1. Economic Decisions and Systems
CHAPTER 1
Economic Decisions and Systems

2. 1-1 Satisfying Needs & Wants
What are needs? What are wants?

3. 1-1 Satisfying Needs & Wants
Needs are essential
Needs are things that required in order to live.
Food, water, clean air, clothing, and shelter
Most people need transportation
Health care and medicine

4. 1-1 Satisfying Needs & Wants
Wants add to the quality of life
Wants are things that add comfort and pleasure to your life.
iPad, Nike running shoes, Titleist Irons
Most purchases you make do more that meet your needs. They make your life easier and more comfortable.

5. 1-1 Satisfying Needs & Wants
Needs and Wants are Unlimited
Your needs and wants will never end
Your needs and wants will change as you change
Your needs and wants will change as technology advances

6. 1-1 Satisfying Needs & Wants
Goods and Services
Goods are things that you can see and touch
Services are activities provided for the satisfaction of others that are consumed at he same times they are produced.
Your needs and wants will change as you change
Your needs and wants will change as technology advances

7. 1-1 Satisfying Needs & Wants
Goods and Services for Businesses and Consumers
A business needs steel, plastics, gasoline, and computers in order to operate (goods)
A business needs a constant supply of electricity, security for buildings and equipment (services)
Consumers buy furniture, televisions, cell phones and books (goods)
Consumers eat in restaurants, take vacations, and take their cars to dealerships for repairs (services)

8. 1-1 Satisfying Needs & Wants
The U.S. Economy
The U.S. is the largest producer of goods and services in the world
The U.S. is also the largest consumer
Increased consumer spending results in more jobs and a high standard of living
Increased consumption creates challenges such as controlling population, preserving natural resources and managing waste

9. 1-1 Satisfying Needs & Wants
Economic Resources – are the things available to be used to produce goods and services (factors of production)
Natural Resources
Raw materials supplied by nature
Oil, minerals, foods, water
Human Resources
The people who produce goods and services
Farmers, Factory workers, Salespeople, Advertisers
Capital Resources
The products and money used in the production of goods and services
Tools, Equipment, Cash

10. 1-1 Satisfying Needs & Wants
Resources are limited
Individuals, businesses and countries compete for access to and ownership of economic resources
Resources that are high in demand or have a limited supply will command high prices

11. 1-2 ECONOMIC CHOICES The Basic Economic Problem
Individuals and businesses have unlimited wants and needs
The economic resources that can be used to meet their needs are limited
Scarcity – not having enough resources to satisfy every need.

12. 1-2 ECONOMIC CHOICES Choices Trade-offs & Opportunity Costs
Economic Decision Making – the process of choosing which needs and wants will be satisfied.
Trade-offs & Opportunity Costs
Trade-off – when you give up something to have something else
Opportunity Cost – the value of the next best alternative that you were not able to choose.

13. 1-2 ECONOMIC CHOICES The Decision Making Process Define the problem
Identify the choices
Evaluate the advantages and Disadvantages of each choice
Choose the best alternative
Act on your choice
Review your decision

14. 1-3 ECONOMIC SYSTEMS The Three Economic Questions
What goods and services will be produced?
How will the goods and services be produced?
What needs and wants will be satisfied with the goods and services produced?

15. 1-3 ECONOMIC SYSTEMS What to produce?
The resources of a country are very important in determining what to produce.
Nations differ in what they determine to be their important needs and wants.

18. 1-3 ECONOMIC SYSTEMS How to produce?
Each country decides how to use its resources to produce the goods and services it needs.
Two centuries ago, more than 80% of U.S. citizens were involved in agriculture.
Today, less than 3% of the U.S. population produces the food the country consumes.

19. 1-3 ECONOMIC SYSTEMS What needs and wants to satisfy?
Decision makers must determine which needs and wants are more critical when deciding what to produce.
What wants and needs you satisfy largely depends on how much money you have and how you choose to spend it or save it.

20. 1-3 ECONOMIC SYSTEMS Types of Economic Systems Command Economy
Market Economy
Traditional Economy
Mixed Economy

21. 1-3 ECONOMIC SYSTEMS Command Economy
The resources are owned and controlled by the government.
The government makes all decisions how resources will be used and what will be produced.
A government may decide to build a superior military or a world-class education system.
EXAMPLE: China

22. 1-3 ECONOMIC SYSTEMS Market Economy
The resources are owned and controlled by the people of the country.
The three economic questions are answered by individuals through buying and selling of goods and services through the marketplace.
Consumers and businesses make decisions based on their own self-interest.

23. 1-3 ECONOMIC SYSTEMS Traditional Economy
Simple economies operated according to tradition or custom.
Used in countries that are less developed and not participating in the global economy.
People will consume most of what they produce and sell or trade with those who live close.
Found in Asia, Africa and parts of South America also the Inuit in Canada

24. 1-3 ECONOMIC SYSTEMS Mixed Economy
Combines the elements of the command and market economies.
Various degrees of government involvement in the marketplace exist.

25. 1-3 ECONOMIC SYSTEMS The U.S. Economic System
Capitalism (free enterprise or private enterprise) – the private ownership of economic resources by individuals.
Private Property
Freedom of Choice
Profit
Competition

26. 1-4 SUPPLY AND DEMAND Participating in a Market Economy
Consumer – A person who buys and uses goods and services.
Producers – Individuals and organizations that determine what products and services will be available for sale.

27. 1-4 SUPPLY AND DEMAND Participating in a Market Economy
Consumers set demand
Demand – the quantity of a good or service that consumers are willing and able to buy.
Supply – The amount of a good or service that business are willing and able to provide.

28. 1-4 SUPPLY AND DEMAND
As the price decreases, the number of consumers willing and able to purchase the product and the quantity they will purchase increases.

29. 1-4 SUPPLY AND DEMAND
At higher prices businesses will be willing to supply larger quantities of the product or service.

30. 1-4 SUPPLY AND DEMAND Factors Influencing Demand
If many consumers want (demand) a particular good or service, its price will tend to go up.
When customers cannot find a good substitute for a product they want, demand for that product will be high.

31. 1-4 SUPPLY AND DEMAND Factors Influencing Supply
As the number of competitors increases, so does supply.
When competition is limited, consumers cannot find good alternatives.

32. 1-4 SUPPLY AND DEMAND Determining Market Price
Market Price – the point where supply and demand are equal.

33. 1-4 SUPPLY AND DEMAND MARKET PRICE
Supply, demand and competition determine the market price for a product or service.