1. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 1 1-1 1-1Satisfying Needs and Wants 1-2 1-2Economic Choices 1-3 1-3Economic Systems 1-4 1-4Supply and Demand 1 C H A P T E R Economic Decisions and Systems

2. © 2012 Cengage Learning. All Rights Reserved. SLIDE 2 1-1Satisfying Needs and Wants Goal 1Explain the difference between needs and wants. Goal 2Distinguish between goods and services. Goal 3Describe the types of economic resources.

3. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 3 KEY TERMS ●needs ●wants ●goods ●services ●economic resources

4. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 4 NEEDS AND WANTS ●Needs are essential to survival ●Wants add to the quality of life ●Needs and wants are unlimited

5. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 5 Checkpoint ●What is the difference between a need and a want? ●Needs are those things required to live, such as food, clothing, and shelter. ●Wants are things that add comfort and pleasure to our lives such as television, music CDs, and movies.

6. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 6 GOODS AND SERVICES ●Goods and services for businesses and consumers ●Goods are things that you can see and touch. They are the products you can purchase to meet your wants and needs. ●Services are activities provided for the satisfaction of others that are consumed at the same time they are produced.

7. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 GOODS AND SERVICES ●The U.S. economy ●The United States is the largest producer of goods and services in the world. It produces more than the next two largest producers, China and Japan, combined. ●Increased consumer spending in a country results in more jobs and a higher standard of living. SLIDE 7

8. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 8 Checkpoint ●How do people satisfy their wants and needs? ●People satisfy their wants and needs by purchasing and consuming goods and services.

9. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 9 ECONOMIC RESOURCES ●Economic resources are the things available to be used to produce goods and services. Economic resources are also known as factors of production. ●The three types of economic resources are natural resources, human resources, and capital resources.

10. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 ECONOMIC RESOURCES ●Natural resources ●Raw materials supplied by nature are natural resources. The earth contains oil, minerals, and the nutrients needed to grow crops and forests and to feed animals. Rivers, lakes, and oceans are the sources of both food and water. The air you breathe comes from the atmosphere that surrounds you. ●All products you consume begin with one or more natural resources. SLIDE 10

11. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 ECONOMIC RESOURCES ●Human Resources ●The people who produce goods and services are known as human resources. In the example of the vegetable soup, many people are needed to complete the work required to produce that product. ●One type of human resource is an entrepreneur. An entrepreneur is the risk taker who uses resources to create a new product or service. SLIDE 11

12. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 ECONOMIC RESOURCES ●Capital Resources ●People must have access to tools and equipment in order to convert natural resources into products. The products and money used in the production of goods and services are capital resources. ●Capital resources include buildings, equipment, and supplies. SLIDE 12

13. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 ECONOMIC RESOURCES Are Limited ●All economic resources have a limited supply. Most resources can be used to produce several different products and services. ●If resources are used to produce one type of product, they will not be available for the production of something else. SLIDE 13

14. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 ECONOMIC RESOURCES Are Limited ●Because there is a limited amount of natural resources, there will also be a limit to the amount of goods and services that can be produced. ●Individuals, businesses, and even countries compete for access to and ownership of economic resources. Those resources that are in very high demand or that have a limited supply will command high prices SLIDE 14

15. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 15 Checkpoint ●What are the three types of economic resources? Give an example of each type. ●Natural: water, land, trees, animals, and minerals. ●Human: labor (people who run farms and factories, transport goods, provide services, or manage businesses). ●Capital: money, land, buildings, tools, and equipment.

16. © 2012 Cengage Learning. All Rights Reserved. SLIDE 16 1-2Economic Choices Goal 1Understand the basic economic problem. Goal 2Explain the steps in the decision- making process.

17. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 17 KEY TERMS ●Scarcity - means not having enough resources to satisfy every need. ●Scarcity affects everyone in every nation on earth, but some people are more affected than others. ●If everyone had unlimited resources there would be no Scarcity

18. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 KEY TERMS ●Economic decision-making ●The process of choosing which needs and wants will be satisfied ●Everyone has to make financial decisions based on scarcity. Individuals and families must decide how to spread their income among all of the things they want and need. City, state, and national governments must cope with the problem of providing the many goods and services citizens demand using the tax dollars they collect. SLIDE 18

19. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 KEY TERMS ●Trade-Off : is when you give up something to have something else, ●You aren’t able to buy a pair of shoes because you decided to spend your money on a movie and pizza with your friends. ●The decision-making process helps you select the best and most satisfying alternative from among a set of choices. SLIDE 19

20. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 KEY TERMS ●opportunity cost - is the value of the next best alternative that you were not able to choose. ●In making a decision, part of your choice will be what you are giving up by the choice you make. The benefit you get from your choice should be greater than the benefit from the next-best choice. SLIDE 20

21. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 21 THE BASIC ECONOMIC PROBLEM ●SCARCITY – Requires ●Choices ●Trade-offs and opportunity costs

22. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 22 Checkpoint ●What is opportunity cost? ●Opportunity cost is the value of the next best alternative that you don’t choose. ●It is what you are willing to give up in order to have your first choice.

23. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 23 THE DECISION-MAKING PROCESS ●You make better decisions when you use a thoughtful process to evaluate your alternatives rather than letting your emotions lead you to a quick choice. ●An effective decision-making process involves six steps.

24. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE DECISION-MAKING PROCESS SLIDE 24 1.Define the problem. 2.Identify the choices. 3.Evaluate the advantages and disadvantages of each choice. 4.Choose one. 5.Act on your choice. 6.Review your decision.

25. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE DECISION-MAKING PROCESS 1.Define the problem. ●For every decision, the problem must be clearly defined in order to make a decision that will lead to a satisfying solution SLIDE 25

26. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE DECISION-MAKING PROCESS ●2.Identify the choices. ●It is common for you to face choices with many alternatives. SLIDE 26

27. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE DECISION-MAKING PROCESS 3.Evaluate the advantages and disadvantages of each choice. ●You might find it helpful to write down your choices and then list the advantages and disadvantages of each SLIDE 27

28. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE DECISION-MAKING PROCESS 4.Choose one. ●Select the choice that you believe will be the best for you at this particular time. SLIDE 28

29. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE DECISION-MAKING PROCESS 5.Act on your choice. ●Once you have made what you believe is the best decision, do whatever you have chosen. SLIDE 29

30. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE DECISION-MAKING PROCESS 6.Review your decision. ●After you have had a chance to experience the results of your choice, it is important to review your choice. ●On a scale of one to ten, how would you rank your decision in terms of the level of satisfaction it provided? SLIDE 30

31. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 31 Checkpoint ●What are the six steps in the decision-making process? ●Define the problem. ●Identify the choices. ●Evaluate advantages and disadvantages of each alternative. ●Choose one. ●Act on your choice. ●Review your decision.

32. © 2012 Cengage Learning. All Rights Reserved. SLIDE 32 1-3Economic Systems Goal 1Identify the three economic questions. Goal 2Differentiate among the main types of economic systems. Goal 3Describe the economic system of the United States.

33. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 33 KEY TERMS ●economic system ●command economy ●market economy – (demand) ●traditional economy ●mixed economy ●capitalism

34. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Economic System ●An economic system is the method a country uses to answer the three economic questions. SLIDE 34

35. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 35 THE THREE ECONOMIC QUESTIONS ●What to produce? ●How to produce? ●What needs and wants to satisfy?

36. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 WHAT to PRODUCE ●The resources of a country are very important in determining what goods can be produced. ●A country can decide to trade some of its resources with other countries to obtain those it needs. SLIDE 36

37. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 HOW to PRODUCE ●Countries must decide the best ways to use their resources to produce what is needed. ●As a country develops, tasks that were traditionally performed using human labor, such as farming and mining, are now performed with more efficient tools and equipment. SLIDE 37

38. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 WHAT NEEDS and WANTS to SATISFY ●Because wants and needs are unlimited, many will remain unmet no matter what goods and services a country decides to produce. ●Decision makers must determine which needs and wants are the most critical when deciding what to produce. SLIDE 38

39. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 39 Checkpoint ●What are the three economic questions? ●What goods and services will be produced? ●How will the goods and services be produced? ●What needs and wants will be satisfied with the goods and services?

40. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 40 TYPES OF ECONOMIC SYSTEMS ●Command economy ●Market economy ●Traditional economy ●Mixed economies

41. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Command Economy ●resources are owned and controlled by the government. (Communism, Socialism) ●Government officials decide what and how goods are produced and how they will be distributed and consumed (Closed Market). They decide how much of the resources will be used to produce goods and services for consumers, such as food, schools, vehicles, and houses. They also decide how much of the resources will be used to produce goods for business and government including machines, equipment, and factories. SLIDE 41

42. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Market Economy ●Resources are owned and controlled by the people of the country. ●The three economic questions are answered by individuals through buying and selling of goods and services in the marketplace (demand). The marketplace is anywhere that goods and services exchange hands. This includes a supermarket, the Internet, a business office, or even a flea market. SLIDE 42

43. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Traditional Economy ●goods and services are produced the way it has always been done. ●The traditional economy is used in countries that are less developed and are not yet participating in the global economy. SLIDE 43

44. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Mixed economies ●Combines elements of the command and market economies. ●While the end of the twentieth century saw a shift away from command economies and toward market economies, various degrees of government involvement in the marketplace exist. SLIDE 44

45. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 45 Checkpoint ●What are the main differences among the three economic systems? ●The main differences among the economic systems are found in the ways in which the three economic questions are answered.

46. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE U.S. ECONOMIC SYSTEM – Market Economy ●Capitalism refers to the private ownership of economic resources by individuals, rather than by the government. ●Individual owners are free to decide what to produce with the resources they own. Individual consumers are also free to decide how they want to use their money to purchase products and services SLIDE 46

47. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 THE U.S. ECONOMIC SYSTEM Market Economy cont. ●This economic freedom lends itself to other names often associated with the U.S. economy—free enterprise or private enterprise along with capitalism and Open Market. SLIDE 47

48. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 48 THE U.S. ECONOMIC SYSTEM ●Private property ●Freedom of choice ●Profit ●Competition

49. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Private property ●The right of private property means you can own, use, or dispose of things of value. In the United States, you can own anything you want and decide what you want to do with it, as long as it does not violate the law. SLIDE 49

50. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Freedom of choice ●Freedom of choice means that you can make economic decisions independently and must accept the consequences of those decisions. ●Business owners can decide where to open a business, what to sell, and how to operate the company. ●Consumers can decide where to shop, what to buy, and what they want to spend. SLIDE 50

51. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Profit - (Profit Motive) ●Businesses invest resources and take risks for one primary reason - to earn a profit. earning a profit is at the heart of the private enterprise system. ●Profit is the money left from sales after all of the costs of operating a business have been paid. ●Because businesses are not guaranteed a profit, investors may lose the money they have put into the business. SLIDE 51

52. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Competition ●The rivalry among businesses to sell their goods and services is known as Competition. ●Competition encourages businesses to improve products, keep prices low, provide effective customer service, and improve business practices. SLIDE 52

53. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 53 Checkpoint ●Name the four principles of the U.S. economic system. ●Private property ●Freedom of choice ●Profit ●Competition

54. © 2012 Cengage Learning. All Rights Reserved. SLIDE 54 1-4Supply and Demand Goal 1Describe supply and demand orally and with graphs. Goal 2Discuss how supply and demand affect prices of products and services.

55. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 55 KEY TERMS ●consumer ●producers ●demand ●supply ●market price

56. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Consumer ●A consumer is a person who buys and uses goods and services. ●The individual buying decisions of consumers have a tremendous influence on a market economy. SLIDE 56

57. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Producers ●Producers are individuals and organizations that determine what products and services will be available for sale. ●Producers invest resources and take risks in order to make a profit. (PROFIT MOTIVE) SLIDE 57

58. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Demand ●Demand is the quantity of a good or service that consumers are willing and able to buy. ●A business depends on demand for their products and services in order to make a profit. SLIDE 58

59. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Supply ●Supply is the quantity of a good or service that businesses are willing and able to provide. ●If consumers want a popular product and are willing to pay a price that allows a business to make a profit, SLIDE 59

60. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 60 PARTICIPATING IN A MARKET ECONOMY ●Consumers set demand ●Producers establish supply ●A graphic view

61. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 61 DEMAND AND SUPPLY

62. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Law of Supply ●As prices increase, businesses will be willing to supply larger quantities of the product. ●As prices Decrease, businesses will be willing to supply smaller quantities of the product. ●P Q s SLIDE 62

63. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Law of Demand ●As prices Decrease, Consumers will be willing to Buy larger quantities of the product. ●As prices Increase, Consumers will be willing to Buy smaller quantities of the product. ●P Q d SLIDE 63

64. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 64 Checkpoint ●How does the price of a product affect demand and supply? ●As prices decrease, the number of consumers willing and able to purchase the product (demand) will increase. ●As prices increase, businesses will be willing to supply larger quantities of the product.

65. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 65 DETERMINING PRICE ●Factors influencing demand ●Factors influencing supply ●Determining market price

66. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Factors influencing demand ●Population ●Choice (numbers of suppliers) ●Choice (substitute products) SLIDE 66

67. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 Factors influencing supply ●Population ●Choice – substitutes ●Competition – number of suppliers SLIDE 67

68. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 MARKET PRICE ●Supply, demand, and competition determine the market price for a product or service. ●The market price is the point where supply and demand are equal. This is called the Equilibrium Point. SLIDE 68

69. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 69 MARKET PRICE

70. © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 1 SLIDE 70 Checkpoint ●How is the market price for a product determined? ●Supply, demand, and competition determine the market price for a product or service. ●The market price is the point at which supply and demand are equal.