1. ECONOMIC ROLES AND DECISIONS Personal Finance Updated: 1-17-2012

2. ECONOMIC ROLES AND DECISIONS  Distinguish between needs and wants  Explain the difference between goods and services  Identify 3 economic roles each person performs.  Understand the impact of worker productivity on our standard of living  Explain how consumers affect the supply and demand for goods and services.  List the three economic questions that must be answered by every society.  Identify five features of our market economy.  Describe the economic resources used in the production of goods and services. Objectives: 2

3. NEEDS & WANTS  Needs are basic to survival  Food, Clothing, Shelter  Wants add to the quality of life  Fancy car, New MP3 player  Unlimited Wants  Wants never end, something new will always be better than what you have http://www.cahomeinsurance.com/California_homeo wners_insurance_homes_owners.jpg http://www.telecomskorea.com/images/ stories/news_07_1/apple_iphone_1.jpg TERMINOLOGY GOODS & SERVICES  Goods  Things you can see and touch  Clothing, cars, food  Services  Wants that are satisfied through the efforts of other people  Haircuts, accounting services, movies 3

4. LIMITED RESOURCES (THE BASIC ECONOMIC PROBLEM)  Scarcity Affects Everyone  Scarcity Affects Businesses and Governments http://www.hindu.com/thehindu/mag/2006/04/02/images/20060402003907 01.jpg 4

5. KEY ECONOMIC QUESTIONS  What to Produce?  How to best use the resources available  How to Produce?  What combination of resources will best suit the current circumstances  For Whom to Produce?  How will the goods and services produced be distributed among the citizens http://www.whscc.nf.ca/images/new%20pics/produce%20copy.jpg 5

6. MARKET ECONOMY Questions are answered : The people through buying and selling activities in the Marketplace. http://content.answers.com/main/content/wp/en/2/28/Union_Square_Farmers_Market.jpg Marketplace is anywhere buyers and sellers exchange goods, services, and some form of money. 6

7. OUR ECONOMIC SYSTEM  Capitalism—economic resources are usually privately owned by individuals rather than by the government Characteristics Include:  Free or Private Enterprise  Private Property  Voluntary exchange of Goods/Services  Freedom of the individual to choose what to produce  Competition  Profit Motive 7

8. ECONOMIC RESOURCES (FACTORS OF PRODUCTION)  Natural Resources  All of the materials that come from the earth  Oil, water, gold  Human Resources  Labor  Capital Resources  Tools, equipment, and buildings that are used to produce goods and services  Money needed to run a business 9/21/2016 http://www.bgr.bund.de/EN/Themen/Klimaentwicklung/Bilder/klimaentwicklung__ 1__g__en,property=default.jpg 8

9. ECONOMIC ROLES YOU PERFORM  Consumer  Worker  Citizen http://www.bobfromaccounting.com/1_1005/mallthumb1.1.jpg 9

10. YOUR CONSUMER ROLE  Dollar Votes  Your buying decisions help businesses make their decisions  Supply -the Quantity of a product or service that a business is willing and able to provide at a particular price. The demand for products and services helps to determine supply  Demand The quantity of a product or service that consumers are willing and able to buy at a particular price 10

11. YOUR CONSUMER ROLE  Supply and Demand Affect Prices  If prices are too high consumers will not buy  If prices are too low businesses won’t supply (not enough profit)  Competition Keeps Prices Reasonable  Equilibrium price Selling $ = Cost + Profit 11

12. SHIFT IN DEMAND AND SUPPLY CURVE  Supply Curve  Production Costs Change  Price of Resources Change  Set Higher Profit Margin  Demand Curve  Tastes, Attitudes, Preferences of Consumers  Price of Complimentary Goods Change  Income Changes  Substitution Effect 12

13. SUPPLY AND DEMAND CURVES 13

14. SUPPLY CURVE SHIFT Supply curve moves do to increase in production cost 14

15. DEMAND CURVE SHIFT Demand curves shifts due to a loss of income 15

16. ELASTICITY OF DEMAND  Products requiring a larger portion of the consumer's income tend to have greater elasticity.  Luxury products tend to have greater elasticity than necessities.  Some products that initially have a low degree of necessity are habit forming and can become "necessities" to some consumers. http://www.netmba.com/econ/micro/demand/elasticity/price/ http://www.investopedia.com/university/economics/economics4.asp 16

17. ELASTIC V. INELASTIC DEMAND  Products that are necessities (needs) are more insensitive to price changes  inelastic good 17

18. ELASTIC V. INELASTIC DEMAND  None necessities (wants) are more sensitive to price changes  Products requiring a larger portion of the consumer's income tend to have greater elasticity  Elastic good 18

19. ECONOMIC CHOICES  Making Economic Decisions…  Choosing how to use limited resources to acquire unlimited wants http://www.biblehelp.org/images/stacks%20of%20money.jpg 19

20. THE DECISION MAKING PROCESS 1. Identify Your Goal 2. Establish Your Criteria 3. Examine your options 4. Choose – Weigh Pros and Cons 5. Act on your choice 6. Review your decision - Evaluate 20

21. YOUR WORKER ROLE  You can’t pay for products and services unless you have a job  Standard of Living: Affected by the amount of money you make  Refers to the way you live as measured by the kinds and quality of goods and services you can afford 21

22. YOUR WORKER ROLE  Productivity as a Worker  Labor/Worker Productivity  The quantity of a good that an average worker can produce in an hour  Improved productivity = increased earnings = increased standard of living 22

23. YOUR CITIZEN ROLE  Pay taxes  For Public Goods  Needed for the community  Vote  Make a better place to live http://msnbcmedia1.msn.com/j/ap/dn10310171938.widec.jpg 23

24. ECONOMIC DECISIONS QUIZ 1. Name one example of a need & one example of a want. 2. Name one example of a good & one example of a service. 3. List the 3 types of resources. 4. What is the basic economic problem? 5. What are the 6 steps in the decision making process? 24

25. ECONOMIC ROLE -QUIZ 1. What are the 3 economic roles all people share? 2. How does demand affect prices? 3. How does supply affect prices? 4. What 2 Things do suppliers need to cover when they price a product? 5. What is standard of living? 6. ____ refers to the quantity of a good that an average worker can produce in an hour. Extra Credit 1. How does competition affect prices? 2. Define public goods. 3. Example of a public good. 25

26. REFERENCES Content: Chapters1 Economic Decisions and Chapter 3 Economic Roles Eggland, Steven, Ristau, Robert, Dlabay, Les, & Burrow, James. (1999). South-western intro to business. South-Western Pub. Images: Most were inserted from Microsoft © Clip Art. The rest are cited on specific slides. 26