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
• What are natural
resources?
• What are human
resources?
Many natural resources
are nonrenewable.
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Satisfying Needs and Wants
continued
What are capital resources?
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Satisfying Needs and Wants
continued
• What is the basic economic problem?
• What is scarcity?
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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
• What is economic decision-making?
• What are the six steps of economic
decision-making?
1. Defining the problem
2. Identifying choices
3. Evaluating the advantages and disadvantages of
each choice
4. Choosing one choice
5. Acting on the choice
6. Reviewing the decision
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Economic Decision-Making
continued
Try to solve a problem
Problem:
Choices:
Adjust the foundation of a house
Ignore the problem
Contact companies located in the same city
Contact companies located in the next city
Contact companies located in other cities
What choice would you make?
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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.
• 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
• What is an economic system?
• 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
• What is capitalism?
• What type of economic system does the
United States have?
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United States Economic System
continued
The four principles of U.S. economic system
are:
• Private property
• Freedom of choice
• Profit
• Competition
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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.
– What is demand?
– What are some examples of consumer
demand?
– What is supply?
– What are some examples of how producers
establish supply?
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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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