Introduction to Business

1. Introduction to Business Chapter 1 Economic Decisions and Systems

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 • 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.

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?

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

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

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

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

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

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