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2 economic principles that drive consumer behavior
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Utility maximization and diminishing marginal utility
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Factors that effect demand
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Price of the product (own price), seasonality, price of competitors products, price of complement goods, income, population, and taste/preferences
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Why should agribusiness managers know if their product is elastic or inelastic
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The correct pricing decision in an elastic market situation is exactly the opposite of that in an inelastic situation
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Things that help employers/consumers make their business the 1st choice
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superior: efficiency, quality, innovation, and customer responsiveness
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Porter's 5 forces
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Threat of: new businesses entering the firm's existing market and of new products entering the existing market. Growing of bargaining power of suppliers and buyers. The level of rivalry among the existing firms in the industry
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Forecasting procedures
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Extrapolation, Graphical analysis, Adjust for inflation, Adjust for population, Moving averages, Seasonality, Cyclical patterns
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3 Major budgets
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Operating, cash flow, and capital expenditure
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Benefits of budgets
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Provides a measure of business performance, Keeps managers focused on the financial impact of their decisions, Quickly communicates financial expectations, Allows quick spotting of deviations
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Limitations of budgets
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Budgets are estimates, not sure things, The execution of a budget is not automatic, Budgets cannot take the place of good management, Good budgeting requires time and patience
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Cross-sectional data
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Data from different groups or locations reflecting observations collected during the same period of time
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time series data
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data from one or more groups or locations reflecting observations collected over a period of time
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necessity good
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a normal good for which income elasticity is between zero and 1
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inferior good
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a good that consumers demand less of when their incomes increase
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Law of Demand
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consumers buy more of a good when its price decreases and less when its price increases
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price elasticity
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The percentage change in quantity demanded of a product given a 1 percent change in its own price
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Law of Supply
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Tendency of suppliers to offer more of a good at a higher price
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Forecasting
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the process of developing an estimate of the future value of a variable
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cross price elasticity
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the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good
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compliment good
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a good or service used in conjunction with another that enhances the satisfaction of that item (ex. sugar in coffee)
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Substitute good
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a product that can take the place of another
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Luxury good
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Goods with an income elasticity of more than one. People spend a larger portion of their income on these items as their incomes increase
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SWOT analysis
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a planning tool used to analyze an organization's strengths, weaknesses, opportunities, and threats
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