Lesson 2

• Assess your situation


  Before making changes, ensure you have a full understanding of the factors affecting your business success, including current business practices, market trends, and changes to the wider environment
• Tools to assess your business' situation

  • SWOT-analysis
  • Benchmarking
  • Market research
  • Trend analysis
  • Webinars
• SWOT-analysis


  Helps you identify your business strengths, weaknesses, opportunities, and threats
• Benchmarking


  Measures your business' performance against similar businesses in your industry
• Market research


  Investigates your business market and industry to identify trends, changes, and customer or client demands
• Trend analysis


  Uses business data collected over time to identify consistent results or trends
• Webinars


  Provide useful information to help develop your business skills
• Set clear goals


  Writing down your goals clearly will make it easier for you to achieve them
• SMART goals


  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Timely
• Prioritize goals to decide which ones to focus on first, and recognize that some goals will need a long-term strategy
• Identify strategies for achieving your goals

  Review goals, list factors creating current circumstances, and think about what strategy could improve the situation
• Develop a plan for implementing your strategies


  Include time frame, actions, responsibilities, resources, and desired outcome
• Measure the results


  Establish how you will measure the results, including setting points to measure success as you work on them
• Consider how often you want to measure your business achievements, as this can help you set new goals regularly
• APPLIED ECONOMICS
• IDENTIFICATION, ENUMERATION, FILL IN THE BLANKS, PROBLEM SOLVING AND FINDING EQUILIBRIUM
• DETERMINANTS OF SUPPLY
• Technology


  • Refers to techniques or methods of production
  • Modern technology which uses modern machines increases supply of goods
• Cost of Production


  • Includes the price of raw materials and the cost of labor
• Number of sellers


  • More sellers or more factories means an increase in supply
  • Less sellers or factories mean less supply
• Taxes and Subsidies


  • Higher taxes discourage production because it reduces the earnings of businessmen
• Weather


  • Production of goods also depends on weather conditions
• Law of demand


  As price increases, quantity demanded decreases, and as price decreases, quantity demanded increases
• Law of supply


  As price increases, quantity supply increases, and as price decreases, quantity supply decreases
• Changes in demand


  Shift of demand curve brought about by changes in the determinants of demand, like income, population, price expectation and so forth
• Changes in Supply


  Shift of supply curve brought by changes in the determinants of supply
• Ceteris Paribus assumption


  Assumes that "all other things equal or constant"
• DETERMINANTS OF DEMAND
• Income


  • People buy more goods and services when their income increases, but will buy less if their income decreases, thus, affecting the demand for goods and services
  • Changes of incomes of people will change their demand for goods and services
  • An increase in income will either increase or decrease demand depending upon the kind of commodity
• Population


  • More people means more demand for goods and services
  • Less population means less demand for goods and services
• Tastes and preferences


  • Demand for goods and services increases when people like or prefer them
  • Tastes or preferences are greatly influenced by advertisement or fashion
  • If a certain product is out of fashion, the demand for it decreases
• Price expectations


  • When people expect the price of goods to increase, they will buy more
  • When people expect the price of goods to decrease, they will buy less
  • This is a general tendency of buyers to economize
• Prices of related goods

  • When the price of a certain good increases, people tend to buy substitute products
• MARKET STRUCTURE
• Perfect competition


  • Characterized by many buyers and sellers, many products that are similar in nature
  • There is perfect knowledge, with no information failure or time lags in the flow of information
• Monopolistic competition


  • A type of imperfect competition such that one or two producers sell products that are differential from one another as goods but not perfect substitutes
  • There are few barriers to entry and exit
• Oligopoly


  • Refers to a market structure that consists of a small number of firms, who together have substantial influence over a certain industry or market
  • Firms are price setters rather than price takers
• Monopoly


  • A market structure in which there is only one producer/seller for a product
  • The single business is the industry
  • A monopolistic can change the price and quality of the product