Producers and Consumers

By Cedella & Erin

Producing Goods and Services

Producers make the goods/ provide services

Operate in a variety of areas
Manufacturing
Agriculture
Transportation
Construction
Producers have much in common, including
motivation.
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 Profit

Profit- Earnings after all costs of production has been made

Example:
Recording company agrees to release CD of a new
singing group
Company spends money to produce CD and
distribute
Company must calculate how many CDs it must sell
in order to recover ts costs and make money
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Factors of Production
Land: Refers to natural resources such as land and water, but also the resources
found in them.

Labor: The contribution of all types of workers. The result in the production of
goods and services
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Factors of production
Capital: Refers to machines and technology used in the production of goods and
services

Entrepreneurship: An entrepreneur runs a small business and assumes all the risk
and reward of a given business

Technology: Make it possible to develop new types of good and services.

 Productivity
Measure of the efficiency with which goods and services can be produced.
Critical determinant of cost efficiency

Output Goods and services

Input Labor, Time, Technology

Specialization- People focus on producing a particular good or service that

they are able to produce well
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Business Organizations
Businesses bring together factors of production to create goods and services

in order to make a profit.

Three types of business organizations:

1. Individual Proprietorship
a. Owned by one person
2. Partnership
a. Owned by two or more people
3. Corporation
a. Owned by many people (shareholders)

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Demand & Supply

Law of demand: When the price of a product goes down, the product will go up.
Vice versa.

Example: A popular artist dies and, thus, he

obviously will be producing no more art.
Demand for his art increases substantially as
people want to purchase the few pieces that
exist.
Law of supply: Price goes up, the supply will go up.
- There are times when a company may intentionally limit supply to cause

the price of products to go up.

Interaction of Demand and Supply
- How much of a product will be made and at what price it will be sold.
Eventually supply will be equal to demand, price will become stable.

Examples:

- A huge wave of new, unskilled workers come

to a city and all of the workers are willing to
take jobs at low wages. Because there are
more workers than there are available jobs,
the excess supply of workers drives wages
downward.
Production Costs
The price of an item is affected by the cost of producing it.
Priced in the item can change based on what is used to make it.

Effects on economy:

Oil
Fuel is made of oil, so if oil prices go up, the price of operating a car or truck goes up as well.
Airfares increase because of the cost of fuel increasing as well
Transportation of goods- price of items increases

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Competition
Rivalry between two or more businesses that offer similar goods or services.
Good for the economic system because competition because competition
encourages efficient use of resources