1 Economic Decisions and Systems 1-1 Satisfying Needs and Wants C H A P T E R 1 Economic Decisions and Systems 1-1 Satisfying Needs and Wants 1-2 Economic Choices 1-3 Economic Systems 1-4 Supply and Demand

1-1 Satisfying Needs and Wants Goal 1 Explain the difference between needs and wants. Goal 2 Distinguish between goods and services. Goal 3 Describe the types of economic resources.

KEY TERMS needs wants goods services economic resources

NEEDS AND WANTS Needs are essential Wants add to the quality of life Needs and wants are unlimited

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.

GOODS AND SERVICES Goods and services for businesses and consumers The U.S. economy

Checkpoint  How do people satisfy their wants and needs? People satisfy their wants and needs by purchasing and consuming goods and services.

ECONOMIC RESOURCES Natural resources Human resources Capital resources Resources are limited

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.

1-2 Economic Choices Goal 1 Understand the basic economic problem. Goal 2 Explain the steps in the decision-making process.

KEY TERMS scarcity economic decision-making trade-off opportunity cost

THE BASIC ECONOMIC PROBLEM Choices Trade-offs and opportunity costs

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.

THE DECISION-MAKING PROCESS 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.

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.

1-3 Economic Systems Goal 1 Identify the three economic questions. Goal 2 Differentiate among the main types of economic systems. Goal 3 Describe the economic system of the United States.

KEY TERMS economic system command economy market economy traditional economy mixed economy capitalism

THE THREE ECONOMIC QUESTIONS What to produce? How to produce? What needs and wants to satisfy?

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?

TYPES OF ECONOMIC SYSTEMS Command economy Market economy Traditional economy Mixed economies

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.

THE U.S. ECONOMIC SYSTEM Private property Freedom of choice Profit Competition

Checkpoint  Name the four principles of the U.S. economic system. Private property Freedom of choice Profit Competition

1-4 Supply and Demand Goal 1 Describe supply and demand orally and with graphs. Goal 2 Discuss how supply and demand affect prices of products and services.

KEY TERMS consumer producers demand supply market price

PARTICIPATING IN A MARKET ECONOMY Consumers set demand Producers establish supply A graphic view

DEMAND AND SUPPLY

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.

DETERMINING PRICE Factors influencing demand Factors influencing supply Determining market price

MARKET PRICE

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.