Transcript Economic Decisions and Systems

Business in the
Global
Economic
Environment
Unit 1
Economic
Decisions and
Systems
Chapter 1
Bell Ringer 1
Analyze Career Opportunities in …
CORPORATE ECONOMICS

1.
2.
Use the internet to
learn more about
careers in corporate
economics. Choose
one of the job titles
listed and answer the
following questions.
Define the job.
Identify the minimum
educational
requirements for the
job.
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Actuary
Commodities Broker
Cost Estimator
Economic Journalist
Economics Teacher
or Professor
Forecasting Assistant
Investment Analyst
Quantitative Analyst
Satisfying Needs and
Wants
1-1
Today’s Goals
 Explain
the difference between needs
and wants
 Distinguish
 Describe
between goods and services
the types of economic resources
Needs
required in order to live
 Examples
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
of Basic Needs:
Good education
Employment
Safety
Transportation
Medical Care/ Medications
Wants
things that add comfort and pleasure to
your life
 Examples
of wants:
How easy is it for you to
meet your basic needs?
Needs & Wants…
 Are
unlimited
 Never
end
 Change
 Are
from day to day
not the same for each person
Goods
 Things
that you can see and touch
Products that you can purchase to meet
your wants and needs
Services
Activities provided for the satisfaction of
others that are consumed at the same time
they are produced
 Businesses
must provide services to you at
the time you want to consume them
Does the service industry
satisfy more needs or wants?
There are important service
businesses that satisfy needs.
Goods and Services
Businesses
Consumers
 Steel
 Furniture
 Plastic
 Televisions
 Gasoline
 Cell
 Computers
 Electricity
 Security
phones
 Books
 Restaurants
 Vacations
The U.S. Economy
The U.S. is the largest producer of goods
and services in the world

More than China and Japan, combined
How do people satisfy
their wants and needs?
By purchasing and consuming goods and services
Economic Resources
The things available to be used to produce
goods and services
 Also
known as factors of production
Natural Resources
raw materials supplied by nature
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Oil
Minerals
Nutrients to grow crops
Forests to feed animals
Rivers
Lakes
Oceans
Air from the atmosphere
Human Resources
the people who produce goods and
services
 Examples:
Entrepreneur
risk taker who uses resources in a new way
to create a new product or service
Capital Resources
products and money used in the
production of goods and services
 Examples:




Buildings
Equipment
Supplies
Money (build a factory, pay employees,
buy or lease vehicles)
What economic resources are
needed for the construction of a
house?

Natural
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Human
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Wood
Water
Architect
Builder
Construction workers
Capital
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Tools
Machinery used by the builder
Money loaned by the bank for home construction
Resources are limited…

Individuals, businesses and countries compete
for access to and ownership of economic
resources

Resources high in demand and low in supply
have higher prices

There is a limited amount of natural resources
and a limit to the amount of goods and
services that can be produced
Product Description Worksheet
Bell Ringer 2
Dream Home ~ Needs vs. Wants
1.
2.
Describe your dream home in detail.
Use a T-Chart to categorize the different
features of your home into needs and
wants.
Needs
Wants
Economic Choices
1-2
Today’s Goals
 Understand
the basic economic problem
The Basic Economic Problem
the mismatch of unlimited wants and needs
and limited economic resources
 Examples:

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School cutbacks due to increasing
operating costs and a strict budget
Inadequate health care due to lack of
doctors and hospitals
Scarcity
not having enough resources to satisfy
every need
 B.E.P.
results from scarcity
 Choices
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based on scarcity:
Limited income families
Countries with few natural resources
Coffee Talk
 Turn
to your neighbor and have a
conversation about your experiences
with the basic economic problem and
scarcity.
 Discuss a time when you didn’t have
enough resources to meet your needs
or wants.
Economic Decision-Making
process of choosing which needs and
wants will be satisfied
 Example:
VS.
How do you make personal
choices between satisfying
your wants and your needs?
Trade-Off
giving up something to have something
else
 The
decision-making process helps you
select the best option among a set of
choices.
Opportunity Cost
the value of the next-best alternative that
you were not able to choose
 What
you are willing to give up in order to
have your first choice
 Benefit
From Choice
Next-Best Choice
New Car vs. Used Car worksheet
Bell Ringer 3
http://pbskids.org/itsmylife/ga
mes/mad_money_flash.html
Directions: You need to have a source of income to
pay for the things you want and need. And you
need to consider carefully what to buy to make sure
it is the best use of your money. Copy and paste the
link above to play a short game that shows you it is
not always easy to balance your income and your
expenses. Sometimes unexpected events or poor
decisions keep you from achieving your goals.
 How
did the game force you to
think about choices and decisions?
Today’s Goals
 Explain
the steps in the decision-making
process.
The Decision-Making Process
 Businesses
and individuals use the process
to choose the best uses for their limited
resources
 Causes
you to carefully consider each
step rather than rushing into a decision
without adequate information
The Decision-Making Process
(14)
The Decision-Making Process
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.
Playspent.org Worksheet
Bell Ringer 4
1. What is a budget?
2. Explain how creating
a budget can help you
avoid scarcity?
Today’s Goals
 Identify
the 3 economic questions.
Economic Systems
 1-3
The 3 Economic Questions
1.
What goods and services will be
produced?
2.
How will the goods and services be
produced?
3.
What needs and wants will be satisfied
with the goods and services produced?
What to Produce???
 Depends
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on…
Type and amount of resources
Skill and abilities
Climates
How to Produce It???
 Depends
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on…
Unskilled or skilled labor
Advanced or simple technology
Available resources or obtained resources
What Needs and Wants to
Satisfy???
 Depends


on…
Which are the most critical
Location
 How
much money consumers have to spend
 How much political power consumers have
CHECKPOINT
1. WHAT TO PRODUCE?
2. HOW TO PRODUCE IT?
3. WHAT WANTS & NEEDS WILL IT SATISFY?
Types of Economic Systems
a nation’s plan for answering the three
economic questions
 Based
on how much government is
involved in the marketplace
Index of Economic Freedom Worksheet
Bell Ringer 5
Name 3 products that
are grown in warm
climates that can’t be
grown in the United
States.
Today’s Goals
 Differentiate
among the main types of
economic systems.
 Describe
the economic system of the
United States.
Command Economy aka
Centrally Planned
resources are owned and controlled by the
government
 Government
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decides:
What is produced
How it is produced
How they are distributed
How they are shared
How much resources are used to make it
Command Economy
Market Economy aka Free Economy
resources are owned and controlled by the
people of the country
 The
3 economic questions are answered
by supply and demand in the
marketplace (anywhere goods and
services exchange hands)
 Little
government involvement
Market Economy
 What
are some disadvantages of living in
a market economy?
 Answer:
too many choices, too much
emphasis on consumerism, overuse of
environmental resources, too much waste
Traditional Economy
goods and services are produced the way
it has always been done
 No
economic growth
 Consume
most of what they produce and
sell or trade the rest locally
Inuit Indians of Northern
Canada
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Resources: seal, caribou,
snow
Main food source: flesh
from the seal, caribou, and
other animals
Shelter: snow to make
igloos, intestines of seals for
the door of an igloo or a
tent, animal skins for
summer tents
Clothing: sinew for thread,
animal skins for clothing
and footwear, intestines of
seal for plastic rainwear
Economic decisions: based
on religious and traditional
beliefs. Elders of clans had
the most power
Mixed Economies aka Duel Economy
combines elements of the command and
market economies
 Means
of production are shared between
the public and private sectors
 All
modern economies
How would business ownership be
affected by different types of
economic systems?
 Traditional
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Limited
Meet basic needs
 Mixed
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Some government
control
Some attention to
the consumer
Command
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Government control
and oversight
Market
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Attention to the
consumer
Few controls
Freedom to succeed
or fail
Utopia
The Story of Atlantis Worksheet
Bell Ringer 6
The Story of Atlantis
1.
What challenges did you face in
being the “leader” of this colony?
2.
What strategies did you use in
deciding who you should pick to
take with you?
Today’s Goals
 Describe
the economic system of the
United States.
The U.S. Economic System
 Market
Economy
 Businesses
and consumers make most of
the decisions about what will be
produced and consumed
Capitalism
private ownership of resources by
individuals, rather than by the government
 A.k.a.
- free enterprise or private
enterprise


Owners are free to decide what to
produce
Consumers are free to decide what to buy
U.S. Economic System
 Based
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
on four (4) principles:
Private Property
Freedom of Choice
Profit
Competition
Private Property
you can own, use, or dispose of things of
value as long as it doesn’t break the law
 Examples:
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Land
Buildings
Money
Patents
Freedom of Choice
you can make decisions independently
and must accept the consequences of
those decisions
 Government
others
steps in when decisions harm
Profit aka Earnings, Gain, Income
money left from sales after all of the costs of
operating a business have been paid
 Must
work hard, invest wisely, and
produce goods and services that are
needed to make a profit
Competition
rivalry among businesses to sell their goods
and services
 Forces
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businesses to:
Improve products
Keep costs low
Provide effective customer service
Search for new ideas
Complete page 22, Make Academic Connections,
Question 4
Use the internet for your research and Microsoft
Word for your report.
Today’s Goals
 Describe
supply and demand orally and
with graphs
Supply and Demand
1-4
Participating in a Market
Economy
 Consumer
- person who buys and uses
goods and services
 Producer
- people and businesses that
decide what products and services to sell
Market Economy
 In
order for a market economy to work
well, consumers must be able to satisfy
their needs and businesses must be able
to make a profit
Demand
quantity of a good or service consumers are willing
and able to buy
Supply
quantity of a good or service that
businesses are willing and able to provide
Law of Demand
 Consumers
buy more of a good when its price
decreases and less when its price increases.
When price goes up…Demand goes down
When price goes down…Demand goes up
The Demand Curve
D
Price
Quantity
Demanded
Law of Supply
 Tendency
of suppliers to offer more of a good at a
higher price and less at lower prices
When price goes up…Supply goes up
When price goes down…Supply goes down
The Supply Curve
S
Price
Quantity
So…

Law of demand
describes how price
affects
CONSUMERS…

Law of supply
describes how price
affects PRODUCERS
Page 26, #4 Math
1. Which price has the highest demand?
2. Which price has the lowest demand?
3. How can business owners use this information?
Price
Quantity
Demanded
Total Value of
Sales
$20.00
8,500
$170,000
$22.50
7,800
$175,500
$25.0
6,200
$155,000
$27.50
5,900
$162,250
$30.00
4,300
$129,000
Page 26 #5
Use a Microsoft Word Memo Template to complete
this assignment.
Due Monday!
Bell Ringer 7
1. Use the internet to find the
average household income
for a family in Illinois.
2. Which state has the
highest income?
3. Which state has the lowest
income?
Today’s Goals
 Discuss
how supply and demand affect
prices of products and services
Factors Influencing Demand
1. Changes in income (the income
effect)…
when
income
goes up
consumers
buy more
when
income
goes down
consumers
buy less
Factors Influencing Demand
2. Prices or availability of substitutes
(substitution effect)…

a substitution is a good that can be used
in place of another
OR
Factors Influencing Demand
3. Prices or availability of complementary
goods…

complementary goods are things that are
often sold or used together
&
Factors Influencing Supply
1. Cost of inputs (factors of production)…
when
production
costs go
up
supply
goes
down
when
production
costs go
down
supply
goes up
Factors Influencing Supply
2. Changes in productivity…
when
productivity
goes up
when
productivity
goes down
supply
goes up
supply
goes
down
Go to www.bls.gov and click here…
Factors Influencing Supply
3. Change in the number of competitors in
the market…

More competitors in a market = increase
supply

Fewer competitors in a market = decrease
supply
Market Price…
the point where supply and demand are
equal (intersect)
S
market price
Pric
e
D
Quantity
How to determine market
price…
 Supply,
demand and competition
Practice Quiz & Crossword Puzzle
www.cengage.com/school/genbus/pob