Chapter 1 Economic Decisions and Systems

Key Topics Satisfying Needs and Wants Economic Choices Economic Systems Supply and Demand

Needs and Wants* What are some products that you would like to have? Are they essential to your everyday lives? ◦ Needs  Things that are required in order to live. ◦ Wants  Things that add comfort and pleasure to your life.

What you buy….. Satisfies your needs and wants ◦ Goods  Physical Items ◦ Services  Activities

Producing Goods/Services Economic Resources ◦ Resources used to produce goods/services. 4 Factors of Production ◦ Natural ◦ Human ◦ Capital ◦ Entrepreneurial Resources are limited ◦ # of Goods and Services Produced

Economic Problems Individuals and businesses have _____________ wants and needs….. School’s for example…. ◦ Cut back on certain classes and extracurricular activities because a budget is low. Scarcity ◦ Not having enough resources to satisfy every need.

It’s Your Choice To choose between the things that you need to have and want… ◦ “Live within your means” Economic Choices ◦ Process of choosing which wants, among several options will be satisfied.

Making Economic Decisions Process of choosing which wants, among several wants being considered, will be satisfied. Understanding the process will allow for your decision making to be easier and possibly better…..

Bell Ringer List and Explain…. ◦ 4 Factors of Production

Basic Economic Problems Scarcity ◦ Not having enough resources to satisfy every need. ◦ Affects everyone….some more than others Our Choices… ◦ Are resulted from scarcity ◦ Economic Decision-Making  Process of choosing which wants, among several options will be satisfied

Decision Making Process* 1. Define the problem 2. Identify your choices 3. Evaluate the advantages and disadvantages 4. Make a choice………. 5. Act on your choice 6. Review your decision

Define the Problem The problem must be clearly defined in order to make a decision that will lead to a satisfying solution.

Identify the Choices Identify all possibly scenarios.

Evaluating Advantages/Disadvantages Weigh out the choices ◦ Pros vs. Cons Buying HD Television or Saving $2500 ◦ Which would you choose?????

Make a Choice and Act on it…. Each choice you make has consequences. How might the choice you make affect you later? No matter what…. ◦ You will think about to the what ifs…

Review your decision Review how that decision affected you… Would you do it again? Did you follow the steps of the decision making process? Was there a better alternative?

The Alternatives Trade-Off ◦ When you give up something to have something else. Opportunity Cost ◦ The value of the next-best alternative.

Types of Business Decisions Programmed Decisions ◦ These are standard decisions which always follow the same routine. As such, they can be written down into a series of fixed steps which anyone can follow. They could even be written as computer program Non-Programmed Decisions ◦ These are non-standard and non-routine. Each decision is not quite the same as any previous decision.

Types of Business Decisions Strategic Decisions ◦ These affect the long-term direction of the business  Whether to take over Company A or Company B Tactical Decisions ◦ These are medium-term decisions about how to implement strategy  What kind of marketing to have, or how many extra staff to recruit? Operational Decisions ◦ These are short-term decisions (also called administrative decisions) about how to implement the tactics  Which firm to use to make deliveries?

Levels of Decision-Making

Good decision-making comes from: Good decision-making comes from: 1. Training of managers in decision-making skills. 2. Good information in the first place. 3. Management skills in analyzing information and handling its shortcomings. 4. Experience and natural ability in decision- making. 5. Risk and attitudes to risk.

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