1. Chapter 1
Economic Decisions

2. Goals Distinguish between WANTS & NEEDS
Explain the difference between goods and services
Describe the economic resources used in the production of goods and services

3. Needs
Basic to survival
Food, Water
Clothing
Shelter

4. Wants Add to the quality of life But not necessary for survival
Wants never end – once we fulfill a want, it is usually followed by another want.

5. Goods and Services
We satisfy our needs and wants with GOODS and SERVICES.
GOODS (PRODUCTS) satisfy our MATERIAL needs and wants.
SERVICES satisfy our wants that we can’t see or touch:
Going to a movie
Get a haircut
Take a swimming lesson
Use your cell phone

6. Economic Resources
Companies need resources to produce goods and services.
Economic resources are also called FACTORS OF PRODUCTION

7. 3 types of resources Natural Resources (renewable and non- renewable)
Raw materials – all materials that come from the earth
Water, air, iron ore, gold, oil, copper, vegetables, fish

8. 2. Human Resources
It takes people or LABOR to turn natural resources into goods and services
People who run farms, factories, manage banks, design, machines, process food, announce the news on CNN, check out or groceries, police the streets, or teach business classes.

9. 3. Capital Resources
Tools and equipment used to produce goods and services
Office building, factories, tractors, carpenters, power tools, computers, delivery trucks
Money used to start and run the business is also capital.

10. Limited Resources
Shortage of resources - In reality, we can’t have everything we want sometimes because of $$$ or because there is a lack of resources to make the product.

11. Scarcity Conflict between unlimited wants and limited resources
Referred to as the “Basic Economic Problem”

12. Economic Choices
Government, Business and Consumers always face scarcity, therefore they must make important decisions about what they will produce, sell, and purchase

13. Making economic decisions
Decision Making Process
Define the problem
Identify choices
Evaluate the advantages and disadvantages of each choice
Choose
Act on your choice
Review your decision

14. Opportunity Cost
When making a decision, you must give up something to gain something else.
Example – You have to make a choice:
Go to a football game with your friends
Pick up an extra shift at work so that you can make some money to put towards that new car you want.
If you choose to work – not going to the football game with your friends would be the opportunity cost
What you give up to gain something else