1. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON2-1 GOALS  Describe the basic economic problem.  List the steps of the decision-making process. ECONOMICS AND DECISION MAKING

2. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 2 The Basic Economic Problem Scarcity refers to the limited resources available to satisfy the unlimited needs and wants of people. Economics is the study of how people choose to use limited resources to satisfy their unlimited needs and wants.

3. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 3 1 2 6 34 5 Review decision Take action Make choice Evaluate alternatives Identify alternatives Define problem The Decision-Making Process

4. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON2-2 GOALS BASICS OF ECONOMICS  Describe how the market sets prices.  Explain the causes of inflation.

5. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 5 Price-Setting Activities Supply is the relationship between the amount of a good or service that businesses are willing and able to make available and the price. Demand is the relationship between the amount of a good or service that consumers are willing and able to purchase and the price. Market price is the point at which supply and demand cross.

6. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 6 Supply and Demand Market Price SupplyDemand

7. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 7 Changing Prices Inflation Demand-pull inflation Cost-push inflation

8. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON2-3 GOALS ECONOMIC SYSTEMS  Name the three main factors of production.  Understand how different countries make economic decisions.

9. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 9 Economic Resources Satisfy Needs Natural resources also known as land Human resources also known as labor Capital resources also known as capital

10. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 10 Types of Economic Systems Command Economies Market Economies Private property Profit motive Free, competitive marketplace Mixed Economies

11. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON2-4 GOALS ACHIEVING ECONOMIC DEVELOPMENT  Describe the factors that affect economic development.  Identify the different levels of economic development.

12. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 12 Development Factors Literacy level Technology Agricultural dependency

13. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 13 Types of Development Industrialized countries Less-developed countries Developing countries

14. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 14 Industrialized Country Developing Country Less-Developed Country Levels of Economic Development Low literacy Limited technology Agricultural or mining economy Improving literacy Improving technology Decreasing dependence on agriculture or mining High literacy Modern technology Industrial economy

15. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS LESSON2-5 GOALS RESOURCES SATISFY NEEDS  Discuss economic principles that explain the need for international trade.  Identify various measures of economic progress and development.

16. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 16 The Economics of Foreign Trade Absolute advantage exists when a country can produce a good or service at a lower cost than other countries. Comparative advantage exists when a country can produce a good or service with more efficiency than other countries.

17. © SOUTH-WESTERN THOMSONINTERNATIONAL BUSINESS 17 Measuring Economic Progress Measure of Production Gross domestic product (GDP) Gross national product (GNP) International Trade Activity Balance of trade Foreign exchange rate Foreign debt Other Economic Measurements Consumer price index (CPI) Unemployment rate