Basic Economic Concepts Chapter 1

A Look at Wants and Needs Chapter 1 Section 1

Scenario Suppose you have $10 to spend. You can go to the movies OR buy lunch, but not both. Which is a want and which is a need? What is the difference?

Wants Determine goods and services that a business provides. Things that are not necessary for survival Example: New computer, bike, movies, etc. Question: What is something you brought to school today that is a want?

Needs Determines goods and services a business will provide. Things you must have for survival Example: Food, water, shelter, clothing

Public vs Private Public Wants Shared by many people Highways, state parks, etc. Satisfied by: government Private Wants Individual/personal Furniture, computer, etc. Satisfied by: individual people

Goods and Services Goods Satisfy wants and needs Physical products Examples: groceries, telephones, clothing Services Satisfy wants and needs Tasks that businesses perform for consumers. People or machines Examples: insurance, tourism, banking, education

Resources Items that people can use to obtain what they want or need. Examples: Money, fuel, labor

How can resources limit your ability to satisfy wants and needs?

Decision-Making Process Used to make the most of your resources Make good choices Identify and consider your various alternatives

Decision-Making Process Step 1: Identify the situation Step 2: Identify possible courses of action Step 3: Determine the pros and cons Step 4: Make a decision Step 5: Evaluate your decision

Decision-Making Process Example Step 1: I only have $10 to spend. I am hungry but I really want to go to the movies. Each will cost $10. Step 2: Go to the movies, eat lunch, go home and eat, rent a movie Step 3: I will see the movie, I won’t be hungry, I can eat at home and still see a movie – but I won’t be able to spend time with my friends.

Decision-Making Process Example Step 4: I am going to rent a movie and go home for lunch. Step 5: Always evaluate!

Business Activities Chapter 1 Section 2

How to Define Business Business is any commercial activity that seeks profit by providing goods and services to others in exchange for money. Profit is the money left over after a business has paid the cost of providing its goods and services.

The Motive of Business: To Make a Profit Businesses supply with the motivation to make a profit Need profit to survive Profit is the reward for satisfying the needs and wants of consumers and businesses. Wealth provided by businesses benefits the entire community – pay taxes and provide jobs.

The Significance of Competition Companies thrive on competition Competition is the contest between businesses to win customers Competition exists because companies have the freedom to produce the products they think will be the most profitable. Quality products, outstanding services, competitive prices

Business Activities During product or service development: Identify opportunities Evaluate the demand Obtain start up capital (money) Manage the production of goods/services Market the goods and/or services Keep records

Market Research The act of gathering and analyzing information about the wants, needs, and preferences of consumers in a certain market. Provides information to meet the demands of business activity.

Business and You You are considered a consumer The person who uses goods or services. Businesses affect consumers when they modify or discontinue products. Consumers affect business because they decide what kinds of goods and services they want to buy. To avoid failure, a business must modify products, services, and business practices to satisfy the consumer.