Chapter 1
Economic Decisions
and Systems
1-1
1-2
1-3
1-4
Satisfying Needs and Wants
Economic Choices
Economic Systems
Supply and Demand
Introduction to Business
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LESSON 1-1
Satisfying Needs and Wants
Goals
 Explain the difference between needs
and wants.
 Distinguish between goods and
services.
 Describe the types of economic
resources.
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Key Terms
 needs
 wants
 goods
 services
 economic resources
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NEEDS AND WANTS
 Needs are essential
 Wants add to the quality of life
 Needs and wants are unlimited
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>> C H E C K P O I N T
What is the difference between a need
and a want?
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GOODS AND SERVICES
 Goods
 Things that you can see and touch
 Products you can purchase to meet your
wants and needs
 Services
 Activities that are consumed at the same
time they are produced
 Intangible
 Also used to satisfy wants and needs
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GOODS AND SERVICES
 Goods and services are purchased by
businesses as well as individual
consumers.
 Businesses supply the goods and
services that meet business and
consumer wants and needs.
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The U.S. Economy
 U.S. is the largest producer of goods
and services in the world.
 U.S. citizens and businesses often
incur debt through loans and credit
cards in order to meet wants and
needs.
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>> C H E C K P O I N T
How do people satisfy their wants and
needs?
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ECONOMIC RESOURCES
 Natural resources (Land)
 Human resources (Labor)
 Capital resources (Capital)
 Resources are limited
 All products you consume begin with
one or more natural resources.
 Economic Resources are also called
Factors of Production.
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>> C H E C K P O I N T
What are the three types of economic
resources? Give an example of each type
of resource.
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LESSON 1-2
Economic Choices
Goals
 Understand the basic economic
problem.
 Explain the steps in the decisionmaking process.
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Key Terms
 Scarcity
 Economic Decision-Making
 Tradeoff
 Opportunity Cost
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Key Terms
 Scarcity – means not having enough
resources to satisfy every need.
 Economic Decision-Making – is the process
of choosing which wants, among several
options, will be satisfied.
 Tradeoff – When you give up something to
have something else.
 Opportunity Cost – is the value of the nextbest alternative that you did not choose.
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THE BASIC ECONOMIC
PROBLEM
 Choices – scarcity forces you to make
choices/decisions among alternatives.
 Tradeoffs and opportunity cost.
 The benefit you get from your choice
should be greater than the benefit from the
next best choice
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>> C H E C K P O I N T
What is opportunity cost? the value of the
next-best alternative that you did not
choose.
What is the basic economic problem?
The basic economic problem is
satisfying unlimited wants and needs
with limited resources.
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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.
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>> C H E C K P O I N T
What are the six steps in the decisionmaking process?
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LESSON 1-3
Economic Systems
Goals
 Identify the three economic questions.
 Differentiate among the main types of
economic systems.
 Describe the economic system of the
United States.
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Key Terms
 economic system
 command economy
 market economy
 traditional economy
 mixed economy
 Capitalism
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Key Terms
 economic system – A nation’s plan for
answering the three economic questions.
 command economy – The resources are
owned and controlled by the government.
 market economy – The resources are
owned and controlled by the people.
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Key Terms
 traditional economy – Goods and services are
produced the way it has always been done.
 mixed economy – Combines elements of the
command and market economies
 Capitalism – Refers to the private ownership of
resources by individuals, rather than by the
government. It is another name for our economic
system
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THE THREE ECONOMIC
QUESTIONS
 What to produce?
 How to produce?
 What needs and wants to satisfy?
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THE THREE ECONOMIC
QUESTIONS
1. What to produce?
2. How to produce?
3. What needs and wants to satisfy?
All economies (or nations) of the world face the
basic economic problem of scarcity of resources.
They also have citizens with many basic needs and
unlimited wants.
Each country must decide how the available
resources will be used to meet the needs and wants.
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>> C H E C K P O I N T
What are the main differences among the
three economic systems?
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What are the main
differences among the four
economic systems?
 Command economy – government owns
and controls resources
 Market economy – individuals own and
control resources
 Traditional economy – based on customs
and traditions. Usually 3rd world countries
 Mixed economies – a blend of the command
and market economy. (Most prevalent).
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THE U.S. ECONOMIC
SYSTEM – 4 basic
principals
1.
2.
3.
4.
Private property
Freedom of choice
Profit
Competition
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The US Economic System
(Capitalism) based on 4
important principals
1. Private property-you can own, use, or
dispose of things of value.
2. Freedom of choice-you can make
decisions independently and must
accept the consequences of those
decisions.
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THE U.S. ECONOMIC SYSTEM
3. Profit – is the money left from sales
after all of the costs of operating a
business have been paid.
Profit is the HEART of the private
enterprise system.
4. Competition – The rivalry among
businesses to sell their goods and
services.
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>> C H E C K P O I N T
Name the four principles of the U.S.
economic system.
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The US Economic System
(Capitalism) based on 4
important principals
 Private Property
 Freedom of Choice
 Profit
 Competition
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LESSON 1-4
Supply and Demand
Goals
 Describe supply and demand orally and
with graphs.
 Discuss how supply and demand affect
prices of products and services.
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Key Terms
 Consumer –is a person who buys and uses
goods and services.
 Producers –are individuals and organizations
that determine what products and services
will be available for sale.
 Demand – is the quantity of a good or service
that consumers are willing and able to buy.
 Supply – refers to the quantity of a good or
service that businesses are willing and able
to provide
 Market Price – is the point where supply and
demand are equal.
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PARTICIPATING IN A
MARKET ECONOMY
 Consumers set demand
 Producers establish supply
 A graphic view
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DEMAND AND SUPPLY
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>> C H E C K P O I N T
How does the price of a product affect
demand and supply?
As prices decrease, the number of
consumers willing and able to purchase
the product (demand) will increase. As
prices increase, businesses will be willing
to supply larger quantities of the product.
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DETERMINING PRICE
 Factors influencing demand –if many
consumers want (or demand) a particular
good or service, its price will tend to go up.
e.g. Summer Rental in the summer
 Factors influencing supply – competition,
natural disasters, and other unforeseen
circumstances.
 Determining market price – Supply, demand,
and competition determine the market price
for a product or service.
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MARKET PRICE
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>> C H E C K P O I N T
How is the market price for a product
determined?
The market price is the point at which
supply and demand are equal.
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Chapter TEST coming up
 Day 1 - Tomorrow you will answer unit
questions in the text book.
 Day 2 - Next you will complete a study
guide and review for the test.
 Day 3 - The following day you will
complete a written test.
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