Understand the role of business in the global economy.

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ESSENTIAL STANDARD 1.00

Understand economic systems.

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OBJECTIVE 1.01

How do businesses satisfy needs and wants?

What are the 6 steps necessary for making choices?

What is the relationship between who answers economic questions and the type of economic systems that exists in a country?

What are the self-regulating principles of a market economy?

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EQ

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SATISFYING NEEDS AND

WANTS

What are needs?Required in order to live

What are wants? Things that add comfort and pleasure in your life.

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SATISFYING NEEDS AND WANTS

What are goods? things that you can see and touch

What are services? activities that are consumed at the same time they are produced.

The United States economy is the largest producer of goods and services in the world.

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SATISFYING NEEDS AND WANTS CONTINUED

How do businesses use economic resources to produce goods and services?

Economic Resources: also called factors of production, are the means through which goods and services are produced

The types of economic resources are:NaturalHumanCapital

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SATISFYING NEEDS AND WANTS CONTINUED

What are natural resources?

Raw materials produced by nature.

Many natural resources are nonrenewable.

What are human resources?

The people who contribute physical and

mental energy to the production process.

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SATISFYING NEEDS AND WANTS CONTINUED

What are capital resources?tools, equipment, and buildings

that are used to produce goods and services.

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SATISFYING NEEDS AND WANTS CONTINUED

What is the basic economic problem?The basic economic problem exists due to limited resources for satisfying unlimited needs and wants.

What is scarcity?not having enough resources to satisfy the unlimited needs and wants.

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SATISFYING NEEDS AND WANTS CONTINUED

The scarcity of resources for satisfying needs and wants influences choices.

What is the purpose of economic decision-making? the process of choosing which wants, among several options, will be satisfied.

What happens to choices in a tradeoff ? the process of giving up something for gaining something else.

What is opportunity cost ? the value of the next-best alternative that you did not choose.

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SATISFYING NEEDS AND WANTS CONTINUED

http://www.teachertube.com/viewVideo.php?video_id=14871

(3:39)

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NEEDS AND WANTS VIDEO

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SIX STEPS OF ECONOMIC DECISION-

MAKING

What is economic decision-making?means of choosing a course of action among several

alternatives.

What are the 6 steps of economic decision-making?

1. Defining the problem2. Identifying choices3. Evaluating the advantages and

disadvantages of each choice4. Choosing one choice5. Acting on the choice6. Reviewing the decision

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ECONOMIC DECISION-MAKING

Try to solve a problem

Problem: Adjust the foundation of a houseChoices: Ignore the problem

Contact companies located in the same city

Contact companies located in the next city

Contact companies located in other cities

What choice would you make?15

ECONOMIC DECISION-MAKING CONTINUED

Some advantages: location of local companies, companies that guarantee of services, and companies that provides simple explanation of necessary services

Some disadvantages: prices for services and location of company in next city or other cities

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ECONOMIC DECISION-MAKING CONTINUED

Choosing one choice: A local company that guarantees services and provides simple explanation of services.

Acting on choice: Schedule for local company to provide services of adjusting foundation of house.

Reviewing decision: Routinely check on condition of foundation of house.

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ECONOMIC DECISION-MAKING CONTINUED

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MAIN TYPES OF ECONOMIC SYSTEMS

What are the three economic questions that all economies must answer?

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ECONOMIC SYSTEMS

• What to produce?• How to produce?• For whom to produce?

What is an economic system? a nation’s plan for answering the three economic

questions.

The main types of economic systems are:Command or Communist Market Traditional Mixed

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ECONOMIC SYSTEMS

Who owns the resources in the main types of economic systems?Command

Market

Traditional

Who answers the economic questions?

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ECONOMIC SYSTEMS

Centered on family

Government

The people

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MARKET ECONOMY SELF-REGULATING

PRINCIPLES

•What is capitalism?•the freedom of consumption and production of goods and services.

•What type of economic system does the United States have?

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UNITED STATES ECONOMIC SYSTEM

The four principles of U.S. economic system are:Private property

can own, use, or dispose of things of value.

Freedom of choice can make decisions independently and must accept

consequences of those decisions.

Profit money left from sales after all of the costs of operating a

business have been paid.

Competition the rivalry among businesses to sell their goods and services.24

UNITED STATES ECONOMIC SYSTEM CONTINUED

What is the role of consumers in a market economy?

A consumer buys and uses goods and services. Consumers decide what to buy, where to buy, from whom to buy, and what price they are willing to pay.

A consumer includes individuals, businesses, and government.

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MARKET ECONOMY

What is the role of producers in a market economy?

Producers are individuals and organizations that determine what products and services will be available for sale.

Producers determine what products and services will be available, what needs and wants they will satisfy, and the prices they want to receive.

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MARKET ECONOMY CONTINUED

The market economy is based on the principles of supply and demand.

What is demand? the quantity of goods or services that consumers are willing and able to buy.

Examples: High demand for a new gaming console or electronic item causes the price to rise.

Last year’s fashions go “out of style” and drop in price occurred.

What are some examples of consumer demand?

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MARKET ECONOMY CONTINUED

What is supply? refers to the quantity of goods or services that businesses

are willing and able to provide.

Supply Examples: Many companies are creating an mp3 player, therefore the price drops.

Only a few companies started selling tablets, such as the iPad, so the price was high when they were introduced to the public.

What are some examples of how producers establish supply? Producers establish the quantity of goods or services that

will be produced to meet the demands of consumers.

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MARKET ECONOMY CONTINUED

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SUPPLY AND DEMAND GRAPHS

Intro to Business, 6e, Thomson South-Western

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SUPPLY AND DEMAND GRAPHS

Intro to Business, 6e, Thomson South-Western

Market (equilibrium) price is the point where supply and demand are equal.

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SUPPLY AND DEMAND GRAPHS

Intro to Business, 6e, Thomson South-Western