Download Producers and Consumers

Producers and
Consumers
Chapter 5.2
Businesses in a Market Economy are
driven by Profit Motive. (the desire to
make money
 Producers—Make
goods and
provide services.
 Maximizing profit—In a
market economy, producers
of goods and services are
motivated by the desire to
make money.
Everyone wants to make a
profit. Profit is the
earnings that are received
after all the cost of
production are paid out to
the suppliers, and
workers.
Items that do not make a profit
will not be produced.
Factors of Production

Land—In economies, land refers to other natural
resources. It includes not only the actual land or
bodies of water but the plants, animals an other raw
material found in/ and on them.

Labor– The contributions of all workers in the
society.

Capital—refers to money, machines and technology
used in the production of goods and services.

Entrepreneurship—The application of devices,
machines, and techniques used for manufacturing.

Technology-- the development of devices,
machines, and inventions.
Productivity

Productivity --is a measure of the
efficiency with which goods and services
can be produced.

Specialization—This is the specific item
that people focus on producing or a
particular service that they are able to
produce well.
Business Organization

Businesses bring together factors of
production to create goods and services
in order to make a profit. By law there
are three types of business organizations
in the U.S.
◦ Individual Partnership—This type of business is
owned and controlled by one person.
◦ Partnership—This type of firm is owned and
controlled by two or more people, who share in
decision making, profits and risk.
◦ Corporation—Is an organization that is owned by
many people but treated by law as a single entity
separate from its owner.
Production Cost (Affected by
supply and Demand)




Demand—is the quantity of a particular good or
service that consumers are willing and able to
buy at a given price.
Law of demand– When the price of a product
goes down, demand for that product will go up.
Supply—is the quantity of a particular product
that producers are able and willing to make
available for sale.
Law of Supply—when the price of a product
goes up, the supply will generally go down.
When the price of product goes down, the supply
will generally go up.

Product cost—the price of an item is
affected by the cost of producing it.
Therefore, changes in the cost of production
change the cost of the product.

Labor cost—The cost of employing
individuals help to create the product. This is
a large cost of production

Competition—is rivalry or competition
between two or more businesses that offer
similar goods or services.