Introduction to Business In order to appreciate and make informed decisions in the world around them, students will need to establish a basic business/economic foundation. Updated July 2012

CH 1 Economic Decisions and Systems How are business decisions affected by consumer behavior?

Opening Questions Things I need to survive include ______. Things I want to have include ________. Where do you like to shop? Go out to eat? Go for entertainment? How do companies get your business? What is the whole motivation behind running a business?

Chapter 1 Targets Explain the difference between wants and needs. Explain the difference between goods and services. Describe how limited resources relate to wants. Describe basic economic problem and decision making Explain the different types of economies Define Motivation, competition, and profit

Wants Vs. Needs WANTS: Things we wish we could have We do NOT have to have them to survive. Public/Private NEEDS: Necessary wants Things we MUST have to survive

FYI Goods Vs. Services SERVICES: Task that people or machines perform. Things that can be physically weighed or measured. SERVICES: Task that people or machines perform. Usually to satisfy a want More people work in jobs that provide services than jobs that produce goods. FYI

Calculate Buying Power GDP = Gross Domestic Product Use exchange rate of all the finished goods and services produced within a country's borders in a specific time period PPP or PPP GDP = Purchasing Power Parity Take into account that one dollar can buy more in some countries and less in others. It is a better gauge of the internal size of each market

Buying Power 1 2 3 4 5 6 7 8 9 10 USA $14,624,180,000,000 China Ranking Country Amount in PPP GDP 1 USA $14,624,180,000,000 2 China 10,084,370,000,000 3 Japan 4,308,630,000,000 4 India 4,001,100,000,000 5 Germany 2,932,040,000,000 6 Russia 2,218,760,000,000 7 Brazil 2,181,680,000,000 8 United Kingdom 2,181,070,000,000 9 France 2,146,280,000,000 10 Italy 1,771,140,000,000

Economic Resources or Natural Resources Anything that people can use to make or obtain what they need or want. Natural Resources Human Resources Capital Resources Unlimited Wants vs. Limited Resources Limits the number of wants you can satisfy

Motivation Forces that causes action Decision-Making Process Choices = trade off or Opportunity Cost Decision-Making Process Define the problem Identify the choices Evaluate the advantages and disadvantages of each choice Choose the best alternative Act on your choice Review your decision

Motivation in a persona and business Needs / Wants Profit Money left over after expenses are paid Biggest motivation for taking the RISK Competition

3 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 produced? The word MARKET derives from the Latin Word Mercari which means “TO TRADE.”

Economies – method country uses to answer economic questions Command Market Traditional Mixed

Command (Planned or Managed) A central authority makes the key economic decisions. Government Strong Command Communism (State makes all the decisions) North Korea, Cuba Moderate Command Socialism Some form of private enterprise State owns major resources (airports, steel, utilities) France, Sweden, Canada

Market Economy Economic decisions are made in the marketplace according to the laws of supply and demand People have the right to: Own Property Start a business Make Agreements (Contracts) Compete in a Marketplace Place where buyers and sellers exchange goods and services for some form of money.

Traditional Simple economics, no global competition Goods & services produced way it always has been done

Mixed Combination of a market and command economy. USA State takes care of people’s needs Marketplace takes care of people’s wants. USA Government Defense, Education Marketplace Business

Your Roles in the Economy Consumer Selects, purchases, uses goods or services Producer Who works/owns a business to earn money Citizen Vote and participate in government About 2/3rd of the dollars teenagers spend is their own money earned from jobs or received as gifts and allowances. FYI

Chapter 1 Target Review Explain the difference between wants and needs. Wants – Things we which we could have Needs – Things we MUST have to survive Explain the difference between goods and services. Goods – Things that can be physically weighed or measured Services – Tasks that people or machines perform Describe how limited resources relate to wants. Limited resources limit the number of wants people can satisfy

Activity Think of the last ‘big’ purchase you made. Write out the Decision Making process you went through: Define the problem Identify the choices Evaluate the advantages and disadvantages of each choice Choose the best alternative Act on your choice Review your decision