Unit One Outline

1. Unit One Outline • Chapter 1: Economic Decisions & Systems • Chapter 2: Economic Activity • Chapter 3: Business in the Global Economy • Chapter 4: Social Responsibility of Business & Government

2. Mr. Tierney – Intro to Business Economic Decisions & Systems 1-1 Satisfying Needs and Wants 1-2 Economic Choices 1-3 Economic Systems 1-4 Supply and Demand CHAPTER 1

3. Chapter One Overview • This chapter describes how needs and wants affect economic decisions of consumers and businesses. • Objectives • Explain the difference between needs and wants • Distinguish between goods and services • Describe types of economic resources

4. Key Terms • Needs • Wants • Goods • Services • Economic Resources As you read Chapter 1, enter the above terms into your notebook.

5. Needs & Wants To buy, or not to buy? • How do you determine what you are going to buy and what you aren’t going to buy? • When consumers consider this question, they also consider the differences between needs & wants.

6. NEEDS AND WANTS A Need or A Want? • Needs are essential in order to live. • Example: Food, Water, Shelter • Wants add to the quality of life • Video Games, Televisions, Jewelry • In any society around the globe, the needs and wants of people living within the society are unlimited. It is impossible for a government to provide a structure within a society that will allow all consumers to be able to fulfill all of their infinite wants and needs. This is the basis for economic study.

7. Needs & Wants • It is not always easy to determine what is a need and what is a want. Whether something is a need or a want could depend on where you live, lifestyle, and your work. • Needs & Wants are unlimited!!!

8. Checkpoint >> What is the difference between a need and a want? Answer • 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. Chapter 1

9. RELATE: What needs and wants do you fulfill on a regular basis? How do you determine which needs and wants you will fulfill? What questions might you ask yourself when deciding which needs/wants will be fulfilled first? Do you think it is possible to fulfill your wants before you fulfill your needs?

10. Goods & Services • People satisfy their needs and wants by purchasing goods and services. • Goods – things that you can see and touch. They are products you can purchase to meet your wants and needs. • Services – are activities that are consumed at the same time they are produced. They are intangible.

11. GOODS AND SERVICES Goods and services are things that businesses within a society create, and that are available for other businesses, consumers, and governments to purchase so that they may fulfill their needs and wants. • Goods are consumable products purchased by consumers. Goods are tangible. • Television • Pop Tarts • Snuggie • Services are activities provided by a business that are consumed by consumers at the time of purchase. Services are intangible. • Meal at a Restaurant • A stay at a hotel • A flight • Dry cleaning Chapter 1

12. Goods & Services • Billions of dollars worth of goods and services are moved around the world every year to fulfill consumers wants and needs. • Goods and services are needed by both businesses and consumers and are essential parts of the United States and the global economy.

13. Checkpoint >> How do people satisfy their wants and needs? Answer • People satisfy their wants and needs by purchasing and consuming goods and services. Chapter 1

14. Assignment • Write a three to five paragraph description of the goods and/or services businesses within your career area provide for society. • Describe whether or not businesses within your industry provide products and/or services and describe what the goods and /or services are that the businesses provide. • Do the product/services provided by businesses within your career fulfill consumers wants and/or needs? Describe. • Include at least one illustration (graph, chart, picture, etc) along with a description of the illustration. • Use the Occupational Outlook Handbook and at least one other resource to aid you in formulating your responses.

15. The U.S. Economy • The good ole’ USA is the largest producer of goods and services in the world (but we are losing ground quickly to other countries)!!! • Americans also consume more than any other country in the world.

16. Economic Resources • Economic Resources – the means through which goods and services are produced. • Also called factors of production, economic resources are broken into three types: natural resources, human resources, and capital resources. These are the things needed to make the goods and services that are consumed by people who are fulfilling their needs and wants.

17. Economic Resources • Natural Resources – raw materials supplied by nature. • Human Resources – the people who produce goods and services. • Capital Resources – products and money used in the production of goods and services. (money, equipment, supplies, etc. would all be considered capital resources)

18. Economic Resources • Resources are limited. All economic resources are in limited supply. • Individuals, businesses, and even countries compete for the ownership of economic resources.

19. Checkpoint >> What are the three types of economic resources? Give an example of each type. Answer • 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. Chapter 1

20. Assignment • With a partner, create a 3-5 five minute presentation outlining the various types of economic resources utilized within your chosen career area. • Answer: • What natural resources are used? • What capital resources are necessary for operation? • Describe the demand for human resources and the changing nature of human resource needs within your career area based on things like changing technology.

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

22. Key Terms • scarcity • economic decision-making • tradeoff • opportunity cost Chapter 1

23. Economic Choices • While economies around the world vary greatly in methodology, they all are trying to do the same thing – Fix the issue of scarcity. • Scarcity refers to the fact that economic resources are scarce, or in limited supply. This condition creates the basic economic problem: • Resources are limited, but needs and wants of consumers are unlimited. How does a country provide the goods and services to its consumers, while facing the issue of scarce economic resources?

24. Economic Choices • Discussion: • What would happen if a country continued to produce goods and services while disregarding the fact that resources are limited? • What products or services can you think of that American’s use regularly that would be considered scarce? • What resources are used within your chosen career area that would be considered scarce?

25. Economic Choices Everyone makes decisions based on scarcity. Scarcity forces you to make choices about how you will spend your money. These decisions are called Economic Decisions. Economic Decision Making is the process of choosing between which wants and needs, among several options will be satisfied.

26. Economic Choices Tradeoffs Consumers make millions of choices every year. However, a problem occurs when consumers make decisions, because in order to make an economic decision, consumers need to give something else up. When you give something up while making an economic choice, it is called a tradeoff. Chapter 1

27. Economic Choices • When you make a trade-off, you also lose the ability to buy something else with the same money that was just spent. This is called an opportunity cost, because the decision you made, in return cost you the opportunity to buy something else. • Opportunity Cost – the value of the next best alternative that you did not choose.

28. Economic Choices • It is important to recognize opportunity costs within an economy because businesses compete for your dollars and businesses keep economies performing. So when consumers make decisions, they choose one product over another, or one business over another. • For these reasons, businesses spend a lot of time completing activities that study the consumer decision making process and how it will help the business increase its profitability.

29. Checkpoint >> What is opportunity cost? Answer • 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. Chapter 1

30. THE DECISION-MAKING PROCESS Either consciously or subconsciously, consumers go through the following steps every time they make a consumer decision. 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. Chapter 1

31. THE DECISION-MAKING PROCESS • Why is it important for businesses to recognize the consumer decision making process? • How can businesses use the consumer decision making process to help it compete? • What things do consumers consider when purchasing products produced by businesses within your chosen career area?

32. Checkpoint >> What are the six steps in the decision-making process? Answer Define the problem. Identify the choices. Evaluate advantages and disadvantages of each alternative. Choose one. Act on your choice. Review your decision. Chapter 1

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

34. Key Terms • economic system • command economy • market economy • traditional economy • mixed economy • capitalism Chapter 1

35. The Three Economic Questions All economies face the mismatch between the scarcity of resources and unlimited consumer wants and needs. Each country/economy around the world needs to figure out how to best utilize its available resources in order to meet the needs and wants of its people.

36. The Three Economic Questions How economies answer the three economic questions is what determines the type of economic system it uses. What to produce? How to produce? What needs and wants to satisfy?

37. What to produce? Nations decide what goods and services to produce based on the economic resources it has available and what its consumers want and need. If a country has the natural resource of oil available to it, it will focus on producing petroleum products to provide jobs for its citizens.

38. How to produce? Nations decide what combination of resources it will utilize to best fit their circumstances. Two centuries ago more than 80% of U.S. citizens were involved in agriculture. Today less than 3% of U.S. citizens are involved in food production. Countries rely on their labor force, resources, and imports/exports to decide how it will produce the goods and services it needs.

39. What Needs & Wants to satisfy? While unfortunate many consumer needs and wants go unsatisfied due to the issue of scarcity. Countries need to determine which needs and wants are most critical in order to determine what goods and services it will produce. Some countries invest in capital goods, others natural resources. Some allow the market to determine what is satisfied while in others the government has the power to decide.

40. Types of Economic Systems Economic System – a nation’s plan for answering the three economic questions. Economic Systems are determined by how much government involvement there is in the utilization and ownership of resources.

41. Types of Economic Systems Command Economy Market Economy Mixed Economy Traditional Economy

42. Command Economy In a command economy, the resources of a country are owned and controlled by the government. In a command economy the government determines what goods and services will be produced, how the goods are services will be produced, and what needs and wants will be satisfied. Some governments are so strict that the government tells it people what school they will go to and what job they will have.

43. Market Economy In a market economy, the resources are owned and controlled by the people of the country. The economic questions are answered by the marketplace, or how people “vote” with their earned dollars. Consumers and businesses make decisions based on their own self interests, which allows for new businesses to pop up that fulfill needs and wants with their products and services.

44. Traditional Economy In a traditional economy goods and services are produced the way they have always been produced. Needs and wants are fulfilled through farming, hunting, and gathering. People are in charge of fulfilling their own needs and wants. This type of economy is typical of underdeveloped countries. Thee methods and technologies used may appear outdated to more developed countries.

45. Mixed Economies Combine elements of the command and market economies. Over the last half century there has been a movement away from command economies towards market economies. There are various levels of government involvement in many different countries. This leads to mixed economies.

46. Most economic systems fall between Pure Market and Pure Command Economies. In some countries the government controls only some resources, while in others there is virtually no government involvement.

47. The U.S. Economic System Because individual businesses and consumers make most of the decisions about what will be produced and consumed, the U.S. system best fits the description of a Market Economy. Some argue that due to the involvement of government in some resources and industries (utilities, health care, education), that the U.S. would actually be a mixed economy. However, due to the fact that the U.S. is closest to a pure market economy of nearly all developed countries, it does best fit the description of a Market Economy. Another name for the economic system of the U.S. is capitalism. Capitalism refers to the private ownership of resources by individuals and businesses, rather than by the government.

48. The U.S. Economic System The freedom of production and consumption lends itself to another phrase commonly used to describe the U.S. Free Enterprise or Private Enterprise - This means you have to opportunity to start, own, and operate businesses. It also refers to the freedom of production and consumption. Individual freedom is vital to the U.S. Economy.

49. The U.S. Economic System The U.S. Economic System is based on four important principles: Private Property Freedom of Choice Profit Competition

50. Private Property Private Property refers to the fact that you can own, use, or dispose of things of value.