Environment Unit 03 Use contemporary examples to demonstrate both - - PowerPoint PPT Presentation

Business and Business Environment

Unit 03 – Use contemporary examples to demonstrate both the positive and negative influence/impact the macro environment has on business

• perations

Lesson 05 : Market Forces and Economic Operations

Introduction to economics

• Economics is a social science concerned with production,

distribution and consumption of goods and services.

• It

studies how individuals, businesses, governments, and nations make choices on allocating resources to satisfy their wants and needs, trying to determine how these groups should

• rganise and coordinate efforts to achieve maximum output.

Types of Economics

• Micro economics – Focuses on the behaviour of individual

consumers and producers : could be a household, a business

• rganisation or a government agency.
• Macro economics – Studies on overall economy on both

national and international levels. Considers aspects of foreign trade, government fiscal and monetary policy, unemployment rates, the level of inflation and interest rates etc.

Wants, Needs & Economics

• Need is something needed to survive – food, water and shelter
• Want is one step up in the order from needs and is simply

something that people desire to have, that they may, or may not, be able to obtain or means to fulfilling our needs.

Unlimited wants Scarcity

Scarcity

• Scarcity refers to the basic economic problem.
• Gap between limited (scarce) resources and unlimited wants.
• This results in people will have to make decisions on how to

allocate the resources efficiently, to satisfy needs and as many additional wants as possible.

Opportunity cost

• Opportunity costs represent the benefits an individual, investor
• r business misses out on when choosing one alternative over

another. Opportunity Cost = Return on Best Forgone Option - Return

• n Chosen Option

Economic Systems

Factors of Production

• Factors of production refers to the inputs those are necessary to
• btain an output.
• Land – Land has a broad definition as a factor of production and

can take on various forms, from agricultural land to commercial real estate to the resources available from a particular piece of land.

• Labour – This refers to the efforts expended by an individual to

bring a product or service to the market.

Factors of Production

• Capital – Capital refers to money, yet, this will not be directly

involved in production. Capital will facilitate the processes used in production.

• Entrepreneurship – This is the factor which combines all the
• ther factors of production into a product or service for the

consumer market.

Cadbury Chocolates – Video Analysis

Answer the following questions using the learning from Cadbury Chocolate manufacturing video. 1) Explain the concept of scarcity. 2) Explain the concept of factors of production and identify the factors of production utilised in Cadbury chocolate manufacturing process.

Economic Systems

The existence of economic scarcity poses three problems concerning the use

• f resources.

1) What to use the available resources for? That is, what goods and services should be produced (or not produced) with the resources? 2) How best to use those resources? For example, in what combinations, using what techniques and what methods? 3) How best to distribute the goods and services produced with them? That is, who gets what, how much and on what basis?

Economic Systems

• Traditional economy
• Command economy
• Free market economy
• Mixed economy

Traditional economy

• These are economies those produce goods based on customs, values, traditions,

beliefs or religion. These areas tend to be rural and not as concerned about making money as they are surviving. Characteristics: 1. Minimal waste 2. Rural conditions 3. Little to no profit 4. Limited technology

Examples:

• Inuit Cultures
• Parts of Africa
• Parts of Latin America
• Parts of Middle East
• Parts of Asia

Pros:

• Tradition is maintained
• Each member of the society has a

profound role Cons

• Vulnerable to changes – example

weather

Command economy

• Command economies are economies those are typically controlled from
• ne place, the government. Government makes all decisions on what and

how much to produce. Government also decide values and pay. Characteristics: 1. Centralized power 2. Government ownership of the means of production 3. Usually socialist or communist

Examples:

• China
• Cuba
• Vietnam
• North Korea

Pros:

• Allows for regulation
• Allows for growth

Cons:

• Unfair to population
• Unrest may happen
• Limited innovation

Market economy

• Market economies are hypothetical. A market economy is where all

production and consumption is controlled by the markets of supply and demand. Factories only produce what will be consumed and the people want only what is produced. Characteristics: 1. Free market ideals

• 2. Zero government involvement

Examples:

• None

Pros:

• Seemingly perfect
• No regulation and taxes

Cons:

• Zero governmental regulations

Mixed economy

• Mixed economies are economies that are a combination of other economies,

specifically, a combination of command and market. Mixed economies allow for private ownership and decisions, but government is still involved. Characteristics 1. Market more or less free of government 2. Some state run enterprises 3. Individual liberties

Examples:

• USA
• Canada
• UK
• Japan
• Many others

Pros:

• Allows for freedom
• Any one can be successful
• Allows for innovation

Cons:

• Government disputes
• Taxes

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