MKT-MP-2 Integrate social-studies skills into marketing, sales and service, to obtain an...
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MKT-MP-2 Integrate social-studies skills into marketing, sales and service, to obtain an understanding of customers and the economic environment in which
MKT-MP-2 Integrate social-studies skills into marketing, sales
and service, to obtain an understanding of customers and the
economic environment in which they function. What is an
Economy?
Slide 2
Economic Systems Economy: the organized way a nation provides
for the needs and wants of its people Resources: the things used in
producing goods and services Resources = Factors of Production Land
Everything contained in the earth or found in the sea Labor All the
people who work Capital Money to start and operate a business
Includes infrastructure: the physical development of a country
Entrepreneurship The skills of people who are willing to invest
their time and money to run a business
Slide 3
Scarcity Scarcity: the difference between wants and needs and
the available resources Examples: USA: educated labor force, great
deal of capital, abundance of entrepreneurs, and many natural
resources Even the US cannot meet all the needs and wants of its
people Some live in poverty Underdeveloped Nations: not that
fortunate
Slide 4
How Does an Economy Work? Nations must answer 3 basic
questions: 1. Which goods and services should be produced? 2. How
should the goods and services be produced? 3. For whom should the
goods and services be produced? How these 3 basic questions are
answered determines the type of economy of the nation. 1.
Traditional Economy 2. Market Economy 3. Command Economy
Slide 5
Traditional Economies Traditions and rituals answer the
questions Often based on cultural and religious practices and
ideals that have been passed down What? There is little choice as
to what to produce If you belong to a community of farmers, you
farm How? There is little choice If you belong to a family of
potters, then you will continue to follow traditions of pot making
from ancestors For Whom? Tradition regulates who buys and sells and
where and how the exchange will take place.
Slide 6
Market Economies Pure Market Economy: there is no government
involvement in economic decisions Govt lets the market answer the
questions What? Consumer decide what to produce based on their
purchases How? Businesses decide what to produce Must be
competitive and produce quality products For Whom? The people who
have money are able to buy more goods and services
Slide 7
Command Economies Government makes all the decisions Government
controls all the factors of production What? Dictator or group of
govt officials decide what to produce based on what they believe is
important How? Government owns all means of production, it runs all
the businesses, it controls all employment opportunities For Whom?
Government decides who gets what is produced
Slide 8
Mixed Economies No economy is purely traditional, market, or
command US is a mixed economy with leanings toward a market economy
Regulations to protect food, air, and water supply Labor laws
Social programs Welfare, Medicare, Medicaid Since all economies are
mixed, how much govt involvement Capitalism Communism
Socialism
Slide 9
Capitalism Political and economic philosophy characterized by
Marketplace competition Private ownership of businesses aka: Free
Enterprise Typically democracies Political power in the hands of
the people Usually more than one political party Examples: USA and
Japan
Slide 10
Communism Social, political, and economic philosophy in which
the government controls the factors of production Usually
authoritarian No private ownership of property or capital Society
is classless Citizens are assigned jobs Examples: Cuba and North
Korea
Slide 11
Socialism Most have democratic political institutions Increased
amount of government involvement in the economy than capitalism
Typically have more social programs for citizens Examples: Canada
and Germany
Slide 12
Economies in Transition Breakup of the former Soviet Union
provides the best example of societies making the difficult change
from command to market economies Examples: Estonia and Latvia
Slide 13
Understanding the Economy When is an economy successful? 1.
When it increases production 2. When it decreases unemployment 3.
When it maintains stable prices Economic Measurements Labor
Productivity Gross Domestic Product Gross National Product Standard
of Living Inflation Rate Unemployment Rate
Slide 14
1. Labor Productivity Output per worker hour that is measured
over a defined period of time Week Month Year Ways to increase
productivity Invest in new equipment Provide additional training or
financial incentives Reduce work force and increase
responsibilities Higher productivity increases profit
Slide 15
2. Gross Domestic Product The output of goods and services
produced by labor and property located within a country GDP is made
up of: Private investment Government spending Personal spending Net
exports of goods and services 2009 GDP = $14.12 Trillion 2010 GDP =
$14.87 Trillion
Slide 16
3. Gross National Product The total dollar value of goods and
services produced by a nation, including goods and services
produced abroad by U.S. citizens and companies. This measure was
used by the U.S. prior to 1991 The main difference between GDP and
GNP With GNP, it is not where the production takes place but who is
responsible for it
Slide 17
4. Standard of Living A measurement of the amount and quality
of goods and services that a nations people have Reflects quality
of life Std of Living = GDP/population
Slide 18
5. Inflation Rate Refers to rising prices Low inflation rate
(1% - 5%) shows a stable economy High inflation rate (10% +) can
devastate an economy Money doesnt have the same value as it did
with lower inflation Money doesnt go as far as it used to
Controlling inflation is performed by the Federal Reserve When
inflation increases, the FED raises interest rates to discourage
borrowing and slow spending Current Inflation Rate = 1.50%
Slide 19
5. Inflation contd Consumer Price Index (CPI) Change in price
over a period of time of some 400 specific retail goods and
services used by the average urban household Producer Price Index
(PPI) Measures wholesale price levels in the economy Changes in PPI
are usually passed along to consumers
The Business Cycle The recurring changes in economic activity
Expansion Time when the economy is flourishing Low unemployment
Increase in output Recession Period of economic slowdown that last
at least 2 quarters (6 months) Unemployment rises Decrease in
output Depression A period of prolonged recession Nearly impossible
to find a job Consumer spending very low Recovery A period of
renewed economic growth following a recession or depression
Slide 22
Factors Affecting Demand Strength of want or need Availability
of supply Availability of alternative products that consumers
believe will satisfy their need/want
Slide 23
The Demand Curve Demand Curve: relationship between the price
and the quantity demanded The Law of Demand: as the price of a
product is increased, the demand will decrease and vice versa
Economic Market: all the consumers who are willing to purchase a
particular product or service
Slide 24
The Demand Curve
Slide 25
Factors Affecting Supply Possibility of profit Amount of
competition Capability of developing and marketing the products and
services
Slide 26
The Supply Curve Supply Curve: a graph that shows the
relationship between price and quantity Law of Supply: with the
price of a product is increased, the more will be produced and vice
versa
Slide 27
The Supply Curve
Slide 28
Market Price Market Price: the point where supply and demand
for a product is equal
Slide 29
What is a Surplus? A surplus occurs when supply exceeds demand
Prices usually drop on the item
Slide 30
What is a Shortage? A shortage occurs when demand exceeds
supply Prices usually go up
Slide 31
What is Equilibrium? Equilibrium occurs when supply and demand
are basically equal Prices tend to remain stable during
equilibrium