Essential Standard 5.00 Understand fundamental economic concepts to obtain a foundation for employment in business.

Objective 5.01 Understand & Distinguish between economic goods and services Explain the concept of economic resources

Topics Satisfying needs and wants Basic economic problem Main types for economic systems Market economy self-regulating principles

Satisfying Needs and Wants

Satisfying Needs and Wants What are needs? What are wants? Needs are required in order to live. Wants are things that add comfort and pleasure to your life.

Satisfying Needs and Wants continued What are goods? What are services? The United States economy is the largest producer of goods and services in the world. Goods are things that you can see and touch. Services are activities that are consumed at the same time they are produced.

Satisfying Needs and Wants continued How do businesses use economic resources to produce goods and services? The types of economic resources are: Natural Human Capital Economic resources, also called factors of production, are the means through which goods and services are produced.

Satisfying Needs and Wants continued What are natural resources? Many natural resources are nonrenewable. What are human resources? Natural resources are raw materials produced by nature. Human resources are the people who contribute physical and mental energy to the production process.

Satisfying Needs and Wants continued What are capital resources? Capital resources are the tools, equipment, and buildings that are used to produce goods and services.

Satisfying Needs and Wants continued What is the basic economic problem? What is scarcity? The basic economic problem exists due to limited resources for satisfying unlimited needs and wants. Scarcity is not having enough resources to satisfy the unlimited needs and wants. The scarcity of resources for satisfying needs and wants influences choices.

Satisfying Needs and Wants continued What is the purpose of economic decision-making? What happens to choices in a tradeoff? What is opportunity cost ? Economic decision-making is the process of choosing which wants, among several options, will be satisfied. Tradeoff is the process of giving up something for gaining something else. Opportunity cost is the value of the next-best alternative that you did not choose.

Main types of economic systems

What are the three economic questions that all economies must answer? Economic Systems What are the three economic questions that all economies must answer? All economies must answer three economic questions. What to produce? How to produce? For whom to produce?

Economic Systems What is an economic system? The main types of economic systems are: Command or Communist Market Traditional Mixed An economic system is a nation’s plan for answering the three economic questions.

Economic Systems Who owns the resources in the main types of economic systems? Command Market Traditional Who answers the economic questions? Centered on family Government The people A command, or communist, economy is an economics system in which the government owns resources and dictates what is produced. A market economy is an economics system where goods and services are owned and controlled by the people. A marketplace is anywhere that goods or services exchange hands. In a traditional economy, goods and services are produced the way it has always been done (customs) and centered on family. A mixed economy combines the elements of the command and market economies.

Market economy self-regulating principles

United States Economic System What is capitalism? What type of economic system does the United States have? Capitalism allows the freedom of consumption and production of goods and services. The economic system of the United States is based on capitalism.

United States Economic System continued The four principles of U.S. economic system are: Private property Freedom of choice Profit Competition Private property – can own, use, or dispose of things of value. Freedom of choice – can make decisions independently and must accept consequences of those decisions. Profit – money left from sales after all of the costs of operating a business have been paid. Competition – the rivalry among businesses to sell their goods and services.

Market Economy What is the role of consumers in a market economy? A consumer includes individuals, businesses, and government. A consumer buys and uses goods and services. Consumers decide what to buy, where to buy, from whom to buy, and what price they are willing to pay.

Market Economy continued What is the role of producers in a market economy? Producers are individuals and organizations that determine what products and services will be available for sale. Producers determine what products and services will be available, what needs and wants they will satisfy, and the prices they want to receive.

Market Economy continued The market economy is based on the principles of supply and demand. What is demand? What are some examples of consumer demand? What is supply? What are some examples of how producers establish supply? Demand is the quantity of goods or services that consumers are willing and able to buy. Supply refers to the quantity of goods or services that businesses are willing and able to provide. Producers establish the quantity of goods or services that will be produced to meet the demands of consumers. Consumers set the demand for goods and services. Demand influences how much producers will supply. Use the following slides to explain supply and demand using graphs. Demand Examples: High demand for a new gaming console or electronic item causes the price to rise. Last year’s fashions go “out of style” and drop in price occurred. Supply Examples: Many companies are creating an mp3 player, therefore the price drops. Only a few companies started selling tablets, such as the iPad, so the price was high when they were introduced to the public.

Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western

Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western

Supply and Demand Graphs Market (equilibrium) price is the point where supply and demand are equal. Intro to Business, 6e, Thomson South-Western