1. Economic Decisions Fri. September 2, 2011

2. Today’s Objectives  Distinguish the difference between wants and needs  Explain the difference between goods and services  Describe economic resources used in the production of goods and services  Understand how scarcity applies to economics 2

3. Economic Decisions

4. Economics Defined o Study of producing, distributing, and consuming goods and services o Involves decisions regarding the use of resources o Decisions are made by Individuals (consumers) Businesses (producers) Societies (government) 4

5. The Economy’s Driving Force WANTS o Things you would like to have o Non-essential, but add to quality of life o Also referred to as a luxury NEEDS o Things necessary for basic living o Essential to human life; required for survival o Includes basic food, water, shelter, clothing 5

6. What satisfies our wants?  Goods are things you can see & touch.  Services are satisfied through the efforts of other people or by equipment.  In order to create goods or to provide a service, you need resources. 6

7. Goods & Services WS

8. Economic Resources

9. Resources Are Limited o Resources are limited. They limit the number of wants and needs that people can satisfy. o Most consumers in the U.S. can satisfy their basic needs. o Most people have unlimited wants. We have to make choices. Basic Needs + Unlimited Wants Economic Resources 9

10. Scarcity o Shortage of resources o Conflict between unlimited wants and limited resources [ Society’s Wants & Needs ] – [ Available Resources ] 10 Your Wants & Needs Your Income

11. Price Gouging 11

12. Economic Choices Economic Decision Opportunity Cost Potential Lost Things Given Up Your choice o A trade off occurs when a choice is made between two or more options. o The opportunity cost is everything you gave up by choosing one option instead of another. 12

13. Factors of Production The means through which goods and services are produced are called factors of production. 13

14. Economic Choices  Humans must make choices that influence how resources are used to meet needs and wants.  Example: U.S. oil supply

15. Factors of Production Natural Resources Capital Resources 15 Human Resources

16. Worksheet o You can work in pairs or by yourself. o Define each factor in your own words. o List one or two examples of each factor of production. o Decide why each resource is limited. 16

17. Natural Resources o Raw materials found in nature o Examples include… Wind Water Minerals Plant life o Limitations 17

18. Human Resources o Human effort used for production o Work force includes everyone willing and able to work o Limitations 18

19. Capital Resources o Physical capital includes other items required for production Real Estate / Buildings Machinery Tools o Limitations 19

20. The Decision- Making Process 20

21. Think about it!  Economic decisions determine how resources are used to fulfill wants and needs.  How does the government decide which wants and needs should be fulfilled for society?  How do businesses decide which wants and needs to fulfill for consumers?  What process do you follow to decide how you should use your resources (money) for wants/needs? 21

22. Economic Decision-Making This is the process of choosing which wants will be satisfied. The decision can be made by following six steps… 22

23. Decision-Making Process 1. Define problem. 2. Identify alternative solutions. 3. Evaluate advantages / disadvantages of each solution. 4. Choose the best alternative. 5. Take action on the choice. 6. Review the decision. 23

24. Decision-Making Handout

25. SUMMARY Definition of economics Wants vs. Needs Goods & Services Scarcity Factors of production Decision- Making Process Economic Questions 25