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Lautner Laces
What is the Economy
• Economy: Study of choices people make to satisfy their wants and needs
• Microeconomics: Study of Economics at the Business level
• Macroeconomics: Behavior of the entire economics
Market Economy
• Firms-hires or demands factors of production and utilizes them to create/sells goods/ services
• Corporation-infinite life, limited liability, can raise money easily, fund raise through stock market
• Proprietorship- single owner, full liability, limited access to fundraising, easier to start than corporation
• Partnership- two or more owners, shared liability, limited access to liability
Resources
• Use workers from third world countries
• Make shoes cheap
• Sell shoes for mediocre price considering Lautner endorsement
• Purchase cheap material
• Similar to “Nike Strategy”
Resources Continued
• Natural Resources: Things grown or produced naturally
• Human Resources: Labor
• Capital Resources: A combination of both
Types of Markets
• Factor Market: Where Businesses buy resources to sell their products
• Product Market: Where consumers purchase products or goods from supplier.
Three Big Questions
• What to produce?
• How to produce it?
• For whom to produce?
• These questions are answered in market economies by prices set by competition in a free market
Prices and Information
• prices provide information about a product in a free market
• if a price is acceptable to a consumer, a trade will be made
• if a price is unacceptable to any consumers, no trade will be made
• Individuals: buy goods that make them happiest
• Firms: use resources to make profits
• Ability to make individual decisions- individuals and firms can pursue employment, property, or services as they wish
• Self interest: the force that drives the actions of individuals and businesses
Price and Profit
• Make Shoes that are Endorsed by Taylor Lautner
• Made from third world countries by unskilled laborers
• Will be slightly low quality
• The athlete will appeal to the younger crowds
• The price will appeal to low income families
• The price of production will be low enough to generate a massive profit
• Like Nike, endorsing popular figures such as Taylor Lautner will bring popularity among young teenagers’
• Because brands like Nike and Adidas endorses people like Tiger Woods, Michael Jordan, and David Beckham, it is well known among consumers
Why this is the best option
• When made by unskilled laborers, the materials will be cheap and will be simple to produce
• If it is cheaply made and is sold for an affordable price, the shoes will generate high profit
• Since a popular figure will endorse the product, many consumers will be attracted to the product