Chapter 1

Chapter 1
Economic Decisions and Systems
Key Topics
Satisfying Needs and Wants
 Economic Choices
 Economic Systems
 Supply and Demand
Needs and Wants*
What are some products that you would like
to have?
 Are they essential to your everyday lives?
◦ Needs
 Things that are required in order to live.
◦ Wants
 Things that add comfort and pleasure to your life.
What you buy…..
Satisfies your needs and wants
◦ Goods
 Physical Items
◦ Services
 Activities
Producing Goods/Services
Economic Resources
◦ Resources used to produce goods/services.
4 Factors of Production
Resources are limited
◦ # of Goods and Services Produced
Economic Problems
Individuals and businesses have
_____________ wants and needs…..
 School’s for example….
◦ Cut back on certain classes and extracurricular
activities because a budget is low.
◦ Not having enough resources to satisfy every need.
It’s Your Choice
To choose between the things that you need
to have and want…
◦ “Live within your means”
Economic Choices
◦ Process of choosing which wants, among several
options will be satisfied.
Making Economic Decisions
Process of choosing which wants, among
several wants being considered, will be
Understanding the process will allow for your
decision making to be easier and possibly
Bell Ringer
List and Explain….
◦ 4 Factors of Production
Basic Economic Problems
◦ Not having enough resources to satisfy every
◦ Affects everyone….some more than others
Our Choices…
◦ Are resulted from scarcity
◦ Economic Decision-Making
 Process of choosing which wants, among several
options will be satisfied
Decision Making Process*
Define the problem
Identify your choices
Evaluate the advantages and disadvantages
Make a choice……….
Act on your choice
Review your decision
Define the Problem
The problem must be clearly defined in
order to make a decision that will lead to
a satisfying solution.
Identify the Choices
Identify all possibly scenarios.
Evaluating Advantages/Disadvantages
Weigh out the choices
◦ Pros vs. Cons
Buying HD Television or Saving $2500
◦ Which would you choose?????
Make a Choice and Act on it….
Each choice you make has consequences.
 How might the choice you make affect
you later?
No matter what….
◦ You will think about to the what ifs…
Review your decision
Review how that decision affected you…
 Would you do it again?
 Did you follow the steps of the decision
making process?
 Was there a better alternative?
The Alternatives
◦ When you give up something to have
something else.
Opportunity Cost
◦ The value of the next-best alternative.
Types of Business Decisions
Programmed Decisions
◦ These are standard decisions which always follow the same
routine. As such, they can be written down into a series of fixed
steps which anyone can follow. They could even be written as
computer program
Non-Programmed Decisions
◦ These are non-standard and non-routine. Each decision is not
quite the same as any previous decision.
Types of Business Decisions
Strategic Decisions
◦ These affect the long-term direction of the business
 Whether to take over Company A or Company B
Tactical Decisions
◦ These are medium-term decisions about how to implement
 What kind of marketing to have, or how many extra staff to recruit?
Operational Decisions
◦ These are short-term decisions (also called administrative
decisions) about how to implement the tactics
 Which firm to use to make deliveries?
Levels of Decision-Making
Good decision-making comes from:
Training of managers in decision-making skills.
Good information in the first place.
Management skills in analyzing information and
handling its shortcomings.
Experience and natural ability in decisionmaking.
Risk and attitudes to risk.