1. The Business in the Global Economy1.00

2. Understand economic systems
Objective 1.01
Understand economic systems

3. Topics Satisfying needs and wants Basic economic problem
Six steps of economic decision- making
Main types for economic systems
Market economy self-regulating principles

4. Satisfying Needs and Wants

5. Satisfying Needs and Wants
Needs are required in order to live.
Wants are things that add comfort and pleasure to your life.
Satisfying Needs and Wants

6. Goods & Services Goods are things that you can see and touch.
Services are activities that are consumed at the same time they are produced.
The United States economy is the largest producer of goods and services in the world.
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8. Economic Resources Economic resources: How goods
and services are produced.
The types of economic resources are:
Natural
Human
Capital

9. Human and Natural Resources
Human resources are the people who contribute physical and mental energy to the production process.
Natural resources are raw materials produced by nature.
Natural resources are raw materials produced by nature.
Human resources are the people who contribute physical and mental energy to the production process.

10. Capital Resources Capital resources are the tools, equipment,
and buildings that are used to produce
goods and services.
Examples:
Trucks
Printers, computers
Factories, Schools, Office space
Capital resources are the tools, equipment, and buildings that are used to produce goods and services.

11. Economic Problem & Scarcity
Basic economic problem - Limited resources to satisfy 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.
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.

12. Economic Decision-Making
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.
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.

13. Six steps of economic decision-making

14. Economic Decision-Making
Defining the problem
Identifying choices
Evaluate advantages / disadvantages of each choice
Choosing one choice
Acting on the choice
Reviewing the decision
Economic decision-making is a means of choosing a course of action among several alternatives.

15. Economic Decision-Making continued
Try to solve a problem
Problem: Adjust the foundation of a house
Choices: Ignore the problem
Contact companies located in the same city
Contact companies located in the next city
Contact companies located in other cities
What choice would you make?

16. Economic Decision-Making continued
Some advantages: location of local companies, companies that guarantee of services, and companies that provides simple explanation of necessary services
Some disadvantages: prices for services and location of company in next city or other cities

17. Economic Decision-Making continued
Choosing one choice: A local company that guarantees services and provides simple explanation of services.
Acting on choice: Schedule for local company to provide services of adjusting foundation of house.
Reviewing decision: Routinely check on condition of foundation of house.

18. B. Evaluating the advantages and disadvantages of each choice
Tony is trying to decide on which cars to sell at his dealership.
He completed a spreadsheet to compare the options of cars.
Which part of economic decision-making process has he
performed?
A. Defining the problem
B. Evaluating the advantages and disadvantages of each choice
C.  Choosing one choice
D.  Acting on a choice

19. Economic Systems

20. Three Economic Questions
What to produce?
How to produce?
For whom to produce?
All economies must answer three economic questions.
What to produce?
How to produce?
For whom to produce?

21. Economic Systems
An economic system is a nation’s plan for answering the three economic questions.
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.

22. 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.

23. Economic Systems
A command /communist economy the government owns resources and dictates what is produced.
Examples: China and Cuba -a central leadership group expecting all the profit from production.
Market economy goods and services are owned and controlled by the people.
Example: local company choosing to produce gaming software.
Marketplace is anywhere that goods or services exchange hands.

24. Economic Systems
Traditional economy, goods and services are produced the way it has always been done (customs) and centered on family.
Examples: Africa, Asia, Latin America and the Middle East.
Mixed economy combines the elements of the command and market economies.
Example: U.S.A.

25. Market economy self-regulating principles

26. United States Economic System
Capitalism allows the freedom of consumption and production of goods and services.
The economic system of the United States is based on capitalism.
Capitalism allows the freedom of consumption and production of goods and services.
The economic system of the United States is based on capitalism.

27. United States Economic System continued
The four principles of U.S. economic system are:
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.
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.

28. Market Economy
A consumer buys and uses goods and services. Example: A local company choosing to produce gaming software.
Consumers decide what to buy, where to buy, from whom to buy, and what price they are willing to pay.
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.

29. Producers
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.

30. SUPPLY & DEMAND
The market economy is based on the principles of supply and demand.
Demand of goods or services that consumers are willing and able to buy.
Example: The purchase of I-Phone applications increasing daily.
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.

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

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

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