Fundamentals of Business

**Products**

Goods or services provided by a business

**Goods**

Tangible products made to be sold 

**Services**

Intangible products that have a monetary value the act of doing work for someone 

**Needs**

Goods and services required for survival eg. food, water, heat, shelter, clothes 

**Wants**

They are goods and or services that enhances a person’s life eg. tv, cell phone, transportation

**Fad**

A short term craze that becomes popular and unpopular quickly 

**Trend**

A general direction that society moves in lasts consistently for a long time, typically solves a problem in society 

**Marketplace**

Where the buying and selling of products takes place, composed of producers and consumers

**Manufacturer**

Makes the good

**Supplier**

Provides the good or service 

**Supply**

The quantity of goods/services that producers and sellers are willing to provide/sell to consumers

**Demand**

Refers to the quantity of goods/services that the market is willing to buy

**Equilibrium**

The number of people that want to buy at that price ='s the number of people that want to sell at that price

**Substitute Goods**

A good that can easily be replaced by another similarly purposed good eg. sugar and sweetener

**Complementary Goods**

A good that is used with another good eg. toothpaste, and toothbrush

**Producer**

Businesses that make goods or provide services 

**Consumers**

People who use products

**Business Interdependence**

When one business relies on another to help with their own business

**Obsolete Products**

Products that consumers no longer want or need

**Producer Goods**

Goods that businesses buy from other businesses to aide in the making of the product or the providing of the service 

**What is the most important thing a business has to do to be successful**

Fill a need or want while making a profit or providing a service to the community

**What does interdependence in business mean? Be able to give examples**

When one business relies on another to help with their own business eg. Mcdonalds being reliant on a paper mill/cardboard company to make their big mac boxes

**How will the consumer benefit if there is a lot of competition**

A consumer will benefit if there is a lot of competition because it gives them purchasing power, because competition creates varying prices and service quality, giving the consumer more choice is what standard of service or good they'll accept and how much they will pay for it

**Explain how manufacturers and suppliers can also be consumers**

Because they are buying materials in order to make or provide something

**What is the Law of Supply**

All other factors being equal, as the price of a good or service increases the quantity of goods or services offered by suppliers increases and vice versa

**What is the Law of Demand**

All other factors being equal as the price of a good or service increases, consumer demand for the good or service will decreases and vice versa

What 5 factors affect the supply of a product

Change in number of producers, changes in technology, changing production costs, changing future expectations, change in environment

**How is supply affected by change in the number of producers**

When a product is proving highly profitable other business will want to make similar products, so in turn supply of that product will increase, cause prices to decrease because of competition (if demand stays the same)

**How is supply affected by changes in technology**

Changes in technology can reduce the production cost by encouraging more business to start producing, increasing supply eg. use of robotics reduces labor costs  

**How is supply affected by change in production costs**

Changing costs involved in production or provision can increase or decrease supply, for example is production becomes expensive supply decreases it if becomes cheaper supply will increase to make more profit 

**How is supply affected by change in future expectations**

Producers always plan ahead to forecast sales, production, financing, economic conditions, and demand

**How is supply affected by change in the environment**

Seasons, Weather conditions, Natural disasters 

**What 5 factors affect the demand of a product**

Change in price, change in consumer income, change in consumer taste/preference, changing future expectations, changes in population

**How is demand affected by change in price**

The lower the price of goods and services the more people purchase. Price may not matter in a urgent scenario

**How is demand affected by change in consumer income**

As income increases people tend to buy more, demand goes up (in some situations though the opposite is true like in the case of groceries, where demand would go down as eating out is more affordable) 

**How is demand affected by change in consumer taste/preference**

Consumer taste over time can cause increase in demand for more fashionable items, and a decrease in demand for unfashionable items 

**How is demand affected by change in future expectations**

If consumers expect the price of an item will increase in the future they will often purchase more in anticipation.

**How is demand affected by change in population**

Certain segments of the population increasing can cause an increase in demand for goods and services associated with that segment eg. seniors and retirement homes. 

**What are the 5 stages of the business cycle**

Prosperity, Inflation, Recession, Depression, Recovery

**Prosperity**

* People making lots of $ 
* Business making products lots of research and development 
* Consumers buying lots of stuff and its expensive
* Employment is high, consumers are feeling very secure

**Inflation**

* Because demand for product is exceed production, prices are going to increase 
* Producers increase price to meet demand 
* Less $ on luxurious items, because they are too expensive 
* Incomes hasn’t increased but prices have 
* Employment is still steady/can't afford to give raises 
* Business sales are still strong, profits have decreased  
* Government increases interest rate
* Government slows down government spending

**Recession**

* Employment rate is low. Since profits have gone down companies begin to lay off employees
* They become more smart shoppers, purchasing second hand products, and lower level or products or may just wait to make purchases because they are less financially secure 
* Government reduces interest rates, and increase spending, to create jobs

**Depression**

* Because of government intervention we often skip this stage 
* Employment is at lowest no hiring 
* Businesses profits have seen a drastic drop in profit, and some can’t survive, and close down 
* Strictly bare essentials

**Recovery**

* Prices are low
* Things producers/consumer have started to breakdown and need replacing 
* Consumers are still feeling financial insecurity but are still buying second hand, lower level products and some may not be buying at all
* Businesses start slowly getting back to normal