Presentation on theme: "1 Economic Decisions and Systems 1-1 Satisfying Needs and Wants"— Presentation transcript:
1 1 Economic Decisions and Systems 1-1 Satisfying Needs and Wants C H A P T E R1Economic Decisions and Systems1-1 Satisfying Needs and Wants1-2 Economic Choices1-3 Economic Systems1-4 Supply and Demand
2 1-1 Satisfying Needs and Wants GoalsExplain the difference between needs and wantsDistinguish between goods and servicesDescribe the types of economic resources
3 Needs and Wants Needs – Things that are required in order to live Ex: Food, water, clean air, clothing, and shelterWants – Things that add comfort and pleasure to your life.Ex: Name brand jeans, cell phoneYou are limited only by your imagination and by what businesses make available for sale
4 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.
5 Goods and Services Goods – Things that you can see and touch Products you can purchase to meet your wants and needsServices – 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
6 Goods and Services for Business Consumers Some goods and services are unique for business and consumer useBusiness needs (Steel, Plastic, Gasoline, and Computers) to operate.Electricity, security, accountantsBusinesses provide goods and services that meet business and consumer needs and wants.
7 The U.S. EconomyThe U.S. is the largest producer of goods and services, and largest consumers in the world,More then (2) China and (3) Japan combinedThe 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.
8 The U.S. Economy (Cont)More spending = More jobs and a higher standard of livingChallenges:Buy things may not needPreserving natural resourcesControlling Pollution
9 Checkpoint #2 How do people satisfy wants and needs? People satisfy there wants and needs by purchasing and consuming goods and services.
10 Economic ResourcesBusinesses produce good and services using economic resourcesThings available to be used to produce goods and services.Factors of Production3 Types of ResourcesNatural ResourcesHuman ResourcesCapital Resources
11 Natural Resources Raw materials supplied by nature Vegetable Soup Oil, Minerals, NutrientsRivers, Lakes, OceansAir you breatheVegetable SoupWhat natural resources are used in its production?Vegetables and SpicesWaterAluminum
12 Human Resources The people who produce goods and services Entrepreneur Vegetable Soup?Farmers (Livestock and Crop)Factory Workers / ManagersTruck DriversEntrepreneurThe risk taker who uses resources to create a new product or service
13 Capital ResourcesThe products and money used in the production of goods and servicesEx: Buildings, equipment, suppliesPeople invest money into businesses so the business will have the capital needed to operate.Make money from the profits earned by the businessSelling their knowledge and skills in the form of labor
14 Checkpoint #3What are the 3 types of economic resources? Give an example of each type of resource.Natural: water, land, trees, animals, and mineralsHuman: Labor (people who work on the farms and in factories, transport goods, provides services, or manage businesses.Capital: Money, Land, Buildings, Tools, and Equipment.
15 1-2 Economic Choices Goals: Describe the basic economic problem Explain the steps in the decision making process
16 The Basic Economic Problem The mismatch of unlimited wants and needs and the limited economic resourcesThe basic economic problem results from ScarcityNot having enough resources to satisfy every need.Countries with few natural resources may not be able to produce enough products and services
17 Choices Everyone has to make financial decisions based on scarcity. Scarcity forces you to make choicesDecisions among the alternativesEconomic Decision-MakingThe process of choosing which needs and wants will be satisfied
18 Trade Offs and Opportunity Costs When you give up something to have something else, you are making a Trade OffEvaluate an alternative by considering the Opportunity Cost of the decisionThe 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.
19 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.
20 The Decision-Making Process Effective Decision-Making Process involves 6 Steps:Define the ProblemIdentify the choicesEvaluate the advantages and disadvantages of each choiceChoose the best alternativeAct on your choiceReview your decision
21 Define the Problem Identify the Choices For every decision the problem must be clearly defined in order to make a decision that will lead to a satisfying solution.Identify the ChoicesIt is common for you to face choices with many alternatives
22 Evaluate the Advantages and Disadvantages of Each Choice Write down your choices and then list the advantages and disadvantages of eachChoose the Best AlternativeSelect the best choice that you believe will be the best for you at this particular time.
23 Act on Your Choice Review Your Decision Once you made you decision, do whatever you have chosenReview Your DecisionOn a Scale of 1 to 10 how would you rank you decision in the terms of the level of satisfaction it provided
24 Checkpoint #5What are the 6 Steps in the Decision-Making Process and explain them?Define the ProblemIdentify the choicesEvaluate the advantages and disadvantages of each alternativeChoose the best alternativeAct on your choiceReview your decision
25 1-3 Economic Systems Goals: Identify the 3 economic questions Differentiate among the main types of economic systemsDescribe the economic system of the United States
26 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:What goods and services will be produced?How will the goods and services be produced?What needs and wants will be satisfied with the goods and services produced?
27 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
28 How to Produce?Countries must decide the best way to use their resources to produce what is needed.The U.S. economy labor needsEach country decides on how to use it resources to produce the goods and service it needsUnskilled or skilled laborAdvanced or simple technologyOwn resources or those it obtains from other countries
29 What Needs and Wants to Satisfy? Decision makers must determine what needs and wants are the most critical when deciding what to produceCapital goods or Consumer goodsIn the U.S. many decisions are left for the individual consumerDepends on how much money you have and decide how you use it or save it
30 Checkpoint #6 What are the 3 economic questions? What goods and services will be produced?How will the goods and services be produced?What needs and wants will be satisfied with the goods and services?
31 Types of Economic Systems A method a country uses to answer the 3 Economic Questions3 Main Types of Economic SystemsCommand EconomyMarket EconomyTraditional EconomyMixed Economy
32 Command EconomyThe resources are owed and controlled by the governmentGovernment officials decide what and how goods are produced and how they will be distributed and consumedHow much of the resources will be used to produce goods and servicesPersonal economic choices are limited in a command economyCommunism
33 Market EconomyThe resources are owned and controlled by the people of the countryThe 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 handsEx: Supermarket, Internet, Business Office, Flea Market
34 Traditional EconomyGoods 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.
35 Mixed Economies Combines elements of the command and market economies Most nations of the world operate a mixed economyAs many countries with traditional economies develop, they often adopt mixed EconomiesGovernment makes many of the decisions on how resources are used.
36 Checkpoint #7What 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.
37 The U.S. Economic SystemWhat is the Economic System of the United States?MarketAnother name for the U.S. Economic System is Capitalism.Refers to the private ownership of economic resources by individuals, rather than by the government.
38 The U.S. Economic SystemThe economic freedom lends itself to other names often associated with the U.S. Economy.Free Enterprise or Private EnterpriseThe U.S. economic system is based on four important principlesPrivate PropertyFreedom of ChoiceProfitCompetition
39 Private Property Freedom of Choice You can own, use, or dispose of things of value.Freedom of ChoiceYou can make economic decisions independently and most accept the consequences of those decisions.
40 ProfitThe money left from sales after all costs of operating a business have been paid.CompetitionThe rivalry among businesses to sell their goods and services
41 Checkpoint #8Name the four principles of which the U.S. Economic System is based?PropertyFreedom of ChoiceProfitCompetition
42 1-4 Economic Systems Goals: Describe supply and demand orally and with graphsDiscuss how supply and demand affect prices of product and services
43 Participating in a Market Economy Buying decisions are made by consumers – including individuals, businesses, and governmentA person who buys and uses goods and servicesDecide what to buy, where to buy, from whom to buy, and what price willing to paySuccessful producers must pay close attention to the needs and experiences of consumersIndividuals and organizations that determine what products and services will be available for sale.
44 Consumers Set DemandWhen 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.
45 Producers Establish Supply Understanding consumer demand helps businesses to determine what types and quantities of products to SUPPLYThe quantity of a good or service that businesses are willing and able to provide.
46 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 consumersSupply Curve – Illustrates the relationship between the price of a product and the quantity businesses are willing to supply
48 Checkpoint #9How 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.
49 Determining PricePrices are affected by the relationship between supply and demand, plus other factors.Factors Influencing DemandFactors Influencing SupplyCompetitorsMarket PriceThe point where supply and demand are equal.
50 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.