Principles of Business, Marketing, and FinancePrinciples of Business, Marketing, and Finance
Producers in a Private Enterprise System
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Scarcity
Scarcity
Scarcity
• Unlimited wants and needs
• Limited resources
• Choices must be made
Basic Economic Problem
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Questions Economies Must Answer
Questions Economies Must Answer
What goods and services will be produced?
How will they be produced?
For whom will they be produced?
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Economic Systems
Controlled Economy
Mixed Economy
Market Economy
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America’s Private Enterprise System
America’s Private Enterprise System
Based on independent decisions by businesses and consumers with only a limited government role regulating those relationships
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America’s Private Enterprise System
America’s Private Enterprise System
Characteristics of Private Enterprise– resources of production are owned and controlled by
individual producers– Producers use the profit motive to decide what to
produce-use of resources to obtain the greatest profit– Individual consumers make decisions about what will
be purchased to satisfy needs– Consumers use value in deciding what to consume– Government stays out of exchange activities between
producers and consumers unless it is clear that individuals or society are harmed by the decision
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ConsumersConsumers
Individuals who purchase products and services to satisfy needs
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DemandDemand
a relationship between the quantity of a product consumers are willing and able to
purchase and the price
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ProducersProducers
businesses that use their resources to develop products and services to consumers for profit– Supply-relationship between the quantity of a product
that producers are willing and able to provide and the price
– Determine the needs and demands of consumers
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GovernmentGovernment
least amount of involvement in free enterprise system
some regulations
use taxes for services
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Business Customer Classifications
Business Customer Classifications
Producers-1.2 million businesses– farms and ranches– mining companies– oil refineries– manufacturers of business and consumer products– construction-largest production category-over 700,000
companies – small-less than $10,000 a year on purchases– large-employ several hundred thousand people
worldwide and may easily spend $10 million in one day on purchases
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Business Customer Classifications
ResellersService
BusinessesGovernment
Non-Profit Organization
s
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Forms of ProductionForms of Production
Extraction and cultivation -products are obtained from nature or grown using
natural resources
Processing -changing and improving the form of another product
Manufacturing -combines raw materials and processed goods into
finished product
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Manufacturing ProcessManufacturing Process
Several manufacturers are
part of the total activity needed to
produce goods that are purchased by
consumers or other businesses.
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Types of Manufacturing Procedures
Types of Manufacturing Procedures
Mass Production -assembly process that makes a large number of
identical products using a continuous, efficient procedure
Custom Manufacturing -building a specific and unique product to meet the needs
of one customer
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Types of Manufacturing Procedures
Materials Processing
• changing the form of raw materials so they can be consumed or used to make other products
Intermittent Processing
• uses short production runs to produce a precise amount of a variation of a product
Continuous Processing
• raw materials constantly move through specially designed equipment changing them into a specific product useable for consumption
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