MONEY – The basic problem

It doesn’t grow on trees!

Money Works: Money, customers and business

One world

SCARCITY

Scarce resources

Distributed differently around the worldMany people have basic needs unmet

Money Works: Money, customers and business

NEEDS

Food

Water

Clothing

Shelter Safet

y

Money Works: Money, customers and business

What do you want?What do you need?

WANTS

Not essential for survival

Money Works: Money, customers and business

CHOICES

Limited incomes

Can’t have it all

Choose between goods and services

To buy or not to buy

Best value

(A)

(B)

Money Works: Money, customers and business

• Have you ever made a difficult choice? What influenced your decision?

THINKING ABOUT CHOICES…

Governments have to make difficult decisions every dayCan you think of examples?

• Do you always get value for money? How do you make your money go further?

Money Works: Money, customers and business

• Businesses provide goods and services.• Compete with each other for customers.• Compete on price and other factors, e.g.

quality, customer service, brand, prestige.

Businesses make a profit by: - getting the most revenue they can for

theirgoods and services

- keeping their costs as low as possible.

BUSINESS & CHOICE

Money Works: Money, customers and business

MONEY – The basic problem

It doesn’t grow on trees!

Money Works: Money, customers and business

Meeting basic needs

making more than they need

EARLY SOCIETIES

developing skills

Money Works: Money, customers and business

Farmer one produces too much wheat for his family.

TRADE - BARTER

Barter - what willing to exchange for what

Farmer two producestoo much cheese.

Money Works: Money, customers and business

Do you want what I have?Have you got what I want?

How can we find each other?Can we agree an exchange?

Could someone give me a better exchange?

I can’t find someone who wants to swap with me!

Just too difficult!!!

PROBLEM?

Money Works: Money, customers and business

• That we can all use and recognise• That is always worth the same• That can be divided up so we know how

many parts make up one whole• That is easy to carry around• That is hard-wearing, as we will pass it

around

Then we can use this to pay each other for goods and services!

WHAT WE NEED IS SOMETHING…

Money Works: Money, customers and business

Medium of exchange Unit of account Store of wealth

MONEY!!!

Money Works: Money, customers and business

A farmer takes his surplus wheatto the market.

DEVELOPING MARKETS

He buys the other food he needs using the money – not just cheese!

He sells this for money.

He is now a producer of his goods and is a supplier to the market.

Money Works: Money, customers and business

The farmer makes very good quality wheat but can’t produce enough to meet the

quantity his customers want and can pay for.

As customers are demanding more than he can supply, he finds customers are prepared to pay more.

The price goes up.

DEVELOPING MARKETS

Money Works: Money, customers and business

The farmer decides to specialise in producing more wheat, as he is particularly good at growing this. As he gets better he finds he can reduce how much it costs to produce his wheat.He is so successful and getting such a high price, other farmers decide it might be a good idea to look at producing more wheat too.

DEVELOPING MARKETS

Money Works: Money, customers and business

• Now several farmers bring their produce to the market.

Customers have choice.

What will the farmer have to do to keep his customers?

DEVELOPING MARKETS

Money Works: Money, customers and business

Market – buyers and sellers come together

Price – determined by demand and supply

Demand – the amount buyers are willing and able to pay

Supply – the quantity suppliers are willing to provide at a certain price

A SIMPLE MARKET

Money Works: Money, customers and businessSupply

demand