slide 1 1-1 1-1satisfying needs and wants 1-2 1-2economic choices 1-3 1-3economic systems 1-4...

SLIDE 1

1-1 Satisfying Needs and Wants

1-2 Economic Choices

1-3 Economic Systems

1-4 Supply and Demand

1C H A P T E R

Economic Decisions and Systems

1-1 Satisfying Needs and Wants Goals

1.Explain the difference between needs and wants

2.Distinguish between goods and services

3.Describe the types of economic resources

Needs and Wants

Needs – Things that are required in order to live Ex: Food, water, clean air, clothing, and shelter

Wants – Things that add comfort and pleasure to your life. Ex: Name brand jeans, cell phone

You are limited only by your imagination and by what businesses make available for sale

Checkpoint #1 What is the main difference

between a need and a want? Needs are those things that are required to live,

such as food, clothing, and shelter. Wants are things that add comfort and pleasure to our lives.

Goods and Services

Goods – Things that you can see and touch Products you can purchase to meet your wants and needs

Services – Activities provided for satisfaction of others that are consumed at the same time they are purchased. Businesses must provide services to you at the time you

want to consume them

Goods and Services for Business Consumers

Some goods and services are unique for business and consumer use

Business needs (Steel, Plastic, Gasoline, and Computers) to operate. Electricity, security, accountants

Businesses provide goods and services that meet business and consumer needs and wants.

The U.S. Economy The U.S. is the largest producer of goods and

services, and largest consumers in the world, More then (2) China and (3) Japan combined

The shift from an economy based on agriculture to an industrialized economy resulted in higher incomes and more choices of products and services for consumers. More money to spend and more ways to spend it.

The U.S. Economy (Cont)

More spending = More jobs and a higher standard of living

Challenges:Buy things may not needPreserving natural resources Controlling Pollution

Checkpoint #2 How do people satisfy wants and

needs? People satisfy there wants and needs by

purchasing and consuming goods and services.

Economic Resources Businesses produce good and services using

economic resources Things available to be used to produce goods and services.

Factors of Production

3 Types of Resources1. Natural Resources

2. Human Resources

3. Capital Resources

Natural Resources Raw materials supplied by nature

Oil, Minerals, Nutrients

Rivers, Lakes, Oceans

Air you breathe

Vegetable Soup What natural resources are used in its production?

1. Vegetables and Spices

2. Water

3. Aluminum

Human Resources The people who produce goods and services

Vegetable Soup?

1. Farmers (Livestock and Crop)

2. Factory Workers / Managers

3. Truck Drivers

Entrepreneur The risk taker who uses resources to create a new

product or service

Capital Resources The products and money used in the

production of goods and services Ex: Buildings, equipment, supplies

People invest money into businesses so the business will have the capital needed to operate. Make money from the profits earned by the business

Selling their knowledge and skills in the form of labor

Checkpoint #3 What are the 3 types of economic resources?

Give an example of each type of resource. Natural: water, land, trees, animals, and minerals

Human: Labor (people who work on the farms and in factories, transport goods, provides services, or manage businesses.

Capital: Money, Land, Buildings, Tools, and Equipment.

1-2 Economic Choices

Goals:1. Describe the basic economic

problem

2. Explain the steps in the decision making process

The Basic Economic Problem

The mismatch of unlimited wants and needs and the limited economic resources

The basic economic problem results from Scarcity Not having enough resources to satisfy every need.

Countries with few natural resources may not be able to produce enough products and services

Choices

Everyone has to make financial decisions based on scarcity.

Scarcity forces you to make choices Decisions among the alternatives

Economic Decision-Making The process of choosing which needs and wants will be

satisfied

Trade Offs and Opportunity Costs

When you give up something to have something else, you are making a Trade Off

Evaluate an alternative by considering the Opportunity Cost of the decision The value of the next best alternative that you were unable

to choose.

Benefit of choice should be greater than the benefit of next best choice.

Checkpoint #4 What is Opportunity Cost?

The value of the next best alternative that you are unable to choose. It is what you are willing to give up in order to have your first choice.

The Decision-Making Process

Effective Decision-Making Process involves 6 Steps:1. Define the Problem

2. Identify the choices

3. Evaluate the advantages and disadvantages of each choice

4. Choose the best alternative

5. Act on your choice

6. Review your decision

Define the Problem For every decision the problem must be

clearly defined in order to make a decision that will lead to a satisfying solution.

Identify the Choices It is common for you to face choices with

many alternatives

Evaluate the Advantages and Disadvantages of Each Choice

Write down your choices and then list the advantages and disadvantages of each

Choose the Best Alternative Select the best choice that you believe will

be the best for you at this particular time.

Act on Your Choice Once you made you decision, do whatever

you have chosen

Review Your Decision On a Scale of 1 to 10 how would you rank

you decision in the terms of the level of satisfaction it provided

Checkpoint #5 What are the 6 Steps in the Decision-Making

Process and explain them?1. Define the Problem

2. Identify the choices

3. Evaluate the advantages and disadvantages of each alternative

4. Choose the best alternative

5. Act on your choice

6. Review your decision

1-3 Economic Systems

Goals:1. Identify the 3 economic questions

2. Differentiate among the main types of economic systems

3. Describe the economic system of the United States

The Three Economic Questions

In order to determine how available resources will be used to meet the needs and wants, each country must answer 3 economic questions:1. What goods and services will be produced?

2. How will the goods and services be produced?

3. What needs and wants will be satisfied with the goods and services produced?

What to Produce?

The resources of a country are very important in determining what goods can be produced.

Just as countries differ in the amount of resources, also differ to be important needs and wants

How to Produce?

Countries must decide the best way to use their resources to produce what is needed. The U.S. economy labor needs

Each country decides on how to use it resources to produce the goods and service it needs Unskilled or skilled labor

Advanced or simple technology

Own resources or those it obtains from other countries

What Needs and Wants to Satisfy? Decision makers must determine what needs

and wants are the most critical when deciding what to produce Capital goods or Consumer goods

In the U.S. many decisions are left for the individual consumer Depends on how much money you have and decide how

you use it or save it

Checkpoint #6 What are the 3 economic

questions?1. What goods and services will be produced?

2. How will the goods and services be produced?

3. What needs and wants will be satisfied with the goods and services?

Types of Economic Systems

A method a country uses to answer the 3 Economic Questions

3 Main Types of Economic Systems

1. Command Economy

2. Market Economy

3. Traditional Economy

4. Mixed Economy

Command Economy

The resources are owed and controlled by the government Government officials decide what and how goods are

produced and how they will be distributed and consumed

How much of the resources will be used to produce goods and services

Personal economic choices are limited in a command economy

Communism

Market Economy

The resources are owned and controlled by the people of the country

The 3 economic questions are answered by individuals through buying and selling of goods and services in the Market Place. Anywhere that goods and services exchange hands

Ex: Supermarket, Internet, Business Office, Flea Market

Traditional Economy

Goods and Services are produced the way it always been done. Used in countries that are less developed and not yet

participating in the global economy.

Three economic questions are still established by their traditions.

Meets the basic needs of the people.

Mixed Economies

Combines elements of the command and market economies

Most nations of the world operate a mixed economy

As many countries with traditional economies develop, they often adopt mixed Economies

Government makes many of the decisions on how resources are used.

Checkpoint #7 What are the main differences among the

three economic systems? The main differences between the economic

systems are found in the ways in which the 3 economic questions are answered.

The U.S. Economic System

What is the Economic System of the United States?Market

Another name for the U.S. Economic System is Capitalism. Refers to the private ownership of economic resources by

individuals, rather than by the government.

The U.S. Economic System

The economic freedom lends itself to other names often associated with the U.S. Economy. Free Enterprise or Private Enterprise

The U.S. economic system is based on four important principles1. Private Property

2. Freedom of Choice

3. Profit

4. Competition

Private Property You can own, use, or dispose of things of

value.

Freedom of Choice You can make economic decisions

independently and most accept the consequences of those decisions.

Profit The money left from sales after all costs of

operating a business have been paid.

Competition The rivalry among businesses to sell their

goods and services

Checkpoint #8 Name the four principles of which the U.S.

Economic System is based?1. Property

2. Freedom of Choice

3. Profit

4. Competition

1-4 Economic Systems

Goals:1. Describe supply and demand orally

and with graphs

2. Discuss how supply and demand affect prices of product and services

Participating in a Market Economy

Buying decisions are made by consumers – including individuals, businesses, and government A person who buys and uses goods and services

Decide what to buy, where to buy, from whom to buy, and what price willing to pay

Successful producers must pay close attention to the needs and experiences of consumers Individuals and organizations that determine what products and

services will be available for sale.

Consumers Set Demand

When consumers make decisions about what they will purchase, they determine the DEMAND for goods and services. The quantity of a good or service that consumers are

willing and able to buy.

A business depends on demand for their product or service in order to make a profit.

Producers Establish Supply

Understanding consumer demand helps businesses to determine what types and quantities of products to SUPPLY The quantity of a good or service that businesses are

willing and able to provide.

A Graphic View of Demand and Supply

Demand Curve – Illustrates the relationship between the price of a product or service and the quantity demanded by consumers

Supply Curve – Illustrates the relationship between the price of a product and the quantity businesses are willing to supply

A Graphic View of Demand and Supply

Checkpoint #9 How does the price of a product affect

demand and supply? As prices decrease, the number of consumers

willing and able to purchase the product and the quantity they are willing to buy (demand) will increase.

As prices increase, businesses will be willing to supply larger quantities of the product.

Determining Price

Prices are affected by the relationship between supply and demand, plus other factors. Factors Influencing Demand Factors Influencing Supply

Competitors

Market Price The point where supply and demand are equal.

Checkpoint #10 How is Market Price for a product

determined?Supply, demand, and competition determine

the market price for a product or service. The market price is the point at which supply

and demand are equal.