Business in the Global Economic Environment

Chapter 1: Economic Decisions

Chapter 1 1.1 Satisfying Needs and Wants

Goals: Explain the difference between

needs and wants. Distinguish between goods and

services. Describe the types of economic

resources.

Wants v. Needs Needs

Are required to live/survive. Examples: food, clothing, and shelter. Necessity.

Wants vs Needs Wants

Add comfort and pleasure to our lives. Not necessary for survival.

Wants vs Needs Unlimited Wants & Needs

Wants & needs never end. Are limited only by our imagination and

by what businesses make available for sale.

Satisfying one want usually creates a new want.

Wants vs Needs Everyone has unlimited wants but

those wants will not be the same for each person.

What does the BBB have to say about wants and needs?

Satisfy most of our wants and needs with goods and services.

Goods Things you can see and touch. Satisfy our wants and needs. Goods are also called products. Examples: food, television, iPod, cell

phone, bicycle, clothing, car.

Services Activities provided for the satisfaction

of our wants and needs. They are consumed at the same time they

are produced. Examples: haircut, car wash, swimming

lessons, massage.

Goods and Services We need both goods and services to

satisfy all of our wants and needs. Supplying goods and services is what

business is all about.

To supply goods and services, businesses need economic resources.

Economic Resources Economic Resources: the things

available to be used to produce goods and services. Also called Factors of Production

Three Kinds of Economic Resources: Natural Human Capital

Natural Resources Raw materials supplied by nature. All of the goods we use today begin

with one or more natural resources. Examples: iron ore, gold, oil,

vegetables, fish, oxygen, trees, wildlife, etc.

Human Resources People who work for a business. People who work to produce goods and

services. Human Resources = Labor Human Resources include people who:

Run their own business (entrepreneur), run farms and factories, manage banks, design machines, police the streets, check out groceries, or teach basic business!

Capital Resources Capital: assets (things of value)

owned by a business or individual

Capitol: a building of government They toured the capitol room by room.

Capital Resources Tools, supplies, equipment, buildings,

and the money that is used to produce goods and services.

Examples: office buildings, factories, tractors, computers, delivery trucks, etc.

Capital Resources Bicycle to deliver newspapers. Computer used by a bank to prepare

customer reports. Grill used to cook the hamburgers you

buy for lunch as well as the restaurant building.

Capital Resources Capital: Includes money that is

needed to run a business. Example: A person may say she or he

is trying to raise $40,000 in capital to expand a business.

Capital goods are important because they help us produce efficiently (faster or cheaper).

Economic Resources All three economic resources –

natural, human, and capital – are needed to produce goods and services to satisfy our wants and needs.

1.1 Quiz

Chapter 1 1.1 Satisfying Needs and Wants

Goals: Explain the difference between

needs and wants. Distinguish between goods and

services. Describe the types of economic

resources.

Chapter 1: Activity Illustrate each of the 3 economic

resources. Add an explanation.

Illustrate an example of a good and an example of a service. Add an explanation.

Chapter 1 1.2 Economic Choices

Goals: Describe the basic economic

problem. Explain the steps in the decision

making process.

Economic Resources All three economic resources –

natural, human, and capital – are needed to produce goods and services to satisfy our wants.

Unfortunately…

Economic Resources We Have Limited Resources Basic Economic Problem: the conflict

between unlimited wants and limited resources (also called scarcity). Limited Resources + Unlimited Wants = Scarcity

Economic Resources Scarcity: not having enough resources

to satisfy every need. Trade-off: when you give up

something to have something else. Opportunity cost: the value of the

next-best alternative that you were not able to choose.

Economic Decision Making Economic Decision Making: the

process of choosing which needs and wants will be satisfied.

There is a proven way for good economic decision making. The Decision Making Process

The Decision-Making Process Process is used by many businesses

and individuals to make important decisions.

Six steps in the decision making process.

The Decision-Making Process1) D2) I3) E4) C5) A6) R

The Decision-Making Process1) Define the problem.2) Identify the choices.3) Evaluate the advantages and

disadvantages of each choice.4) Choose the best alternative.5) Act on your choice.6) Review your decision.

Chapter 1 1.2 Economic Choices

Goals: Describe the basic economic

problem. Explain the steps in the decision

making process.