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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Topics
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Satisfying needs and wants
Basic economic problem
Six steps of economic decision-making
Main types for economic systems
Market economy self-regulating principles
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Satisfying Needs and Wants
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Satisfying Needs and Wants
• What are needs?
• What are wants?
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Satisfying Needs and Wants
continued
• What are goods?
• What are services?
• 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?
• The types of economic resources are:
– Natural
– Human
– Capital
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Satisfying Needs and Wants
continued
• Natural resources are
raw materials produced
by nature.
Many natural resources
are nonrenewable.
• Human resources are
the people who
contribute physical and
mental energy to the
production process.
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Satisfying Needs and Wants
continued
Capital resources are the 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 satisfing unlimited
needs and wants.
• Scarcity is 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
• What is the purpose of economic
decision-making?
• What happens to choices in a tradeoff?
• What is opportunity cost ?
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Six steps of economic decisionmaking
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Economic Decision-Making
Economic decision-making is a means of
choosing a course of action among
several alternatives.
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Economic Decision-Making
continued
The six steps in the economic decisionmaking process are:
– Defining the problem
– Identifying choices
– Evaluating the advantages and disadvantages
of each choice
– Choosing one choice
– Acting on the choice
– Reviewing the decision
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Economic Decision-Making
continued
Solve a problem
Problem: Adjust the foundation of a house
Choices: Ignore the problem
Contact companies located in the
same city
Contact companies located in the
next city
Contact companies located in
other cities
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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.
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Economic Decision-Making
continued
• 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
What are the three economic questions that
all economies must answer?
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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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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.
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United States Economic System
continued
• 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 includes individuals,
businesses, and government.
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Market Economy continued
• What is the role of producers in a market
economy?
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Market Economy continued
The market economy is based on the
principles of supply and demand.
– Demand is the quantity of goods or services
that consumers are willing and able to buy.
– What are some examples of consumer
demand?
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Market Economy continued
– Supply refers to the quantity of goods or
services that businesses are willing and able
to provide.
– What are some examples of producers of
supplies?
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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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