Business Studies - Economy

 What Is the Economy?

An economy is the system for deciding how scarce resources are used so that goods and services can be produced and consumed. Resources are things like land, people (who can work or innovate through their ideas) and raw materials. They are seen as scarce because we have unlimited wants but there are not enough resources to produce the goods and services to satisfy these wants. The economy is important to all of us. What’s happening in the economy can affect us and the decisions we make. Our decisions can also influence how the economy is performing. Every time you choose to buy something (or not to), you are affecting the economy. 

Sectors Of the Economy

In the economy there are five sectors: Households sector, Firms sector, Financial Sector, Government sector and Overseas Sector. 

Household Sector

This sector is made up of individiuals in the economy.

• They provide their time and skills or ‘labour’ to firms in exchange for income (wages). 

• They are consumers who buy goods and services from Firms.

• They may borrow from, or save money with, the Financial sector. 

• They pay taxes to the Government. 

Firms Sector

This sector is made up of all businesses in the economy. 

• They produce output (goods and services), which they sell to consumers and receive revenue. 

• They may borrow money from, or save money with, the Financial Sector

• They pay taxes to the Government.

Financial Sector

This sector is made up of banks and other financial institutions in the economy. 

• They receive savings from Households and Firms

• They help households and Firms invest by lending them money. 

Government Sector

This sector is made up of all bodies in national, state and local governments

• They receive taxation revenue from Households and Firms

• They spend this money on public goods and services, such as roads, parks, schools and hospitals. 

Overseas Sector

This sector relates to New Zealand’s trade with other nations.

• New Zealand exports (sells) goods and services, produced by businesses in New Zealand, to other countries.

• New Zealand imports (buys) goods and services, produced by businesses in other countries. 

Injections and Leakages

In the circular flow model, money flows in and out of the economy. Think of a bathtub with the tap on but the plug out. Water is being added by the tap but also leaking out. It's important to get the balance right so the water doesn’t overflow or drain out completely. 

Think of all the exchanges taking place in the economy.

Some are putting money into the economy. These are injections. 

Some of these are taking out money out of the economy - the money is not being utiised elsewhere in the economy. These are leakages. 

The Financial sector plays an important role in facilitating business investment. Firms rely on banks lending them money so they can invest in things like new equipment, higher wages or additional staff, to increase production. 

Business & Enterprise

Business & Enterprise

What are some different ways to set the price of a product?

Ask people to pay too much for your product or service and they will stop buying. Ask too little and your profit margin slides or customers assume your product is poor quality. An 'optimum price' factors in all your costs and maximises your margins while remaining attractive to customers. Here's some ideas of how to set your price:

- Know the market: You need to find out how much customers will pay, as well as how much competitors charge. You can then decide whether to match or beat them. Simply matching a price is dangerous, though - you need to be sure all your costs - both direct and indirect - are covered.

-Chose the best pricing technique: Cost-plus pricing involves adding a mark-up percentage to costs; this will vary between products, businesses and sectors. Value-based pricing is determined by how much value your customers attach to your product. Decide what your price strategy is before making a calculation.

-Work out your costs: Include all direct costs, including money spent developing a product or service. Then calculate your variable costs (for supplies and materials, packaging and so on) - the more you make or sell, the higher these will be. Work out what percentage of your fixed costs (over heads such as rents, rates and wages) the product needs to cover. Add all of these costs together and divide by volume to produce a unit break-even figure.

What is a target Market?

A small business's target market is the group of people who it targets with advertising. These people are the consumers who are most likely to use the company's products and services. Marketers use different variables when determining their target markets, including demographics, personal interests and the times in which consumers shop. Target market can vary by size. But a company's target market generally must be large enough to earn a profit.

How can we group people in our target market?

- Look at your current customer base

- Check out your competition

- Analyse your product/service

- Choose specific demographics to target

- Consider the psycho-graphics of your target

- Evaluate your decisions

- Additional resources

How can we find out if people in our target market want to buy our product?

These include gender, age, income levels, race, education, religion, martial status, and geographic location. Consumers that fall into these groups tend to value the same products and services, which is why narrowing down these segments is one of the most important factors to determine target markets.

What are different ways to advertise a product?

Advertising is the lure that draws new customers to your business or product. The trick is to find a form of advertising that fits your business, your budget and your target market. You'll have plenty of options to choose from, as traditional media such as print and new media such as social networks both have their advantages

- Social Media Marketing: Social media platforms are an attractive marketing tool for new businesses, because promoting yourself there has little or no monetary cost. The catch is that you'll need to invest significant time in building a presence, and making your content

Market Day Reflection - Fruit Flora

Market Day Reflection - Fruit Flora

For the last few weeks of this term, we have been working on Business & Enterprise - market Day.

Firstly we had to get into groups and come up with ideas of what we will be selling on Market Day. Then we decided on our final product/s and that was Otai & Fruit Kebabs. We've chosen to make Otai because it is a traditional Tongan fruit drink and it is a great refreshment especially on a hot day like yesterday during Market Day. Instead of using plastic cups and straw we decided to use paper cups & straws which is more environmentally friendly. For our Otai we sold them for $1.50 and our fruit kebabs for $1.00, We were very happy with the amount of our product that got sold, therefore we sold all of our products and made a profit of $124.00. 

Market Day was very successful for our group because we were well organised and we were keeping track of what we do each day so that nothing falls behind. We were also lucky enough to have support from our families by donating some extra fruits which really helped our group to make more of our product. 

Market day was a great way to finish off term 4. Our group and I enjoyed making and selling our products to the school/community and parents.