introduction to business © thomson south-western chapterchapter economic decisions and systems 1-1...
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Introduction to Business© Thomson South-Western
ChapterChapterChapterChapter
Economic Decisions and Systems
1-11-1 Satisfying Needs and Wants
1-21-2 Economic Choices
1-31-3 Economic Systems
1-41-4 Supply and Demand
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NEEDS AND WANTS
Needs are essential Wants add to the quality of life – add
comfort and pleasure to your life. Needs and wants are unlimited - they
never end!
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GOODS AND SERVICES
Goods and services for businesses and consumers
Goods – things you can see & touch Services – activities consumed at the
same time they are produced. The U.S. economy – largest producer
of goods and services in world.
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ECONOMIC RESOURCES – are the means through which goods & services are produced.
Natural resources – raw materials supplied by nature
Human resources – people producing goods and services (example- employees)
Capital resources – the products and money used in the production of goods and services (example – pick up truck, factory, lumber)
Resources are limited
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THE BASIC ECONOMIC PROBLEM – the mismatch of unlimited wants and needs and limited economic resources.
Scarcity – means not having enough resources to satisfy
every need. Economic decision-making - is the process of
choosing which wants, among several options, will be satisfied.
Tradeoffs – give up something to have something else. Opportunity costs – the value of the next-best
alternative that you did not choose.
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THE DECISION-MAKING PROCESS1. 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.
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THE THREE ECONOMIC QUESTIONS What to produce? How to produce? What needs and wants to satisfy?
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TYPES OF ECONOMIC SYSTEMS – nation’s plan for answering the three economic questions. Command economy – resources are owned and
controlled by the government.
Market economy – the resources are owned and controlled by the people of the country.
Traditional economy – goods and services are produced the way it has always been done. Used in less developed countries and not yet participating in the global economy.
Mixed economies – combines elements of the command and market economies.
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THE U.S. ECONOMIC SYSTEM – another name in United States is capitalism. Private property Freedom of choice Profit Competition
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LESSON 1-4LESSON 1-4
Supply and Demand
Goals Describe supply and demand orally and
with graphs. Discuss how supply and demand affect
prices of products and services.
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PARTICIPATING IN A MARKET ECONOMY Consumers set demand Producers establish supply A graphic view
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DEMAND AND SUPPLY
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DETERMINING PRICE
Factors influencing demand Factors influencing supply Determining market price
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MARKET PRICE