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
◦
◦
◦
◦

Natural
Human
Capital
Entrepreneurial
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.

Scarcity
◦ 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
satisfied.

Understanding the process will allow for your
decision making to be easier and possibly
better…..
Bell Ringer

List and Explain….
◦ 4 Factors of Production
Basic Economic Problems

Scarcity
◦ Not having enough resources to satisfy every
need.
◦ 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*
1.
2.
3.
4.
5.
6.
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

Trade-Off
◦ 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
strategy
 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:
1.
2.
3.
4.
5.
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.

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ecisionmaking.htm