelveLesson Twelve

Supply and Demand in a Private Enterprise SystemSupply and Demand in a Private Enterprise System

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Needs and WantsNeeds and Wants

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Goods and ServicesGoods and ServicesGoods and ServicesGoods and Services

• Business– Steel– Plastic– Gasoline– Computers– Electricity– Security– Accounting


Goods and ServicesGoods and ServicesGoods and ServicesGoods and Services

• Consumers– Watches– Televisions– Cell phones– Vacations– Service at an

automobile dealership


U.S. EconomyU.S. EconomyU.S. EconomyU.S. Economy

• Largest producer of goods and services in the world.

• Americans consume more than any other country.

• America has twice as many shopping malls as it does high schools.

• Americans use credit to buy now, and pay later.• High level of demand may stem from the

quantity of goods and services available and the amount of money businesses spend to advertise.


Economic ResourcesEconomic Resources

• Means through which goods and services are produced – however resources are limited


Basic Economic ProblemBasic Economic ProblemBasic Economic ProblemBasic Economic Problem

• Scarcity• Choices are based on scarcity• Economic decision making -a process of choosing which wants, among several

options will be satisfied

• Trade-off -when you give up something to have something else

• Opportunity cost -the value of the next-best alternative that you did not

choose


Questions Economies Must AnswerQuestions Economies Must AnswerQuestions Economies Must AnswerQuestions Economies Must Answer

What goods and services will be What goods and services will be produced?produced?

How will the goods and services be How will the goods and services be produced?produced?

For whom will the goods and services be For whom will the goods and services be produced?produced?


Economic SystemsEconomic SystemsEconomic SystemsEconomic Systems

• Controlled Economy -government makes decisions

• Free Economy (Market Economy)

--consumers influence decisions

• Mixed Economy

-some goods and services are provided by the government and some by private enterprise


America’s Private Enterprise America’s Private Enterprise EconomyEconomy


• Based upon independent decisions by businesses and consumers with limited government activity to regulate relationships.


•Stimulated by the profit motive.

•Resources of production are owned and controlled by individual producers.



• Individual consumers make decisions about what will be purchased to satisfy needs.

• Value determines what consumers will purchase.• Government stays out of the exchange activities.• Consumers - individuals who purchase products and

services to satisfy needs• Demand - a relationship between the quantity of a

product consumers are willing and able to purchase and the price

• Producers - businesses that use their resources to develop products and services




• Supply-a relationship between the quantity of a product that producers are willing and able to provide and the price


• Government-allows consumers and producers to make decisions without any interference

Microeconomics and Consumer Microeconomics and Consumer DemandDemand


Factors Affecting DemandFactors Affecting DemandFactors Affecting DemandFactors Affecting Demand

• Strength of the need or want• Available supply of products and services to

satisfy needs• Availability of alternative products that

consumers believe will satisfy their needs• Demand Curves

– Relationship between price and the quantity demanded

– Rising prices result in lower demand


•All of the consumers who will purchase a particular product or service

Supplying the ProductSupplying the ProductSupplying the ProductSupplying the Product

• Possibility of profit• Amount of competition• Capability of developing and marketing products or

services• Economic resources• Supply Curve

– Graphs relationship between price and quantity suppliedGraphs relationship between price and quantity supplied– Law of Supply-when price of a product goes down, fewer Law of Supply-when price of a product goes down, fewer

products will be producedproducts will be produced

• Market Price -point where supply and demand for a product are equal


The Decision-making ProcessThe Decision-making Process


Principles of Business, Marketing and Finance Lesson Twelve Supply and Demand in a Private...

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