Economic DecisionsEconomic DecisionsChapter 1Chapter 1

I’ve just given you I’ve just given you $250!$250!

~Write down what ~Write down what you would do with it!you would do with it!

~~

Goals for the chapterGoals for the chapter

Distinguish between needs and wantsDistinguish between needs and wants

Explain the differences between Explain the differences between goods and servicesgoods and services

Describe the economic resources Describe the economic resources used in the production of goods and used in the production of goods and services.services.

What is a need?What is a need?

Needs Needs are things that are necessary are things that are necessary for survivalfor survival

– FoodFood– ClothingClothing– Housing Housing

What are wants?What are wants?

WantsWants are things that are not are things that are not necessary for survival but which add necessary for survival but which add comfort and pleasure to our lives.comfort and pleasure to our lives.

– Designer jacketDesigner jacket– Stereo systemStereo system– Class ringClass ring

Wants never endWants never end

Our wants are limited only by our Our wants are limited only by our imaginationimagination

One want fulfilled leads to more One want fulfilled leads to more wantswants– Ex. Your new jacket will satisfy you Ex. Your new jacket will satisfy you

temporarily but soon there will be a temporarily but soon there will be a nicer onenicer one

– Ex. Buying tennis racket leads to tennis Ex. Buying tennis racket leads to tennis shoes leads to tennis club membershipshoes leads to tennis club membership

From your list, how From your list, how many items were needs many items were needs

and how many were and how many were wants?wants?

We satisfy our wants with We satisfy our wants with goods and servicesgoods and services

GoodsGoods are things you can see and are things you can see and touch.touch.– Jacket, DVD players, IpodJacket, DVD players, Ipod

ServicesServices are satisfied through the are satisfied through the efforts of other people or by efforts of other people or by equipment.equipment.– Make a deposit at a bank, getting a Make a deposit at a bank, getting a

haircut, go to a moviehaircut, go to a movie

Economic ResourcesEconomic Resources

You cannot create goods from You cannot create goods from nothing or supply a service without nothing or supply a service without some effort.some effort.

The means through which goods and The means through which goods and services are produced are called services are produced are called economic resources (factors of economic resources (factors of production)production)– Three kinds (natural, human, and Three kinds (natural, human, and

capital)capital)

Natural ResourcesNatural Resources

The raw materials supplied by nature The raw materials supplied by nature are called are called natural resourcesnatural resources..

Materials that come from the earth, Materials that come from the earth, water, airwater, air– Iron ore from the earthIron ore from the earth– Vegetables from the groundVegetables from the ground– Fish from the waterFish from the water

Human ResourcesHuman Resources

Natural resources do not satisfy our Natural resources do not satisfy our wants by themselves.wants by themselves.

It takes people to turn them into goods It takes people to turn them into goods and make the products and services.and make the products and services.

Human resourcesHuman resources are the people who are the people who work to produce goods and services.work to produce goods and services.

LaborLabor is another name for this is another name for this – People who run farms, manage banks, People who run farms, manage banks,

teachteach

Capital ResourcesCapital Resources

The tools, equipment, and buildings The tools, equipment, and buildings that are used to produce goods and that are used to produce goods and services are called services are called capital capital resourcesresources. .

– Office buildingsOffice buildings– FactoriesFactories– Delivery trucksDelivery trucks

Capital ResourcesCapital Resources

The word The word capitalcapital is often used in is often used in place of capital resources, especially place of capital resources, especially when referring to the factors of when referring to the factors of production.production.

– Money needed to run a businessMoney needed to run a business Capital investment in a companyCapital investment in a company Raising capital to expand businessRaising capital to expand business

Do you think it is Do you think it is possible to satisfy all possible to satisfy all

of your wants and of your wants and needs?needs?

You cant possibly!You cant possibly! You may want a new You may want a new car, then you have to car, then you have to

get gas for the car, new get gas for the car, new rims….etcrims….etc

The idea of not being able to The idea of not being able to satisfy all of your wants and satisfy all of your wants and needs is our next concept…..needs is our next concept…..

ScarcityScarcity

All three economic resources All three economic resources (natural, human and capital) are (natural, human and capital) are necessary to produce goods and necessary to produce goods and services to satisfy our wantsservices to satisfy our wants

Unfortunately we do not have an Unfortunately we do not have an endless supply of these resources.endless supply of these resources.

The conflict between unlimited wants The conflict between unlimited wants and limited resources is the and limited resources is the basic basic economic problem (scarcity).economic problem (scarcity).

What are some things What are some things that are scarce?that are scarce?

Decision-Making ProcessDecision-Making Process

1.1. Define the problemDefine the problem

2.2. Identify the choicesIdentify the choices

3.3. Evaluate the advantages and Evaluate the advantages and disadvantages of each choicedisadvantages of each choice

4.4. ChooseChoose

5.5. Act on your choiceAct on your choice

6.6. Review your decisionReview your decision

What we learnedWhat we learned

Distinguished between needs and Distinguished between needs and wantswants

Explained the differences between Explained the differences between goods and servicesgoods and services

Described the economic resources Described the economic resources used in the production of goods and used in the production of goods and services.services.

Discussed the Decision making Discussed the Decision making processprocess