EMS_ Term 3 & 4

Topics include : Price Theory; Sectors of the Economy; Trade unions ; Functions of a business; Business Plan

Demand

The quantity of a good or service that consumers want to buy when the good or service is at a specific price

Law of demand

Law in economics that states that consumers buy more of a good or service when its price goes down, and less of a good or service when its price goes up

Demand on a price graph

- movement along the curve : downward sloping
- when graph shifts : it moves to the right

Supply

How much of a good or service is available for consumers to buy

Law of supply

Law that states that if demand stays the same, when the price of a good or service increases, the quantity supplied increases and when the price of a good or service decreases so does the quantity supplied

Supply on a price graph

- movement along the curve : upward sloping
- when graft shifts : it moves to the left

Equilibrium price

The price of a product when demand equals supply

Factors that affect demand

New technology
changes in consumer's preferences
Changes in a country's population
Price
Income levels

Factors that affect supply

Natural disasters
New production technology
Government regulations
The cost of production inputs
Producers' expectations about products and services

Primary sector

Economic sector in which businesses use land and natural resources as raw materials
- farming, fishing, forestry, mining

Secondary sector

Economic sector in which people use raw materials from the primary sector to process or manufacture things people can use
- food and drink factories, textile factories, clothing manufacturers, bottling plants

Tertiary sector

Economic sector in which businesses offer services to the public
- schools, hospitals,, banks, restaurants

Organized worker

A worker who belongs to a trade union

Blue-collar workers

People who usually work outside or in a factory and use mostly their hands and physical labor in their jobs

White-collar workers

People who work in an office and who use their minds more than physical labor

Trade union

An organized association of workers in a trade, group of trades, or a profession, that is formed to protect and further the worker's rights and interests
- controlled, run and paid for by its workers
- negotiate with employers to get the best deal for their members(wages, hiring/firing, working conditions)

There are trade unions for....

- General workers - skilled and unskilled employees in a range of industries
- Tradesmen - employees with particular skills
- Blue-collar workers - skilled and unskilled workers in a particular industry
- White-collar workers - professionals such as teachers

Role of trade unions

When workers feel that employers are not listening to them, their trade unions can organize industrial action

Trade unions can organize the following

Workers can:
- stop working and strike
- stop working overtime or work less overtime
- advertise their problems with posters and protests

Industrial action

- Strike = don't go to work
- Go-slow = work slower to reduce productivity
- Picketing = stand outside premises with posters
- Lock-out = close business doors to keep employees out

Trade unions also...

- Work to get the government to pass laws that will improve member's lives
- Provide professional training and legal advice
- Represent workers' interests during disputes with employers

Collective bargaining

When trade unions negotiate workers' rights with employers

Responsibilities of trade unions

Trade unions must :
- negotiate with employers to improve their workers' conditions
- try to attract new trade union members
- help to settle disputes between employers and employees
- help to bring about peaceful workplace

Business function

An operation or process that people in the business perform often to help the business to achieve its objectives

The administrative function

Runs the administrative side of the business

Characteristics of the administrative function

- performing daily tasks such as answering phone calls
- filing information
- planning
- scheduling
- record-keeping

The purchasing function

Responsible for procuring or buying all of the raw materials and finished goods that a business needs to functions

Responsibilities of the purchasing function

- acquiring raw materials at the best possible price
- making sure that purchases stay within budget
- keeping accurate records of purchases

The marketing function

Makes potential customers aware of the business's goods/services

Responsibilities of the marketing function

- determine how the business and its goods should be branded to have the biggest impact on potential customers
- to advertise and promote goods
- provide publicity for the business and its goods
- find a target market for the goods

The finance functions

Manages all of the aspects of the business's finances

Responsibilities of the finance function

- managing the cash flow of the business
- managing the budgets of the business
- keeping records of income and expenses
- paying the business's tax

The public relations function

Is about giving businesses positive publicity, it communicates with the public about what the business does

Role of the public relations function

- finds out about how the public sees the business
- gives advice to senior management about how the business can improve public opinion about it
- communicates with the public to create a positive image of the business
- runs promotional events

The human resources function

Manages the people in a business, it looks after the welfare of employees

Responsibilities of the human resources function

- recruiting or hiring staff
- defining job descriptions
- dismissing an retrenching staff
- administering staff leave
- training staff

The production function

Manages all aspects of the production function

Responsibilities of the production function

- getting resources or inputs required for the production process
- managing efficiency and quality
- choosing the best production method
- controlling production costs

The general management

Oversees and manages all of the other business functions

Responsibilities of the general management function

- plans and strategizes at a high level
- keeps the business on track
- oversees all of the other functions
- ensures that the functions work together and communicate with one another

Business plan

Formal or written plan that gives a detailed description of how a business is going to achieve its goals

Concept of a business plan

- written when people want to start a new business, they use it to apply for finance or start-up capital
- also used by existing businesses when they plan to change the nature of their business/when they want to apply for finance for expanding the business

Format of the business plan

- front cover
- table of contents
- description of goods/services offered
- goals
- who owns the business
- production, marketing and management plan
- SWOT analysis and conclusion
- financial plan

Description of goods/services offered by the business

- nature of business
- goods and services offered
- description of location
- what makes the business's goods unique
- whether the pricing is luxury or budget

Front cover of the business plan

- logo of your business
- name of your business
- name & title/position in the business
- slogan of your business
- date on which the plan was prepared

Goals of the business

- vision statement = statement of what the business aims to achieve in the medium or long term
- the business's short and long term goals

Owner of the business

- business name, the name you have registered
- form of ownership
- where the business is based
- names of all owners
- brief description of the business experience that the owners have

Production plan of the business

Needs to show that production operations are efficient, cost effective, organized and reliable. Needs to specify the following:
- where the business gets its raw materials form
- what equipment and machinery is used
- what equipment and machinery they already have and what it still needs to get for manufacturing

Batch production

System that makes a batch of goods of one kind and then moves on to another kind

Mass production

System that used 1 continuous system to make a high number of goods of the same kind

Job production

System that businesses use when they produce once-off goods that are all different

Marketing plan of the business

Explains how the business is going to market its goods and services, needs to convey what is unique about the goods and services.

Contents of the marketing plan of the business

- marketing aims
- how your goods/services will benefit customers
- target market
- information about competitors
- your plan to advertise & brand your business

Management plan of the business

Investors can see whether the managers of the business have enough skills and experience to make the business succeed.

Contents of the management plan of the business

- names of all the business's management staff
- details about their work experience in managerial positions
- other businesses they have managed\
- who will run the business
- CVs of all management staff

Financial plan of the business

No business will work if it is not financially feasible
- the part that potential investors will remember the most

Credit

An arrangement with a business to pay later for something you buy

Creditworthy

Able to be trusted to pay back money that is owed; safe to lend money to

Credit limit

The maximum amount that the business is willing to allow the person to buy for on credit

Credit agreement

An agreement between a business and a person/business applying for credit, a legally binding document signed by both parties

Terms of credit

How long the person has to pay the credit amount back

Debtor

Person or business owing money to the business

Database

An organized set of data that is stored in a computer and can be looked at and used in various ways- for debtors, a list of all their names, addresses and telephone numbers needed to send out statements and follow up on payments owing

Advantages of credit to a business

- Gains more clients
- Can charge more for goods bought on credit
- Can use the database of debtors (marketing purposes)

Disadvantages of credit to a business

- Administrative costs
- Risk of bad debts or non-payments
- Transactions are more time consuming

Advantages of credit to a consumer

- Can buy more expensive goods immediately
- Can take advantage of sales or special deals
- Can create a credit-worthy reputation

Disadvantage of credit to a consumer

Pay more for goods