Understand the role of business in the global economy. Essential Standard 1.00 Understand the role of business in the global economy. 1 1

Understand economic systems. Objective 1.01 Understand economic systems. 2 2

Topics Satisfying needs and wants Basic economic problem Six steps of economic decision-making Main types for economic systems Market economy self-regulating principles 3 3

Market economy self-regulating principles 4 4

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

United States Economic System Capitalism allows the freedom of consumption and production of goods and services. The economic system of the United States is based on capitalism. 6 6

United States Economic System continued 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. 7

United States Economic System continued 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. 8 8

Market Economy What is the role of consumers in a market economy? A consumer includes individuals, businesses, and government. Consumers set Demand 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. 9

Market Economy continued What is the role of producers in a market economy? Producers establish supply. 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. 10

Market Economy continued The market economy is based on the principles of supply and demand. Demand is the quantity of goods or services that consumers are willing and able to buy. What are some examples of consumer demand? Consumers set the demand for goods and services. Demand influences how much producers will supply. 11

Market Economy continued Supply refers to the quantity of goods or services that businesses are willing and able to provide. What are some examples of producers of supplies? Producers establish the quantity of goods or services that will be produced to meet the demands of consumers. 12

Supply & Demand Generates competition Influence market (equilibrium) prices.

Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western 14 14

Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western 15 15

Supply and Demand Graphs Market (equilibrium) price is the point where supply and demand are equal. 16 Intro to Business, 6e, Thomson South-Western 16