Economic Decisions Chapter 1

I’ve just given you $250! ~Write down what you would do with it!~

Goals for the chapter Distinguish between needs and wants Distinguish between needs and wants Explain the differences between goods and services Explain the differences between goods and services Describe the economic resources used in the production of goods and services. Describe the economic resources used in the production of goods and services.

What is a need? Needs are things that are necessary for survival Needs are things that are necessary for survival –Food –Clothing –Housing

What are wants? Wants are things that are not necessary for survival but which add comfort and pleasure to our lives. Wants are things that are not necessary for survival but which add comfort and pleasure to our lives. –Designer jacket –Stereo system –Class ring

Wants never end Our wants are limited only by our imagination Our wants are limited only by our imagination One want fulfilled leads to more wants One want fulfilled leads to more wants –Ex. Your new jacket will satisfy you temporarily but soon there will be a nicer one –Ex. Buying tennis racket leads to tennis shoes leads to tennis club membership

From your list, how many items were needs and how many were wants?

We satisfy our wants with goods and services Goods are things you can see and touch. Goods are things you can see and touch. –Jacket, DVD players, Ipod Services are satisfied through the efforts of other people or by equipment. Services are satisfied through the efforts of other people or by equipment. –Make a deposit at a bank, getting a haircut, go to a movie

Economic Resources You cannot create goods from nothing or supply a service without some effort. You cannot create goods from nothing or supply a service without some effort. The means through which goods and services are produced are called economic resources (factors of production) The means through which goods and services are produced are called economic resources (factors of production) –Three kinds (natural, human, and capital)

Natural Resources The raw materials supplied by nature are called natural resources. The raw materials supplied by nature are called natural resources. Materials that come from the earth, water, air Materials that come from the earth, water, air –Iron ore from the earth –Vegetables from the ground –Fish from the water

Human Resources Natural resources do not satisfy our wants by themselves. Natural resources do not satisfy our wants by themselves. It takes people to turn them into goods and make the products and services. It takes people to turn them into goods and make the products and services. Human resources are the people who work to produce goods and services. Human resources are the people who work to produce goods and services. Labor is another name for this Labor is another name for this –People who run farms, manage banks, teach

Capital Resources The tools, equipment, and buildings that are used to produce goods and services are called capital resources. The tools, equipment, and buildings that are used to produce goods and services are called capital resources. –Office buildings –Factories –Delivery trucks

Capital Resources The word capital is often used in place of capital resources, especially when referring to the factors of production. The word capital is often used in place of capital resources, especially when referring to the factors of production. –Money needed to run a business  Capital investment in a company  Raising capital to expand business

Do you think it is possible to satisfy all of your wants and needs?

You cant possibly! You may want a new car, then you have to get gas for the car, new rims….etc The idea of not being able to satisfy all of your wants and needs is our next concept…..

Scarcity All three economic resources (natural, human and capital) are necessary to produce goods and services to satisfy our wants All three economic resources (natural, human and capital) are necessary to produce goods and services to satisfy our wants Unfortunately we do not have an endless supply of these resources. Unfortunately we do not have an endless supply of these resources. The conflict between unlimited wants and limited resources is the basic economic problem (scarcity). The conflict between unlimited wants and limited resources is the basic economic problem (scarcity).

What are some things that are scarce?

Decision-Making Process 1. Define the problem 2. Identify the choices 3. Evaluate the advantages and disadvantages of each choice 4. Choose 5. Act on your choice 6. Review your decision

What we learned Distinguished between needs and wants Distinguished between needs and wants Explained the differences between goods and services Explained the differences between goods and services Described the economic resources used in the production of goods and services. Described the economic resources used in the production of goods and services. Discussed the Decision making process Discussed the Decision making process