 Everyone has them  Basic- food, clothing, shelter ◦ But not satisfied with just the basics  Endless  Differ depending on where you live and who you are  Influenced by society and culture  Change  Only satisfied for a short time

 Resources people have for producing goods and services to satisfy wants  Land = natural resources  Labor = time and energy, knowledge and skills  Capital = anything produced in an economy that is used to produce other goods and services (tools, machines, money)

 You WANT spaghetti for dinner

 Combine land, labor, capital to produce a good or service  Farmers use soil, water, seeds, farm machinery  Labor used to produce the wheat Making the pasta  Wheat processed into flour  Rolled into the pasta you want to eat

 Process by which products are made available to the people who want them  Distribute to markets to make goods available to consumers  Now the pasta is made how do you get it?  It is sold to the grocery store  You go to the store and purchase it

 Act of buying or using goods and services  Now you can buy it, cook it and eat it

 You enjoyed it so much, you want to eat it for dinner next week, too

Why make economic choices? What goes into making a decision?  Never enough resources to produce all the goods and services people want  Benefits you’ll receive form your choice  Costs of choice; giving up the benefits you would have received from the alternative

 Highest valued benefit given up when a choice is made

 Resources are limited compared to the number and variety of wants people have  Based on the relationship between wants and the resources available to satisfy them

 When it comes to making choices, individuals, businesses and governments have to…  Make economic decisions about how to use resources to produce goods and services to satisfy needs

1. Which goods and services should be produced and in what amounts? (what and how much) 2. How should goods and services be produced? 3. Who will get goods and services that are produced?

 Who gets to make the first major economic decision? ◦ People who own or can get resources What prediction helps to decide which goods and services to produce? -- what people will want to consume  What choice do people want to make when making decisions about how to produce? ◦ Want to choose the combination of resources that will be least costly

 Practical application of science to commerce or industry  What has led to the growth of technology? ◦ Desire to find the least costly way to produce goods and services

 Why is it so difficult to decide who gets what? ◦ Wants are always greater than the resources available to satisfy them  What do societies take into consideration when trying to solve the problem of who gets what? ◦ Goals and values

 BASIC ECONOMIC DECISIONS ARE MADE ACCORDING TO LONG- ESTABLISHED PATTERNS OF BEHAVIOR THAT ARE UNLIKELY TO CHANGE  EX. FAMILY, TRIBE OF HUNTERS

WHAT IS PRODUCED?HOW IS IT PRODUCED?  BASED ON TRADITION; HAVE TO HAVE ENOUGH FOR THE ENTIRE FAMILY  CUSTOMS

WHO GETS WHAT IS PRODUCED? WHO OWNS THE RESOURCES?  DETERMINED BY CUSTOMS  PEOPLE—FREEDOM TO MAKE THEIR OWN DAY TO DAY DECISIONS  SMALL SOCIETIES  FEW REMAIN IN THE WORLD

 GOVERNMENT OR CENTRAL AUTHORITY OWNS OR CONTROLS FACTORS OF PRODUCTION AND MAKES BASIC ECONOMIC DECISIONS  EX. COMMUNIST SOVIET UNION

WHO MAKES THE DECISIONS? WHO GETS WHAT?  CENTRAL PLANNING GROUP/GOVERNMENT  CONSUMERS HAVE LITTLE OR NO POWER IN WHAT AND HOW MUCH GETS PRODUCED  DEPENDS ON THE GOALS AND VALUES OF THE GOVERNMENT

 PRIVATE INDIVIDUALS OWN FACTORS OF PRODUCTION AND ARE FREE TO MAKE OWN CHOICES ABOUT PRODUCTION, CONSUMPTION AND DISTRIBUTION  EX. FARMERS’ MARKET

WHO OR WHAT MAKES THE DECISIONS?  PEOPLE  BASED ON COMPETITION AND PROFIT SEEKING  DIFFERENCE BETWEEN THE TOTAL COST OF PRODUCTION AND TOTAL REVENUE RECEIVED FROM BUYERS  INVEST= USE MONEY TO HELP BUSINESS START AND EVENTUALLY EARN A PROFIT

FREE ENTERPRISECAPITALISM  SYSTEM IN WHICH PEOPLE IN A MARKET ECONOMY ARE FREE TO UNDERTAKE ECONOMIC ACTIVITIES WITH NO CONTROL BY THE GOVERNMENT  PEOPLE MAKE THEIR OWN DECISIONS ABOUT HOW TO SAVE RESOURCES AS CAPITAL AND HOW TO USE THEIR CAPITAL TO PRODUCE GOODS AND SERVICES

 MIXTURE OF ALL 3 BASIC SYSTEMS  EX. UNITED STATES  LIMITS ◦ GOVERNMENT REQUIRES THE ECONOMY PROVIDE CERTAIN SERVICES ◦ SHOULD THE GOVERNMENT BE MORE OR LESS INVOLVED?