1. 1 Economic Decisions and Systems 1-1 Satisfying Needs and Wants
C H A P T E R 1
Economic Decisions and Systems
1-1 Satisfying Needs and Wants
1-2 Economic Choices
1-3 Economic Systems
1-4 Supply and Demand

2. 1-1 Satisfying Needs and Wants
Goal 1 Explain the difference between needs and wants.
Goal 2 Distinguish between goods and services.
Goal 3 Describe the types of economic resources.

3. KEY TERMS
needs
wants
goods
services
economic resources

4. NEEDS AND WANTS Needs are essential to your life
Wants add to the quality of life
Needs and wants are unlimited
Examples?
Different for you and your parents?

5. Checkpoint  What is the difference between a need and a want?
Needs are those things required to live, such as food, clothing, and shelter.
Wants are things that add comfort and pleasure to our lives such as television, music CDs, and movies.

6. GOODS AND SERVICES What is the difference?
Goods are manufactured and sold
Services are provided
You purchase and use services to satisfy your wants and needs, but unlike goods, businesses must provide services to you at the time you want to consume them.

7. The U.S. economy The largest producer Also the largest consumer
More than the next two combined
China and Japan
Also the largest consumer
Largest consumer of oil
More than the next four combined
Why did this happen?
Shift from agricultural to an industrial economy

8. Checkpoint  How do people satisfy their wants and needs?
People satisfy their wants and needs by purchasing and consuming goods and services.

9. ECONOMIC RESOURCES Natural resources Human resources Capital resources
Raw materials provided by mother nature
Human resources
People who produce goods and services
Capital resources
Equipment and money used in production
Resources are limited

10. Checkpoint 
What are the three types of economic resources? Give an example of each type.
Natural: water, land, trees, animals, and minerals.
Human: labor (people who run farms and factories, transport goods, provide services, or manage businesses).
Capital: money, land, buildings, tools, and equipment.

11. 1-2 Economic Choices Goal 1 Understand the basic economic problem.
Goal 2 Explain the steps in the decision-making process.

12. KEY TERMS
scarcity
economic decision-making
trade-off
opportunity cost

13. THE BASIC ECONOMIC PROBLEM
What is the Basic Economic Question?
Unlimited wants and needs VS limited economic resources
Scarcity
Not having enough resources to satisfy every need

14. Economic Decision Making
The process of choosing which needs and wants will be satisfied
Choices
Scarcity forces you to make decisions among the alternatives

15. Trade-offs and opportunity costs
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
Examples?

16. Checkpoint  What is opportunity cost?
Opportunity cost is the value of the next best alternative that you don’t choose.
It is what you are willing to give up in order to have your first choice.

17. THE DECISION-MAKING PROCESS
1. Define the problem.
2. Identify the choices.
3. Evaluate the advantages and disadvantages of each choice.
4. Choose one.
5. Act on your choice.
6. Review your decision.

18. Checkpoint  What are the six steps in the decision-making process?
Define the problem.
Identify the choices.
Evaluate advantages and disadvantages of each alternative.
Choose one.
Act on your choice.
Review your decision.

19. 1-3 Economic Systems Goal 1 Identify the three economic questions.
Goal 2 Differentiate among the main types of economic systems.
Goal 3 Describe the economic system of the United States.

20. KEY TERMS economic system command economy market economy
traditional economy
mixed economy
capitalism

21. THE THREE ECONOMIC QUESTIONS
What to produce?
How to produce?
What needs and wants to satisfy?
How are they different in different countries?

22. Checkpoint  What are 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?

23. TYPES OF ECONOMIC SYSTEMS
Command economy
Resources are owned and controlled by the government of the country
Market economy
Resources are owned and controlled by the people of the country

24. TYPES OF ECONOMIC SYSTEMS
Traditional economy
Goods and services are produced the way it has always been done.
The traditional economy is used in countries that are less developed
Mixed economies
Combines elements of the command and market economies

25. Checkpoint 
What are the main differences among the three economic systems?
The main differences among the economic systems are found in the ways in which the three economic questions are answered.

26. THE U.S. ECONOMIC SYSTEM Capitalism Based on four principles
Private property
Freedom of choice
Profit
Competition

27. Checkpoint  Name the four principles of the U.S. economic system.
Private property
Freedom of choice
Profit
Competition

28. 1-4 Supply and Demand
Goal 1 Describe supply and demand orally and with graphs.
Goal 2 Discuss how supply and demand affect prices of products and services.

29. KEY TERMS
consumer
producers
demand
supply
market price

30. PARTICIPATING IN A MARKET ECONOMY
Consumers set demand
Producers establish supply
Between the two, a market price is set
A graphic views

31. DEMAND

32. SUPPLY

33. Checkpoint  How does the price of a product affect demand and supply?
As prices decrease, the number of consumers willing and able to purchase the product (demand) will increase.
As prices increase, businesses will be willing to supply larger quantities of the product.

34. DETERMINING PRICE Factors influencing demand
Need, available substitutes
Factors influencing supply
Competition
Natural Disaster
Determining market price
The point where supply and demand are equal

35. MARKET PRICE

36. Checkpoint  How is the market price for a product determined?
Supply, demand, and competition determine the market price for a product or service.
The market price is the point at which supply and demand are equal.