Economic Decisions and Systems CHAPTER 1 4/21/2017 1 Economic Decisions and Systems 1-1 Satisfying Needs and Wants 1-2 Economic Choices 1-3 Economic Systems 1-4 Supply and Demand ITB

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! Chapter 1

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. Chapter 1

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 Chapter 1

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. Chapter 1

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. Chapter 1

THE THREE ECONOMIC QUESTIONS What to produce? How to produce? What needs and wants to satisfy? Chapter 1

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. Chapter 1

THE U.S. ECONOMIC SYSTEM – another name in United States is capitalism. Private property Freedom of choice Profit Competition Chapter 1

LESSON 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. Chapter 1

PARTICIPATING IN A MARKET ECONOMY Consumers set demand Producers establish supply A graphic view Chapter 1

DEMAND AND SUPPLY Chapter 1

DETERMINING PRICE Factors influencing demand Factors influencing supply Determining market price Chapter 1

MARKET PRICE Chapter 1