economic decisions fri. september 2, 2011. today’s objectives distinguish the difference between...
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Economic DecisionsFri. September 2, 2011
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Today’s Objectives
Distinguish the difference between wants and needs
Explain the difference between goods and services
Describe economic resources used in the production of goods and services
Understand how scarcity applies to economics
Economic Decisions
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Economics Defined
o Study of producing, distributing, and consuming goods and services
o Involves decisions regarding the use of resources
oDecisions are made byIndividuals (consumers)Businesses (producers)Societies (government)
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The Economy’s Driving Force
WANTS
o Things you would like to have
o Non-essential, but add to quality of life
o Also referred to as a luxury
NEEDS
o Things necessary for basic living
o Essential to human life; required for survival
o Includes basic food, water, shelter, clothing
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What satisfies our wants?
Goods are things you can see & touch.
Services are satisfied through the efforts of other people or by equipment.
In order to create goods or to provide a service, you need resources.
Goods & Services WS
Economic Resources
Click icon to add picture
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Resources Are Limited
o Resources are limited. They limit the number of wants and needs that people can satisfy.
o Most consumers in the U.S. can satisfy their basic needs.
o Most people have unlimited wants. We have to make choices.
Basic Needs
+Unlimited
Wants
Economic Resources
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Scarcity
oShortage of resources
oConflict between unlimited wants and limited resources
[ Society’s Wants & Needs ] – [ Available Resources ]
Your Wants & Needs
Your Income
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Price Gouging
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Economic Choices
Economic Decision
Opportunity Cost
Potential Lost
Things Given Up
Your choice
o A trade off occurs when a choice is made between two or more options.
o The opportunity cost is everything you gave up by choosing one option instead of another.
Factors of ProductionThe means through which goods and services are produced are called factors of production.
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Economic Choices
Humans must make
choices that influence how
resources are used to meet
needs and wants.
Example: U.S. oil supply
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Factors of Production
NaturalResources
Capital Resources
HumanResources
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Worksheet
o You can work in pairs or by yourself.
oDefine each factor in your own words.
o List one or two examples of each factor of production.
oDecide why each resource is limited.
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Natural Resources
o Raw materials found in nature
o Examples include… Wind Water Minerals Plant life
o Limitations
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Human Resources
o Human effort used for production
o Work force includes everyone willing and able to work
o Limitations
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Capital Resources
o Physical capital includes other items required for production Real Estate /
Buildings Machinery Tools
o Limitations
The Decision-Making Process
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Think about it!
Economic decisions determine how resources are used to fulfill wants and needs.
How does the government decide which wants and needs should be fulfilled for society?
How do businesses decide which wants and needs to fulfill for consumers?
What process do you follow to decide how you should use your resources (money) for wants/needs?
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Economic Decision-Making
This is the process of choosing which wants will be satisfied. The decision can be made
by following six steps…
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Decision-Making Process
1. Define problem.2. Identify alternative
solutions.3. Evaluate advantages /
disadvantages of each solution.
4. Choose the best alternative.
5. Take action on the choice.
6. Review the decision.
Decision-MakingHandout
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SUMMARY
Definition of economics
Wants vs. Needs
Goods & Services
ScarcityFactors of
productionDecision-
Making Process
Economic Questions