Warm-Up
• Answer the following in complete sentences.– Is there a difference between needs and
wants? Explain your answer.
Needs and Wants
• Need: things you cannot live without– Examples
• Water, food, shelter, clothing
Wants: things you would like to have but can live without
They add comfort and
Pleasure to life
Goods and Services
• Goods– Things you can see and touch
• Examples: computers, food, clothes
• Services– When someone does something for someone
• Examples: hair care, dental care, doctor visits
Warm-Up
• When Campbell’s Soup makes it’s Chicken Noodle Soup, what resources to they use to make the soup? Be specific and list all the resources you can think of.
Natural Resources
• Raw materials supplied by nature– Examples: lumber, coal, oil, water, animals,
crops
Human Resources
• People producing the goods and services– Examples: farmers, factory workers, managers,
accountants, entrepreneurs
Capital Resources• The products and money used in the
production of goods and services– Examples: money, tools, equipment
• NOTE: Economic Resources are Limited
Opportunity Cost
Definition: the value of your next best alternative that you did not choose
What did you give up or not have when making a decision to buy something or obtain a goal?
Decision Making Process
• Specify – Determine your goal. What is your need/want
• Search – Gather information
• Sift – Look at all options and opportunity costs
• Select – Make a choice and act on it
• Study – Evaluate the result
Warm-up
• Identify the possible opportunity cost for each of the following.– Trying out for an athletic team– Accepting a part-time job– Studying for an important exam– Saving money to buy a used car– Obtaining a loan to start a business
Economic Systems
The Three Economic Questions
1. What to produce?• Depends on resources, climate, and
education
2. How to produce?• Skilled/unskilled labor; technology available
3. What needs and wants to satisfy?• What is most critical
Types of Economies
• Command Economy – Government owns most of the resources and make most of the economic decisions.
Types of Economies
• Market Economy: People rather than the government own the resources and run the business.
Types of Economies
• Traditional Economy – Goods and services are produced the same way for generations– Countries with traditional economies do not
participate in the global economy
Does our society have any elements of a traditional economy?
Mixed Economy
• A combination of a market economy and a command economy.– U.S. has a mixed economy (the dominate
economy is a market economy)
The U.S. Economic System
• Capitalism– Private ownership of resources by individuals
not government• Free to decide what to produce and buy
Four Principles of the U.S. Economy
• Private Property– Individuals can own,
use, or dispose of things of value
• Freedom of Choice– Make decisions
independently and must accept consequences of those decisions
Four Principles of the U.S. Economy
• Profit– Formula: Price – Cost = Profit
• Price you sell the product – amount producer spends to make product = left over profit
– Making money (Profit) is the heart of the private enterprise system
Competition
• Contest among sellers to win customers.
How does competition affect consumers?– Better customer service– Good quality products– Fair prices
Warm-Up
• What are the 5 steps in the decision-making process?
• List the three components of economic resources and give an example of each.
Supply and Demand
• Consumers– anyone who buys or uses products.
• Producers– Individuals/organizations that determine
what products/services will be available for sale
Demand
• Quantity of goods that consumers are willing and able to buy– Law of Demand
• As prices go up, demand goes down – Example: of a cheeseburger cost $1 each we might buy
more than if they are $10 each
Price
$10.50
9.00
7.50
6.00
4.50
3.00
1.50
1,000Quantity
2,000 3,000 4,000 5,000 6,000 7,000
Demand Curve for Movies
Supply
• Quantity of products that Producers are willing and able to make available for sale– Law of Supply
• As prices go up, supply goes up• Example: if you are a supplier of computers you
might make more available at $800 than at $200
Price
$105
90
75
60
45
30
15
10,000Quantity
20,000 30,000 40,000 50,000 60,000 70,000 80,000
Supply Curve for Watches
Price
$2,100
1,800
1,500
1,200
900
600
300
100Quantity
200 300 400 500 600 700 800
Market Price for Notebook Computers
DemandDemand SupplySupply
Warm-up
• List the three economic resources and give an example of each.
• List the 5 decision making steps and give an example of each.