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Economics for Small Businesses • Importance of Supply & Demand – What affects demand? • • • • • Income Tastes & preferences Number of buyers Price of complements & substitutes Expectations of the future Monopolistic Competition • Most businesses operate in this economic environment – Sell homogenous products/services – Find a competitive advantage to “separate” from other like businesses • Affect perceptions Economic Indicators • Indicators help to forecast future & assist in making business decisions • Can be industry specific – New home starts -> construction industry • Can be “broad” – Personal income -> help most industries Economic Indicators • • • • • • • • Personal Income Gross Domestic Product (GDP) Consumer Confidence Inventory Survey of Purchasing Managers (SPM) Unemployment Rate Inflation Interest Rates Elasticities • Price – If price changes, how is quantity sold affected & how does this affect Total Revenue – Inelastic vs. elastic • Income – If income changes, how is quantity sold affected – Normal vs. inferior good • Cross – If price of substitute or complement changes, how in quantity sold affected Small Business Banking • Business checking account – High fees, high minimum balances – Shop around – Commercial banks, savings banks & credit unions • Line of Credit – Secured by investment (Certificate of Deposit) – Secured by business asset Banking • Money Market Deposit Account (MMDA) – Savings account with checking privileges • Escrow Accounts – Tax payments • Sales tax • Employee withholdings • Employer share of FICA & MQFE – Deposits Credit Card • For business use – Difficult to obtain – May need collateral • For customer use – Pay percentage of sales to bank – Fees • Set-up • Equipment • Monthly FYI – Job Projections (NYS Department of Labor (5 yrs) • Business – Accountants – Auditors – Financial Managers – Public Relations • Investments – Personal Financial Advisors – Stockbrokers • Social Workers Job Projections • Computer – Computer & information system manager – Software engineer – Computer support specialist – Computer system analyst – Network administrator • Law – Lawyers – paralegal Job Projections • Education – K-5 – 6-8 – 9-12 – Special Ed – Science – Math • Sales Job Projections • Health – Nurses aides – Nurses – Medical assistants – Home health aid – Medical billing • Eating establishments – Food prep – servers Job Projections • Services – Maids – Landscapers – Child care – Auto service tech – Electrician – Retail sales – Construction laborers – Call center/client service