Sally Sold Seashells By The Seashore

An Introduction to Economics

Sally started his own business.

• Entrepreneur–Creation–Organization

–Risks–Responsibilities

Sally’s Seashell Store competed against a similar business named

Oliver’s Ocean Originals.

• Free Enterpise System–Motivated by Profit (money kept after

expenses)–Competition Helps the Consumer–Monopoly, Oligopoly, Perfect Competition

Sally sold collected shells andalso offered a guided tour to

collect your own shells.

• Goods – tangible or physical products• Services – intangible products• Need – required for survival• Want – like to have

Sally’s store was a small shack on the beach with tables and bookcases. He hired

two kids to collect shells. He also developed a way to locate quality

seashells.• Factors of Production– Land– Labor– Capital– Entrepreneurship

During tourist season, Sally sells seashells for $2.00 each. He tried to sell them for

$3.00, but sales plummeted.• Scarcity – allocation of limited resources for

unlimited wants• Demand – the quantity of goods a consumer is

willing and able to buy• Elastic Demand – a change in price creates a

change in demand• Inelastic Demand – a change in price has little

effect on the demand for a product

Sally has noticed that he rarelyhas repeat customers.

• Diminishing Marginal Utility – people will not buy more than they can reasonably use, regardless of price

Sally has seen prices rise during hurricane season when shells are hard to find. He also saw prices drop when a competitor imported shells from the Pacific ocean.

• Supply – the amount of a good that producers are willing to provide

• Surplus – more supply than needed• Shortage – less supply than needed• Equilibrium – where demand and supply meet

I don’t know how this applies to Sally.• Gross Domestic Product (GDP) – total market

value of goods and services produced nationwide during a given period of time

• Federal Reserve – government agency regulating lending to stimulate the economy

• Business Cycle – periodic pattern of expansion and contraction the economy goes through

• Inflation – a jump in prices that slow consumer spending

• Recession – slowing of spending; the Fed lowers the interest rate to promote spending