UNIT C

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UNIT C THE BUSINESS OF FASHION
3.02 Explain the economics of fashion.
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Economics terminology

• Economics Study of
• meeting the unlimited wants of a society with
  limited resources
• Goods tangible products.
• Services intangible products.
• Consumers users of products.
• Customers buyers of products.

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Economic resources

• Factors of production
• Land, labor, and capital resources
• Used to produce the goods and services that
  people consume

• Natural resources
• Human resources

• Capital
• Entrepreneurship

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Natural resources

• Contained in the earth
• Found in the sea

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Human resources

• People who work
• Employees

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Capital

• Money needed to start and operate a business
• Goods used in the production of other goods
• Ex
• - Raw Materials
• - Machinery

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Entrepreneurship

• Entrepreneurs
• Willing to take a risk
• Recognize wants and needs
• Start own business
• Organize economic resources
• Create goods and services

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Supply Demand

• Supply The amount of goods producers are
  willing to produce and sell at a given price.
• Demand The amount of goods consumers are
  willing and able to buy at a given price.
• Elasticity The degree to which changes in price
  affect the demand for a product.
• Elastic demand Changes in the price of the
  product result in changes in demand for that
  product.
• Inelastic demand Changes in the price of the
  product have very little effect on the demand for
  that product.

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The law of supply and demand

• (Economic Principle)
• The supply of a good or service
• Increases when demand is great.
• Decreases when demand is low.

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The interaction of supply demand

• People will pay more for goods in short supply.
• Companies that produce and sell an item in
  limited supply can charge a higher price for the
  goods.
• making more profit
• Other companies may begin to produce the product
• increases supply
• causes the price to decrease
• When products are readily available, prices are
  lower, resulting in lower profits.

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The interaction of supply demand (cont.)

• When supply of a product is high, many producers
  stop making the product and begin producing
  products that have less supply, increasing the
  chance of profit.
• When demand decreases, price will decrease.

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• Scarcity A condition in which more goods and
  services are desired than are available.
• Opportunity cost The value of what is given up
  when an economic choice is made.
• Utility Usefulness of a good or service in
  satisfying wants and needs.

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Economic utilities

• Form utility
• Place utility
• Time utility
• Possession utility
• Information utility

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• Form utility Usefulness provided by changing
  raw materials or assembling parts to create a
  useful good.
• Place utility Usefulness provided by having a
  product available where customers need it.
• Time utility Usefulness provided by having a
  product available when it is needed.
• Possession utility Usefulness provided by
  creating opportunities for the consumer to own
  the product.
• Information utility Usefulness provided by
  communicating information about products.

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Goods Items physically made by manufacturers
tangible products.

• Consumer goods Products useful to consumers.
• Industrial goods Products used by businesses in
  producing goods and services.

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Consumer goods

• Convenience goods Emergency items, impulse
  items, or staple goods usually purchased in small
  quantities at frequent intervals with a minimum
  of comparison shopping.

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Consumer goods (cont.)

• Specialty goods Goods for which the consumer
  has a preference due to quality, uniqueness,
  brand identification, or other specific
  characteristics.
• Price is rarely a deciding factor in the purchase
  decision, and the consumer is unlikely to accept
  substitutes.

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Consumer goods (cont.)

• Shopping goods Merchandise purchased by the
  consumer only after comparison shopping.
• These are often expensive items and comparison or
  price and quality is important.

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Services Acts performed for the consumer
intangible products.

• Consumer services Acts performed for the
  consumer for a fee.
• Industrial services Acts performed for
  businesses for a fee.

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Free-market system

• An economic system in which individuals, not the
  government, make important economic decisions.

• Consumers decide how to spend their money.
• Consumer choices determine which products are
  offered for sale.
• Sellers may charge any price they desire.

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Profit

• The money left over after costs, expenses, and
  taxes have been deducted from sales.

• The driving force behind the free-market system
• Determines whether or not a business will succeed

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Competition

• A rivalry between two or more businesses to gain
  as much of the total market sales or customer
  acceptance as possible.

• Helps maintain reasonable prices
• Provides consumers with new and improved products
• Provides wide selection of products

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Competition

• Pure competition
• Oligopoly
• Monopoly
• Direct competition
• Indirect competition
• Price competition
• Nonprice competition

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Pure competition

• A market situation in which no single company in
  an industry is large or powerful enough to
  influence or control prices.

• Many buyers and sellers
• No single buyer or seller controls prices or
  number of units sold.
• All products sold are very similar to each other.
• Companies may enter or exit the industry without
  pressure or restraints the industry is
  insignificantly affected when a company enters or
  exits.

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Oligopoly
A market structure in which a few large,
competitive firms dominate the market.

• Firms react to the actions of their competitors.
• Laws prevent oligopolies from price setting among
  themselves.
• Government may prevent mergers that would reduce
  competition.
• Difficult for new firms to enter the industry or
  for established firms to leave the industry

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Monopoly
A market in which there are no direct
competitors only one company offers goods or
services for sale and has total control over
products and prices.

• U.S. has no textile/apparel monopolies.
• The government does allow some utilities to
  operate as monopolies in industries where it
  would be inefficient to have more than one firm.

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Direct competition
Competition between two or more retailers that
utilize the same type of business format.
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Indirect competition
Competition between two or more retailers that
employ different types of business formats to
sell the same type of goods.
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Price competition
Competition focused on the selling price of a
product.
Consumers prefer to buy the products that are
lowest in price.
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Nonprice competition

• Competition based on factors that are not related
  to price.

• Quality
• Customer services
• Business location
• Business reputation
• Qualified salespeople

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Business cycle

• The fluctuations in the economy over periods of
  several years.

• Prosperity
• Recession
• Depression
• Recovery

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Prosperity

• Highest period of economic growth
• Low unemployment
• High output of goods and services
• High consumer spending
• Consumers willing to spend on fashion products

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Recession

• Fewer goods and services being produced
• Worker layoffs
• Retail sales decrease
• Necessary products such as food, housing, and
  transportation take priority over fashion
  products.

• Period of economic slowdown
• Rising unemployment
• Decrease in consumer spending

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Depression

• Prolonged recession
• Extremely low consumer spending
• High unemployment
• Drastic decrease in production of products
• Poverty can result.
• Fashion products are not being purchased.

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Recovery

• Renewed economic growth and an increase in output
  of goods and services
• Reduced unemployment
• Increased consumer spending
• Moderate business expansion
• Gradual increase in sale of
  fashion products