Objective 1.01 Understand economic systems. Needs, Wants, and Decision-Making 1

Satisfying needs and wants Basic economic problem Six steps of economic decision-making Topics 2

Satisfying Needs and Wants 3

What are needs? - are required in order to live What are wants? - add comfort and pleasure to your life 4

Satisfying Needs and Wants What are goods? - things that you can see and touch What are services? - activities that are consumed as they are produced The United States economy is the largest producer of goods and services in the world. 5

Satisfying Needs and Wants How do businesses use economic resources* to produce goods and services? The types of economic resources are: –Natural –Human –Capital (Economic resources are the means in which goods and services are produced--also called factors of production.) 6

Satisfying Needs and Wants Natural resources are raw materials produced by nature. Many natural resources are nonrenewable. Human resources are the people who contribute physical and mental energy to the production process. 7

Satisfying Needs and Wants Capital resources are the tools, equipment, and buildings that are used to produce goods and services. 8

Satisfying Needs and Wants The basic economic problem exists due to limited resources for satisfying unlimited needs and wants. Scarcity is not having enough resources to satisfy the unlimited needs and wants. The scarcity of resources for satisfying needs and wants influences choices. 9

Satisfying Needs and Wants What is the purpose of economic decision-making? What happens to choices in a tradeoff? What is opportunity cost? 10

Six steps of economic decision-making 11

Economic Decision-Making Economic decision-making is a means of choosing a course of action among several alternatives. 12

Economic Decision-Making The six steps in the economic decision- making process are: –Defining the problem –Identifying choices –Evaluating the advantages and disadvantages of each choice –Choosing one choice –Acting on the choice –Reviewing the decision 13

Economic Decision-Making Solve a problem Problem: Adjust the foundation of a house Choices: Ignore the problem Contact companies located in the same city Contact companies located in the next city Contact companies located in other cities

Economic Decision-Making 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 15 3

Economic Decision-Making 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

Economic Decision-Making Reviewing decision: Routinely check on condition of foundation of house. 17 6