1. Introduction to Business
Chapter 1
Economic Decisions and Systems
Lesson Plan, Day 1

2. Warm-Up Answer the following in complete sentences.
Is there a difference between needs and wants? Explain your answer.

3. Needs and Wants Need: things you cannot live without
Examples
Water, food, shelter, clothing
Wants: things you would like to have but can live without
They add comfort and
Pleasure to life

4. Goods and Services Goods Services Things you can see and touch
Examples: computers, food, clothes
Services
When someone does something for someone
Examples: hair care, dental care, doctor visits

5. Economic Resources
The means through which goods and services are produced

6. Warm-Up
When Campbell’s Soup makes it’s Chicken Noodle Soup, what resources to they use to make the soup? Be specific and list all the resources you can think of.

7. Natural Resources Raw materials supplied by nature
Examples: lumber, coal, oil, water, animals, crops

8. Human Resources People producing the goods and services
Examples: farmers, factory workers, managers, accountants, entrepreneurs

9. Capital Resources
The products and money used in the production of goods and services
Examples: money, tools, equipment
NOTE: Economic Resources are Limited

10. The Basic Economic Problem
Scarcity
Not having enough resources to satisfy every need

11. Decision Making Tradeoff
When you give up something to have something else

12. Opportunity Cost
Definition: the value of your next best alternative that you did not choose
What did you give up or not have when making a decision to buy something or obtain a goal?

13. Decision Making Process
Specify – Determine your goal. What is your need/want
Search – Gather information
Sift – Look at all options and opportunity costs
Select – Make a choice and act on it
Study – Evaluate the result

14. Warm-up
Identify the possible opportunity cost for each of the following.
Trying out for an athletic team
Accepting a part-time job
Studying for an important exam
Saving money to buy a used car
Obtaining a loan to start a business

15. Economic Systems The Three Economic Questions What to produce?
Depends on resources, climate, and education
How to produce?
Skilled/unskilled labor; technology available
What needs and wants to satisfy?
What is most critical

16. Types of Economies
Command Economy – Government owns most of the resources and make most of the economic decisions.

17. Types of Economies
Market Economy: People rather than the government own the resources and run the business.
The three economic questions are answered by individuals through buying and selling of goods in the marketplace. The marketplace is anywhere goods and services are exchanged.
Consumers and businesses make decisions based on their own self interests – consumers send messages to producers by what they buy.

18. Types of Economies
Traditional Economy – Goods and services are produced the same way for generations
Countries with traditional economies do not participate in the global economy
Does our society have any elements of a traditional economy?
Again – who decides what is produced? Children are taught to use the same methods to make the same goods their ancestors produced. They often usethe natural resources readily available to them and will consume most of what they produce and sell and trade the rest.
Another example of traditional economy in our society today is the Amish.

19. Mixed Economy A combination of a market economy and a command economy.
U.S. has a mixed economy (the dominate economy is a market economy)

20. The U.S. Economic System Capitalism
Private ownership of resources by individuals not government
Free to decide what to produce and buy

21. Warm-Up
What are some disadvantages of living in a market economy?

22. Four Principles of the U.S. Economy
Private Property
Individuals can own, use, or dispose of things of value
Freedom of Choice
Make decisions independently and must accept consequences of those decisions
As long as it does not violate the law, you can own anything you want and decide what to do with it
As a business owner you can decide what and where to sell and as a consumer you can decide what and where to buy products/services. Only when individual decisions harm others will the government regulate freedom of choice.

23. Four Principles of the U.S. Economy
Profit
Formula: Price – Cost = Profit
Price you sell the product – amount producer spends to make product = left over profit
Making money (Profit) is the heart of the private enterprise system
Although profit is not the only reason people go into business, but it is very difficult to continue a business if you are not making a profit
Ask for examples of competition

24. Competition Contest among sellers to win customers.
How does competition affect consumers?
Better customer service
Good quality products
Fair prices

25. Warm-Up What are the 5 steps in the decision-making process?
List the three components of economic resources and give an example of each.

26. Supply and Demand Consumers Producers
anyone who buys or uses products.
Producers
Individuals/organizations that determine what products/services will be available for sale

27. Demand Quantity of goods that consumers are willing and able to buy
Law of Demand
As prices go up, demand goes down
Example: of a cheeseburger cost $1 each we might buy more than if they are $10 each

28. Demand Curve for Movies
Price
$10.50
9.00
7.50
6.00
4.50
3.00
1.50
1,000
Quantity
2,000
3,000
4,000
5,000
6,000
7,000

29. Supply
Quantity of products that Producers are willing and able to make available for sale
Law of Supply
As prices go up, supply goes up
Example: if you are a supplier of computers you might make more available at $800 than at $200

30. Supply Curve for Watches
Price
$105 90 75 60 45 30 15
10,000
Quantity
20,000
30,000
40,000
50,000
60,000
70,000
80,000

31. Market Price
Point at which supply and demand are equal.

32. Market Price for Notebook Computers
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
400
500
700
800
Demand
Supply

33. Warm-up List the three economic resources and give an example of each.
List the 5 decision making steps and give an example of each.

34. Warm-Up Explain the following terms: Freedom of choice Capitalism
Right to private property