Chapter 1

1. Chapter 1 Economic Decisions

2. Goals • Distinguish between WANTS & NEEDS • Explain the difference between goods and services • Describe the economic resources used in the production of goods and services

3. Needs • Basic to survival • Food, Water • Clothing • Shelter

4. Wants • Add to the quality of life • But not necessary for survival • Wants never end – once we fulfill a want, it is usually followed by another want.

5. Goods and Services • We satisfy our needs and wants with GOODS and SERVICES. • GOODS (PRODUCTS) satisfy our MATERIAL needs and wants. • SERVICES satisfy our wants that we can’t see or touch: • Going to a movie • Get a haircut • Take a swimming lesson • Use your cell phone

6. Economic Resources • Companies need resources to produce goods and services. • Economic resources are also called FACTORS OF PRODUCTION

7. 3 types of resources • Natural Resources (renewable and non-renewable) • Raw materials – all materials that come from the earth • Water, air, iron ore, gold, oil, copper, vegetables, fish

8. 2. Human Resources • It takes people or LABOR to turn natural resources into goods and services • People who run farms, factories, manage banks, design, machines, process food, announce the news on CNN, check out or groceries, police the streets, or teach business classes.

9. 3. Capital Resources • Tools and equipment used to produce goods and services • Office building, factories, tractors, carpenters, power tools, computers, delivery trucks • Money used to start and run the business is also capital.

10. Limited Resources • Shortage of resources - In reality, we can’t have everything we want sometimes because of $$$ or because there is a lack of resources to make the product.

11. Scarcity • Conflict between unlimited wants and limited resources • Referred to as the “Basic Economic Problem”

12. Economic Choices • Government, Business and Consumers always face scarcity, therefore they must make important decisions about what they will produce, sell, and purchase

13. Making economic decisions • Decision Making Process • Define the problem • Identify choices • Evaluate the advantages and disadvantages of each choice • Choose • Act on your choice • Review your decision

14. Opportunity Cost • When making a decision, you must give up something to gain something else. • Example – You have to make a choice: • Go to a football game with your friends • Pick up an extra shift at work so that you can make some money to put towards that new car you want. • If you choose to work – not going to the football game with your friends would be the opportunity cost • What you give up to gain something else