Competency 1 - Applies economic theory to address decision-making in households and business firms. 1.1 The Economic Way of Thinking In this section, you learned that scarcity is an integral part of t

Competency 1 - Applies economic theory to address decision-making in households and business firms.

1.1 The Economic Way of Thinking

In this section, you learned that scarcity is an integral part of the human experience. Our wants are unlimited, but our capability to produce and consume are limited. Therefore, we must learn to make the best choices with the resources we have. In this section, you were introduced to the economic way of thinking, the model-building process used by economists, and the pitfalls to economic reasoning.

1.2 Market Demand & Supply

In this portion of the course, you learned about demand and supply analysis. Demand and supply analysis is fundamental to an understanding of how a capitalist or market-oriented economy works. You also learned how to analyze demand and supply and how they influence quantities and prices.

1.3 Price Elasticity & Consumer Choice Theory

In this section, you learned about buying goods and services when they meet our needs and desires. The rational consumer tries to maximize their satisfaction while trying to stay within their budgetary constraints. The price elasticity of demand measures consumer responsiveness to changes in price. Consumer choice theory explains why the law of demand works. In this section, you saw how changes in consumer income and the price of related goods affect the quantity demanded.

Competency 1 Demonstration of Mastery

Artifact: Forecasting Total Market Demand - Part 1

After reviewing the essential concepts, readings, and cases for 1.1, 1.2, and 1.3 complete the following steps.

Scenario: You are starting a business and you have asked your bank to give you loan. The banker wants you to provide a demand forecast for the industry you are operating in. Follow the steps below to prepare for your next meeting with the banker. 

Steps:

1. Define the market.
   • Select a product or service that interests you.
   • Review information online about the industry.
   • Identify the potential end users (minimum of five).
   • Discuss how product substitution could impact market demand.
2. Create market segments.
   • Create a table that lists each segment of end users. Be sure each segment is small and homogenous enough that the drivers of demand are consistent across the entire segment. The table should include the quantity or volume consumed by each segment.
   • Describe how you selected each market segment and the sources used to find the data.
3. Analysis of market potential
   • Respond to the following questions:
     • Is the demand in this industry strong enough to warrant a substantial investment? Explain your answer. Provide data that supports your rationale.
     • Which specific market segments present the greatest opportunities? Explain your answer. Provide data that supports your rationale.
4. Cite all sources in APA format
5. This should not be more than 5 pages long.