1. Units 1 & 2 Economic Decisions and Systems PRINCIPLES OF BUSINESS, FINANCE AND MARKETING

2.  Satisfying Wants & Needs  Economic Choices  Economic Systems  Supply and Demand UNIT 1.01

3.  Wants  Not necessary for survival, but add comfort and pleasure to our lives  i.e. video games, designer clothes,  Needs  Things that are necessary for survival  i.e. food, clothing, shelter Question: Is a car a want or a need? SATISFYING WANTS AND NEEDS

4. Unlimited wants and needs, limited economic resources  Scarcity  Not having enough resources to satisfy every need  Limited supplies of goods and services  Someone’s going to go without BASIC ECONOMIC PROBLEM

5.  Opportunity Cost  Value of the next best alternative that you were not able to chose  Trade Off – what you make when you give something up to have something else  College vs. Work ECONOMIC CHOICES Job College Year Annual Income/ ExpenseCumulative Annual Income/ ExpenseCumulative 1 $ 20,000 $ (20,000) 2 $ 20,000 $ 40,000 $ (20,000) $ (40,000) 3 $ 20,000 $ 60,000 $ (20,000) $ (60,000) 4 $ 20,000 $ 80,000 $ (20,000) $ (80,000) 5 $ 20,000 $ 100,000 $ (20,000) $ (100,000) 6 $ 20,000 $ 120,000 $ 50,000 $ (50,000) 7 $ 20,000 $ 140,000 $ 50,000 $ - 10 $ 20,000 $ 200,000 $ 50,000 $ 150,000 15 $ 20,000 $ 300,000 $ 50,000 $ 400,000 20 $ 20,000 $ 400,000 $ 50,000 $ 650,000 25 $ 20,000 $ 500,000 $ 50,000 $ 900,000

6.  6 Steps  Define the problem  Identify the alternatives  List all pros and cons  Choose among alternatives  Act on your choice  Evaluate your decision  Example  Can’t get to work  Walk, bike, car, mooch ride  Lazy, embarrassing, cool  CAR!  Spend $20K on used car  Can’t afford gas  DECISION MAKING PROCESS

7.  Values  Things that are important to you in life  Goals  Things a person wants to accomplish  i.e. college degree, starting a business Freedom of Choice – the freedom to make decisions independently while accepting the consequences of those decisions FACTORS THAT AFFECT DECISION-MAKING

8.  Factors of Production  Natural Resources: raw materials (water, oil, trees)  Renewable resources can be replaced  Non-renewable resources cannot be replaced  Human Resources : people who contribute physical or mental energy  Capital Resources : tools, equipment, buildings, money, etc. used to produce goods and services ECONOMIC RESOURCES

9. Initiative to combine natural, human and capital resources to produce goods or services  The 3 economic questions 1.What to produce? 2.How to produce? 3.What needs and wants to satisfy? Who decides this determines a countries economic system ENTREPRENEURIAL RESOURCES

10.  Traditionalism or Traditional Economy  Do things the way they’ve always been done  Pros: everyone has a role in the economy; economic life is stable  Cons: discourages new ideas; growth is limited  Examples: parts of Africa, Latin American rain forest ECONOMIC SYSTEMS

11.  Communism or Command Economy  Government owns/controls all resources  Pros: everyone has a job and benefits; can make a dramatic change in a short time on production of goods  Cons: consumer goods rank low on priority list, few consumer wants are met; lack of incentive to work hard  Examples: North Korea, China, Cuba ECONOMIC SYSTEMS

12.  Capitalism or Market Economy  People owns/controls all resources  Pros: produce goods & services people want and need; freedom of choice; income: input ratio; competition keeps prices lower  Cons: wealth of economy not equally distributed  Examples: US, Japan, Canada, Great Britian ECONOMIC SYSTEMS

13.  Socialism or Mixed Economy  Government owns major industries; allows for private ownership of other businesses  Pros: gov’t and private business work together; insurance/social security benefits provided  Cons: high tax rates; smaller spendable income; discourages private business  Examples: Sweden, France ECONOMIC SYSTEMS

14.  Private Property  Business or individual owns their own property, not the government  Freedom of Choice  Freedom to make decisions independently while accepting the consequences of those decisions  Profit  Amount of money available to a business after all costs and expenses have been paid  Competition  Rivalry among businesses to sell their goods and services THE US ECONOMIC SYSTEM

15. The process of choosing which needs and wants will be satisfied  Consumer – person who buys and uses goods & services  Producer – business that makes the goods & services  Demand – the quantity of a good or service that consumers are willing to buy  The cheaper an item is, the more people will want/be able to afford it (and visa versa)  Supply – the quantity of a good or service that businesses are willing and able to provide  The more expensive it is to produce, fewer businesses are willing to make it (and visa versa) Consumers set demand, producers establish supply ECONOMIC DECISION-MAKING

16. SUPPLY AND DEMAND Price of 3-day Pass Number of Passes Sold Demand

17. SUPPLY AND DEMAND Price of 3-day Pass Number of Passes Sold Supply

18. SUPPLY AND DEMAND Price of 3-day Pass Number of Passes Sold Demand Supply Market Price