Principles of Business, Marketing, and Finance
Producers in a Private Enterprise System
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Basic Economic Problem
Scarcity
• Unlimited
wants and
needs
Scarcity
• Limited
resources
Scarcity
• Choices
must be
made
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Questions Economies Must
Answer
 What goods and services
will be produced?
 How will they be
produced?
 For whom will they be
produced?
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Economic Systems
Controlled
Economy
Market
Economy
Mixed
Economy
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America’s Private Enterprise
System
 Based on independent decisions by businesses and
consumers with only a limited government role regulating
those relationships
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America’s Private Enterprise
System
 Characteristics of Private Enterprise
– resources of production are owned and controlled by
individual producers
– Producers use the profit motive to decide what to
produce-use of resources to obtain the greatest profit
– Individual consumers make decisions about what will
be purchased to satisfy needs
– Consumers use value in deciding what to consume
– Government stays out of exchange activities between
producers and consumers unless it is clear that
individuals or society are harmed by the decision
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Consumers
 Individuals who purchase products and services
to satisfy needs
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Demand
a relationship between the quantity of a
product consumers are willing and able to
purchase and the price
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Producers
 businesses that use their resources to develop
products and services to consumers for profit
– Supply-relationship between the quantity of a product
that producers are willing and able to provide and the
price
– Determine the needs and demands of consumers
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Government
least amount of involvement in free
enterprise system
some regulations
use taxes for services
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Business Customer
Classifications
 Producers-1.2 million businesses
–
–
–
–
–
farms and ranches
mining companies
oil refineries
manufacturers of business and consumer products
construction-largest production category-over
700,000 companies
– small-less than $10,000 a year on purchases
– large-employ several hundred thousand people
worldwide and may easily spend $10 million in one
day on purchases
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Business Customer
Classifications
Resellers
Service
Businesses
Government
Non-Profit
Organizations
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Forms of Production
Extraction and cultivation
-products are obtained from nature or grown using
natural resources
Processing
-changing and improving the form of another product
Manufacturing
-combines raw materials and processed goods into
finished product
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Manufacturing Process
Several
manufacturers are
part of the total
activity needed to
produce goods that
are purchased by
consumers or other
businesses.
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Types of Manufacturing
Procedures
Mass Production
-assembly process that makes a large number of
identical products using a continuous, efficient procedure
Custom Manufacturing
-building a specific and unique product to meet the needs
of one customer
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Types of Manufacturing
Procedures
Materials
Processing
Intermittent
Processing
• changing the
form of raw
materials so
they can be
consumed or
used to make
other
products
• uses short
production
runs to
produce a
precise
amount of a
variation of a
product
Continuous
Processing
• raw materials
constantly
move through
specially
designed
equipment
changing them
into a specific
product useable
for consumption
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