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Business English Lecture 1Basic Economic Concepts
Wants
(dopyt) - Simply the desires of citizens. Wants are different from needs as wewill see below. Wants are a means of expressing a perceived need. Wants arebroader than needs.
Needs
(potreby): These are basic requirements for survival like food and water andshelter. In recent years we have seen a perceived shift of certain items from wants toneeds. Telephone service, to many, is a need. I would argue, however, that they arewrong.
Scarcity
(nedostatok) - the fundamental economic problem facing ALL societies.Essentially it is how to satisfy unlimited wants with limited resources. This is the issuethat plagues all government and peoples. How do we conquer the issue of scarcity?Many people have thought they had the answer (see Marx, Smith, Keynes, etc.) butthe issue of scarcity still exists.
Factors of Production/Resources
- these are those elements that a nation has atits disposal to deal with the issue of scarcity. How efficiently these are useddetermines the measure of success a nation has. They areLand - natural resources, etc.Capital - investment monies.Labor - the work force; size, education, quality, work ethic.Entrepreneurs - inventive and risk taking spirit. This is a rather new addition to atraditional list.
The "Three Basic Economic Questions"
- these are the questions all nations mustask when dealing with scarcity and efficiently allocating their resources.
What
to produce?
How
to produce?
For whom
to produce?
Economics
- Economics is the study the production and distribution of goods andservices, it is the study of human efforts to satisfy unlimited wants with limitedresources.
Opportunity Cost
- the cost of an economic decision. The classic example is "
gunsor butter."
What should a nation produce; butter, a need, or guns, a want? What isthe cost of either decision? If we choose the guns the cost is the butter. If we choosebutter, the cost is the guns. Nations bust always deal with the questions faced byopportunity cost. It is a matter of choices. Resources are limited thus we cannot meetevery need or want.
Free Products
: Air, sunshine are and other items so plentiful no one could ownthem.
Good
: tangible commodity. These are bought, sold, traded and produced.
Consumer Goods
: Goods that are intended for final use by the consumer.
 
Capital Goods
: Items used in the creation of other goods. Factory machinery, trucks,etc.
Durable Goods
: Any good that lasts more than three years when used on a regular basis.
Non Durable Goods
: Any item that lasts less than 3 years when used on a regular basis.
Services
: Work that is performed for someone. Service cannot be touched or felt.
Consumers
: people who use these goods and services.
Value
: An assignment of worth. The assignment is usually based upon the utility(usefulness) or scarcity of the item (supply and demand).
Utility
: capacity to be useful.
Paradox of value
: assignment of the highest value to those things we need the least,like water and the highest things we often don't need at all like diamonds. Why do wedo this? Good question. I do not have an answer.
Wealth
: the sum collection of those economic products that are tangible, scarce anduseful.
Productivity
- the ability to produce vast amounts of goods (economic products) inan efficient manner. The American capilist economy is productive because:We use our resource efficiently.We specialize to increase efficiency and productivity.We invest in Human Capital (our labor pool)
Money
– a nominal expression of wealth, they temselves have no real value, theyrepresent value. Tato bankovka je chranena aktivami statni banky cssr 
Gross domestic product -
a measure of the goods and services produced by labor and property that is
located in a given state/country
. GDP is the most commonmeasure or international standard of national economic performance that is used bygovernments and economists worldwide.
Supply and Demand -
The demand for a product is defined as the quantity of theproduct which consumers are willing to purchase.Factors that affect the demand relationship of a product include:
•
 
The price of the product. Generally, the higher the product is priced, the lower the quantity demanded by consumers.
•
 
Consumer income. The higher the consumer’s income, the more goods theconsumer will demand.
•
 
The price and availability of related goods. If attractive substitute products areavailable at a lower price, less of a product will be in demand.
•
 
Consumer expectations. If consumers expect product prices to rise, the moreof the product they will demand now.
 
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͵
•
 
Advertising. Effective advertising can promote and expand demand for theproduct of a company, or advertising can expand the marketplace for an entireindustry.
•
 
Demographics. As the population demographics change over the years so doconsumer tastes and the products that they consume.The demand curve for a product portrays the important relationship that existsbetween the quantity of a product that would be purchased and the prices that arecharged for the product. Movement along the demand curve reflects a change in thequantity demanded. For example when prices decline, the quantity of the productdemanded by consumers will increase. This is called the law of demand, andexplains why demand curves normally slope downward and to the right. When thedemand curve shifts, this is known as a change in demand. Change in demand iscaused by some factor other than price.The price elasticity of demand refers to the responsiveness of the quantity of goodsthat are demanded in relation to changes in the price of the product. Most productshave elastic demand. Demand is said to be elastic when a given change in priceproduces a greater percent change in the quantity of the product that is demanded.The elasticity of demand is determined by the availability of substitute products andthe percentage of the consumers total budget that is spent on the product.Necessities, in general, tend to be more inelastic than luxury goods. Gasolinerepresents a good example of a product with elastic demand. On the other hand,some products will be in demand no matter what the price; for example, insulin,which is used by diabetics. If the price of insulin were to double, in all probability thequantity of insulin demanded would remain constant. This situation is known asinelastic demand.The supply of a product is defined as the quantity of the product which producers or manufacturers are willing to produce and sell.A change in supply is different from the change in the quantity supplied. A
change inthe quantity supplied
occurs when the price of the product itself changes, and thischange is depicted as a movement along the existing supply curve. A
change insupply
occurs because of factors other than price. A change in supply is reflected bya movement or shift, of the entire supply curve, up or down.The factors that affect supply changes, and which can shift the supply curve include:
•
 
A change in the price of the inputs of production such as raw materials, labor,or capital.
•
 
Changes in production technology such as the use of additional or moreefficient machinery or production methods.
•
 
Changes in fiscal or monetary policy such as the imposition of taxes or other incentives or disincentives introduced by governments.
•
 
Natural disasters such as fires, floods, ice storms, or tornadoes which reducethe availability of goods on hand and may interrupt production schedules.
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