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DSST Things to know_Intro to Business

More demand than supply shortage more supply than

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More demand than supply – shortage More supply than demand – surplus Supply Factors –
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Changes in the price of raw materials Forecast of future prices (up or down) Technology changes Competitors (increase and decrease) Price of substitute goods Demand Factors- Income distribution (increase or decrease) Consumer preferences Population age and distribution Demand for Substitute goods (increase or decrease) Characteristics of Market Economy and Mixed Economy Competition (see below) Right to own property Freedom of choice in buying and selling goods and services Profits Types of Competition o Monopoly – lack of competition – one dominant supplier to an industry, controls pricing o Monopolistic – several producers make similar products that are perceived as slightly different o Oligopoly – few producers, little differentiation of product o Perfect – many producers no perceived differences Aggregate Output – total amount of goods and services produced in an economy in a given period (GDP) Gross Domestic Product – total value of all goods and services produced domestically in a given period (goods produced outside of the country are not included) (GNP) Gross National Product – total value of all goods and services produced by a nation’s companies regardless of where the facility is located in a given period of time (less accurate) (CPI) Consumer Price Index – based on the market price of a basket of goods and services vary from month to month (food, housing, clothing, transportation, medical care, recreation, education, and misc. items, such as haircuts and cigarettes) (PPI) Producer Price Index – measurement of selling prices received by domestic producers of goods and services for their products, includes prices for raw materials, component goods, and finished goods Unemployment Rate – low rate can translate into difficulty finding qualified workers, high rate can indicate low consumer demand Productivity – rate of which goods and services are produced in a given period; output per capita, the higher the productivity the healthier the economy National Debt – raise money – government sells bonds, levies taxes. More bonds the government sells the more money it takes out of the investor dollars making it harder for businesses to borrow money Balance of Trade – IF more goods are sold abroad than it imports the balance of trade is positive, If more goods are Imported than it exports the balance of trade runs “trade deficit” we owe more to other countries than we are taking in Buying existing business – Risks are known Existing customer base and suppliers
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Financial history as basis for future performance Buying a franchisee Franchisee helps to set up business Helps with training, marketing, advertising o Disadvantages: Cost of buying franchise license Start up costs Percentage that franchisee pays the franchiser Lack of creativity and control
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