Transcript 1.01x

ESSENTIAL STANDARD
1.00
Understand the role of business in the global
economy.
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OBJECTIVE 1.01
Understand economic systems.
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EQ
 How do businesses satisfy needs and wants?
 What are the 6 steps necessary for making
choices?
 What is the relationship between who answers
economic questions and the type of economic
systems that exists in a country?
 What are the self-regulating principles of a market
economy?
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SATISFYING NEEDS
AND WANTS
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SATISFYING NEEDS AND WANTS
Needs
Required in order to live
Wants
Things that add comfort and pleasure in
your life.
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SATISFYING NEEDS AND WANTS
CONTINUED
Goods
things that you can see and touch
Services
activities that are consumed at the same
time they are produced .
The United States economy is the largest
producer of goods and services in the world.
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SATISFYING NEEDS AND WANTS
CONTINUED
 How do businesses use economic resources to
produce goods and services?
 Economic Resources: also called factors of
production, are the means through which goods
and services are produced
 The types of economic resources are:
Natural
Human
Capital
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SATISFYING NEEDS AND WANTS
CONTINUED
Natural resources
Raw materials produced
by nature.
Many natural resources
are nonrenewable.
Human resources
The people who
contribute physical
and mental energy
to the production
process.
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SATISFYING NEEDS AND WANTS
CONTINUED
Capital resources
tools, equipment, and buildings that are
used to produce goods and services.
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SATISFYING NEEDS AND WANTS
CONTINUED
The basic economic problem
exists due to limited resources for satisfying
unlimited needs and wants.
Scarcity?
not having enough resources to satisfy the
unlimited needs and wants.
The scarcity of resources for
satisfying needs and wants influences
choices.
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SATISFYING NEEDS AND WANTS
CONTINUED
 Economic decision-making
the process of choosing which wants, among
several options, will be satisfied.
 What happens to choices in a tradeoff?
Give up something for gaining something else.
 What is opportunity cost ?
the value of the next-best alternative that you
did not choose.
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NEEDS AND WANTS VIDEO
 http://www.teachertube.com/viewVideo.php?video_id=14871
 (3:39)
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SIX STEPS OF ECONOMIC
DECISION-MAKING
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ECONOMIC DECISION-MAKING
 Economic decision-making means of choosing a course of
action among several alternatives.
 What are the 6 steps of economic decision -making?
1. Defining the problem
2. Identifying choices
3. Evaluating the advantages and disadvantages of
each choice
4. Choosing one choice
5. Acting on the choice
6. Reviewing the decision
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ECONOMIC DECISION-MAKING
CONTINUED
Try to solve a problem
Problem:
Choices:
Adjust the foundation of a house
Ignore the problem
Contact companies located in the same city
Contact companies located in the next city
Contact companies located in other cities
What choice would you make?
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ECONOMIC DECISION-MAKING
CONTINUED
Some advantages: location of local
companies, companies that guarantee of
services, and companies that provides simple
explanation of necessary services
Some disadvantages: prices for services and
location of company in next city or other cities
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ECONOMIC DECISION-MAKING
CONTINUED
Choosing one choice: A local company that
guarantees services and provides simple
explanation of services.
Acting on choice: Schedule for local company
to provide services of adjusting foundation of
house.
Reviewing decision: Routinely check on
condition of foundation of house.
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MAIN TYPES OF
ECONOMIC SYSTEMS
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ECONOMIC SYSTEMS
All economies must answer three
economic questions:
• What to produce?
• How to produce?
• For whom to produce?
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ECONOMIC SYSTEMS
 An economic system is a nation’s plan for answering
the three economic questions.
 The main types of economic systems are:
 Command or Communist
 Market
 Traditional
 Mixed
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ECONOMIC SYSTEMS
Who owns the resources in the main types
of economic systems?
 Command
 Centered on family
 Market
 Government
 Traditional
 The people
Who answers the economic questions?
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ECONOMIC SYSTEMS
 A command economy or communist, is an economics system
in which the government owns resources and dictates what is
produced.
 A market economy is an economics system where goods and
services are owned and controlled by the people.
 A marketplace is anywhere that goods or services exchange
hands.
 In a traditional economy, goods and services are produced the
way it has always been done (customs) and centered on
family.
 A mixed economy combines the elements of the command
and market economies .
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MARKET ECONOMY
SELF-REGULATING
PRINCIPLES
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UNITED STATES ECONOMIC SYSTEM
Capitalism allows the freedom of
consumption and production of
goods and services.
The economic system of the United States is
based on capitalism.
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UNITED STATES ECONOMIC
SYSTEM CONTINUED
The four principles of U.S. economic system are:
 Private property
 can own, use, or dispose of things of value.
 Freedom of choice
 can make decisions independently and must accept
consequences of those decisions.
 Profit
 money left from sales after all of the costs of operating a
business have been paid.
 Competition
 the rivalry among businesses to sell their goods and services.
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MARKET ECONOMY
 What is the role of consumers in a market economy?
 A consumer buys and uses goods and services. Consumers
decide what to buy, where to buy, from whom to buy, and what
price they are willing to pay.
 A consumer includes individuals, businesses, and government.
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MARKET ECONOMY CONTINUED
What is the role of producers in a market economy?
 Producers are individuals and organizations that
determine what products and services will be
available for sale.
 Producers determine what products and services will
be available, what needs and wants they will satisfy,
and the prices they want to receive.
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MARKET ECONOMY CONTINUED
The market economy is based on the principles of
supply and demand .
Demand
 the quantity of goods or services that consumers are
willing and able to buy.

What are some examples of consumer
demand?
 Last year’s fashion go “out of style” and drop in price
occurred.
 High demand for a new gaming console or electronic item
causes the price to rise.
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MARKET ECONOMY CONTINUED
 Supply?
 refers to the quantity of goods or services that businesses
are willing and able to provide.
 Supply Examples: Many companies are creating an mp3
player, therefore the price drops.
 Only a few companies started selling tablets, such as the
iPad, so the price was high when they were introduced to the
public.
 Examples of how producers establish supply.
 Producers establish the quantity of goods or services that
will be produced to meet the demands of consumers.
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SUPPLY AND DEMAND GRAPHS
Intro to Business, 6e, Thomson South-Western
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SUPPLY AND DEMAND GRAPHS
Intro to Business, 6e, Thomson South-Western
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SUPPLY AND DEMAND GRAPHS
Market (equilibrium) price is the point where supply and demand
are equal.
Intro to Business, 6e, Thomson South-Western
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