1. Understand the role of business in the global economy. 1 ESSENTIAL STANDARD 1.00

2. Understand economic systems. 2 OBJECTIVE 1.01

3.  How do businesses satisfy needs and wants?  What are the 6 steps necessary for making choices?  What is the relationship between who answers economic questions and the type of economic systems that exists in a country?  What are the self-regulating principles of a market economy? 3 EQ

4. 4 SATISFYING NEEDS AND WANTS

5.  Needs  Required in order to live  Wants  Things that add comfort and pleasure in your life. 5 SATISFYING NEEDS AND WANTS

6.  Goods  things that you can see and touch  Services  activities that are consumed at the same time they are produced.  The United States economy is the largest producer of goods and services in the world. 6 SATISFYING NEEDS AND WANTS CONTINUED

7.  How do businesses use economic resources to produce goods and services?  Economic Resources: also called factors of production, are the means through which goods and services are produced  The types of economic resources are:  Natural  Human  Capital 7 SATISFYING NEEDS AND WANTS CONTINUED

8.  Natural resources Raw materials produced by nature. Many natural resources are nonrenewable.  Human resources The people who contribute physical and mental energy to the production process. 8 SATISFYING NEEDS AND WANTS CONTINUED

9. Capital resources  tools, equipment, and buildings that are used to produce goods and services. 9 SATISFYING NEEDS AND WANTS CONTINUED

10.  The basic economic problem  exists due to limited resources for satisfying unlimited needs and wants.  Scarcity?  not having enough resources to satisfy the unlimited needs and wants. 10 SATISFYING NEEDS AND WANTS CONTINUED The scarcity of resources for satisfying needs and wants influences choices.

11.  Economic decision-making  the process of choosing which wants, among several options, will be satisfied.  What happens to choices in a tradeoff?  Give up something for gaining something else.  What is opportunity cost ?  the value of the next-best alternative that you did not choose. 11 SATISFYING NEEDS AND WANTS CONTINUED

12.  http://www.teachertube.com/viewVideo.php?video_id=14871 http://www.teachertube.com/viewVideo.php?video_id=14871  (3:39) 12 NEEDS AND WANTS VIDEO

13. 13 SIX STEPS OF ECONOMIC DECISION-MAKING

14.  Economic decision-making means of choosing a course of action among several alternatives.  What are the 6 steps of economic decision-making? 1.Defining the problem 2.Identifying choices 3.Evaluating the advantages and disadvantages of each choice 4.Choosing one choice 5.Acting on the choice 6.Reviewing the decision 14 ECONOMIC DECISION-MAKING

15. Try to 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 What choice would you make? 15 ECONOMIC DECISION-MAKING CONTINUED

16.  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 16 ECONOMIC DECISION-MAKING CONTINUED

17.  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.  Reviewing decision: Routinely check on condition of foundation of house. 17 ECONOMIC DECISION-MAKING CONTINUED

18. 18 MAIN TYPES OF ECONOMIC SYSTEMS

19. All economies must answer three economic questions: 19 ECONOMIC SYSTEMS What to produce? How to produce? For whom to produce?

20.  An economic system is a nation’s plan for answering the three economic questions.  The main types of economic systems are:  Command or Communist  Market  Traditional  Mixed 20 ECONOMIC SYSTEMS

21.  Who owns the resources in the main types of economic systems?  Command  Market  Traditional  Who answers the economic questions? 21 ECONOMIC SYSTEMS  Centered on family  Government  The people

22.  A command economy or communist, is an economics system in which the government owns resources and dictates what is produced.  A market economy is an economics system where goods and services are owned and controlled by the people.  A marketplace is anywhere that goods or services exchange hands.  In a traditional economy, goods and services are produced the way it has always been done (customs) and centered on family.  A mixed economy combines the elements of the command and market economies. 22 ECONOMIC SYSTEMS

23. 23 MARKET ECONOMY SELF-REGULATING PRINCIPLES

24.  Capitalism allows the freedom of consumption and production of goods and services.  The economic system of the United States is based on capitalism. 24 UNITED STATES ECONOMIC SYSTEM

25. 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.  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. 25 UNITED STATES ECONOMIC SYSTEM CONTINUED

26.  What is the role of consumers in a market economy?  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.  A consumer includes individuals, businesses, and government. 26 MARKET ECONOMY

27. What is the role of producers in a market economy?  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. 27 MARKET ECONOMY CONTINUED

28. The market economy is based on the principles of supply and demand.  Demand  the quantity of goods or services that consumers are willing and able to buy.   What are some examples of consumer demand?  Last year’s fashion go “out of style” and drop in price occurred.  High demand for a new gaming console or electronic item causes the price to rise. 28 MARKET ECONOMY CONTINUED

29.  Supply?  refers to the quantity of goods or services that businesses are willing and able to provide.  Supply Examples: Many companies are creating an mp3 player, therefore the price drops.  Only a few companies started selling tablets, such as the iPad, so the price was high when they were introduced to the public.  Examples of how producers establish supply.  Producers establish the quantity of goods or services that will be produced to meet the demands of consumers. 29 MARKET ECONOMY CONTINUED

30. 30 SUPPLY AND DEMAND GRAPHS Intro to Business, 6e, Thomson South-Western

31. 31 SUPPLY AND DEMAND GRAPHS Intro to Business, 6e, Thomson South-Western

32. Market (equilibrium) price is the point where supply and demand are equal. 32 SUPPLY AND DEMAND GRAPHS Intro to Business, 6e, Thomson South-Western