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Introduction to Business

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1 Introduction to Business
Chapter 1 Economic Decisions and Systems Lesson Plan, Day 1

2 Warm-Up Answer the following in complete sentences.
Is there a difference between needs and wants? Explain your answer.

3 Needs and Wants Need: things you cannot live without
Examples Water, food, shelter, clothing Wants: things you would like to have but can live without They add comfort and Pleasure to life

4 Goods and Services Goods Services Things you can see and touch
Examples: computers, food, clothes Services When someone does something for someone Examples: hair care, dental care, doctor visits

5 Economic Resources The means through which goods and services are produced

6 Warm-Up When Campbell’s Soup makes it’s Chicken Noodle Soup, what resources to they use to make the soup? Be specific and list all the resources you can think of.

7 Natural Resources Raw materials supplied by nature
Examples: lumber, coal, oil, water, animals, crops

8 Human Resources People producing the goods and services
Examples: farmers, factory workers, managers, accountants, entrepreneurs

9 Capital Resources The products and money used in the production of goods and services Examples: money, tools, equipment NOTE: Economic Resources are Limited

10 The Basic Economic Problem
Scarcity Not having enough resources to satisfy every need

11 Decision Making Tradeoff
When you give up something to have something else

12 Opportunity Cost Definition: the value of your next best alternative that you did not choose What did you give up or not have when making a decision to buy something or obtain a goal?

13 Decision Making Process
Specify – Determine your goal. What is your need/want Search – Gather information Sift – Look at all options and opportunity costs Select – Make a choice and act on it Study – Evaluate the result

14 Warm-up Identify the possible opportunity cost for each of the following. Trying out for an athletic team Accepting a part-time job Studying for an important exam Saving money to buy a used car Obtaining a loan to start a business

15 Economic Systems The Three Economic Questions What to produce?
Depends on resources, climate, and education How to produce? Skilled/unskilled labor; technology available What needs and wants to satisfy? What is most critical

16 Types of Economies Command Economy – Government owns most of the resources and make most of the economic decisions.

17 Types of Economies Market Economy: People rather than the government own the resources and run the business. The three economic questions are answered by individuals through buying and selling of goods in the marketplace. The marketplace is anywhere goods and services are exchanged. Consumers and businesses make decisions based on their own self interests – consumers send messages to producers by what they buy.

18 Types of Economies Traditional Economy – Goods and services are produced the same way for generations Countries with traditional economies do not participate in the global economy Does our society have any elements of a traditional economy? Again – who decides what is produced? Children are taught to use the same methods to make the same goods their ancestors produced. They often usethe natural resources readily available to them and will consume most of what they produce and sell and trade the rest. Another example of traditional economy in our society today is the Amish.

19 Mixed Economy A combination of a market economy and a command economy.
U.S. has a mixed economy (the dominate economy is a market economy)

20 The U.S. Economic System Capitalism
Private ownership of resources by individuals not government Free to decide what to produce and buy

21 Warm-Up What are some disadvantages of living in a market economy?

22 Four Principles of the U.S. Economy
Private Property Individuals can own, use, or dispose of things of value Freedom of Choice Make decisions independently and must accept consequences of those decisions As long as it does not violate the law, you can own anything you want and decide what to do with it As a business owner you can decide what and where to sell and as a consumer you can decide what and where to buy products/services. Only when individual decisions harm others will the government regulate freedom of choice.

23 Four Principles of the U.S. Economy
Profit Formula: Price – Cost = Profit Price you sell the product – amount producer spends to make product = left over profit Making money (Profit) is the heart of the private enterprise system Although profit is not the only reason people go into business, but it is very difficult to continue a business if you are not making a profit Ask for examples of competition

24 Competition Contest among sellers to win customers.
How does competition affect consumers? Better customer service Good quality products Fair prices

25 Warm-Up What are the 5 steps in the decision-making process?
List the three components of economic resources and give an example of each.

26 Supply and Demand Consumers Producers
anyone who buys or uses products. Producers Individuals/organizations that determine what products/services will be available for sale

27 Demand Quantity of goods that consumers are willing and able to buy
Law of Demand As prices go up, demand goes down Example: of a cheeseburger cost $1 each we might buy more than if they are $10 each

28 Demand Curve for Movies
Price $10.50 9.00 7.50 6.00 4.50 3.00 1.50 1,000 Quantity 2,000 3,000 4,000 5,000 6,000 7,000

29 Supply Quantity of products that Producers are willing and able to make available for sale Law of Supply As prices go up, supply goes up Example: if you are a supplier of computers you might make more available at $800 than at $200

30 Supply Curve for Watches
Price $105 90 75 60 45 30 15 10,000 Quantity 20,000 30,000 40,000 50,000 60,000 70,000 80,000

31 Market Price Point at which supply and demand are equal.

32 Market Price for Notebook Computers
$2,100 1,800 1,500 1,200 900 600 300 100 Quantity 200 400 500 700 800 Demand Supply

33 Warm-up List the three economic resources and give an example of each.
List the 5 decision making steps and give an example of each.

34 Warm-Up Explain the following terms: Freedom of choice Capitalism
Right to private property

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