1. Chapter 1 Economic Decisions & Systems
Business Essentials
Mrs. Wilson

2. BEFORE ACTIVITY Think-Pair-Share
Define and list an example of a need and a want.

3. 1-1 Satisfying needs & wants
In this lesson, students learns to distinguish between wants and needs and between goods and services.
1-1 Satisfying needs & wants

4. Needs & Wants
Hardly a day goes by that you don’t see a product or service that you would like to have
Web, mall, TV, radio, grocery store
How do you decide what to buy or even if you need to buy at all?
Determining what is a need and what is a want is an important part of making good decisions
Needs – things that are required in order to live
Ex) food, water, clean air, clothing, shelter
Other needs in today’s economy are a good education, employment, safety, and transportation

5. Needs & Wants
Wants – things that add comfort and pleasure to your life
Ex) CD, iPad, tv, latest fashions
Your needs and wants never end
They change from day to day, they are not the same for each person
You are limited only by your imagination and by what businesses make available for sale

6. Goods & Services
You satisfy your needs and wants by purchasing and consuming goods and services
Goods – things that you can see and touch
Goods are the products you can purchase to meet your wants and needs
Services – activities that are consumed at the same time they are produced
Services are intangible, meaning they have not physical characteristics

7. Goods & Services
Goods and services are purchased by businesses as well as by consumers
What are some good and services businesses need/want? (p8)
What are some goods and services consumers need/want?
Businesses supply the goods and services that meet business and consumer needs and wants

8. Goods & Services
The United States is the largest producer of goods and services in the world
Americans consume more than any other country
Some believe the high level of U.S. consumer demand stems from the sheer quantity of goods and services available and the amount of money businesses spend to advertise their offerings
Spending opportunities occur daily and require careful decisions to make sure important needs and wants are satisfied in the future as well as today

9. Economic Resources
How do you get the goods and services you need and want?
Economic resources are needed!
Economic resources – the means through which goods and service are produced, also called factors of production
3 kinds of economic resources:
Natural resources – raw materials supplied by nature (p9)
Human resources – the people who produce goods and services
Capital resources – the produces and money used in the production of goods and services

10. Economic Resources All economic resources have a limited supply
Individuals, businesses, and even countries compete for access to and ownership of economic resources
Those resources that are in very high demand or that have a limited supply will command high prices
Because there is a limited amount of natural resources, there will also be a limit to the amount of goods and services that can be produced

11. This lesson presents the basic economic problem facing consumers and businesses and the steps in making effective decisions.
1-2 Economic choices

12. The Basic Economic Problem
Individuals and businesses have unlimited wants and needs
The economic resources they have are limited
The mismatch of unlimited wants and needs and limited economic resources is called the basic economic problem (p12)
The basic economic problem results from scarcity – not having enough resources to satisfy every need

13. The Basic Economic Problem
Everyone makes decisions based on scarcity (p13)
Scarcity forces you to make choices or decisions among the alternatives
Following a logical process can help you make better decisions
Economic decision-making – the process of choosing which wants, among several options, will be satisfied
Once you learn the process, your decision-making will be easier and the process may lead to better choices

14. The Basic Economic Problem
Most of the choices you make result from considering a number of alternatives
When you decide on one, you give up on the other alternatives you might have chosen
Trade-off – what you make when you give something up to have something else
The decision-making process helps you select the best and most satisfying alternative from among a set of choices
Opportunity cost – the value of the next-best alternative that you did not choose (p13)

15. The Decision-Making Process
There are 6 steps in the decision-making process
Businesses and individuals use the process as they choose the best uses for their limited resources
Define the problem
Identify the choices
Evaluate the advantages and disadvantages of each choice
Choose one
Act on your choice
Review your decision

16. In this lesson, students learn how the main types of economic systems answer 3 economic questions.

17. The 3 Economic Questions
All economies (or countries) of the world face the basic economic problem of scarcity of resources
Each country must decide how the available resources will be used to meet the needs/wants of its citizens
All economies must answer 3 economic questions:
What goods/services will be produced?
How will the goods/services be produced?
What needs/wants will be satisfied with the goods/services produced?
How the questions are answered indicates the type of economic system that exists in each country

18. Types of Economic Systems
Economic system – a nation’s plan for answering the 3 economic questions
The type of system is based on how much the government is involved in the marketplace
Each is based on one of the 3 main types:
Command economy – resources owned and controlled by the government
Market economy – resources owned and controlled by the people of the country
Traditional economy – goods/services are produced the way it has always been done

19. The U.S. Economic System
Most nations of the world can be classified as a mixed economy – combines elements of the command and market economies
Can you identify the economic system of the U.S.?
Because individual businesses and consumers make most of the decisions about what will be produced and consumed, the U.S. system best fits the definition of the market economy
Another name for the economic system in the U.S. is capitalism – the private ownership of resources by individuals, rather than by the government

20. The U.S. Economic System
The U.S. economic system is based on 4 important principles:
Private property
Freedom of choice
Profit
Competition

21. This lesson discusses supply and demand and how they affect the prices of goods and services offered for sale.
1-4 supply & demand

22. Participating in a Market Economy
In a market economy, buyers and sellers use the marketplace to make economic decisions
Buying decisions are made by consumers – people who buy and use goods and services
Producers pay close attention to the needs and activities of consumers
Producers – individuals and organizations that determine what products and services will be available for sale
Producers invest resources and take risks in order to make a profit

23. Participating in a Market Economy
When consumers make decisions about what they will purchase, they determine the demand for goods and services
Demand – the quantity of a good or service that consumers are willing and able to buy
Understanding demand tells a business what type and what quantity of products and services to supply
Supply – the quantity of a good or service that businesses are willing and able to provide

24. Participating in a Market Economy
Supply, demand, and competition determine the market price for a product or service
Market price – the point where supply and demand are equal

25. AFTER ACTIVITY
Reflect
Describe the 3 types of economic systems.