Objective 1.01

Understand economic systems.

Needs, Wants, and Decision-Making

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• Satisfying needs and wants• Basic economic problem• Six steps of economic decision-making

Topics

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Satisfying Needs and Wants

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Satisfying Needs and Wants

• What are needs?- are required in order to live

• What are wants? - add comfort and pleasure to your life

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Satisfying Needs and Wants

• What are goods?- things that you can see and touch

• What are services? - activities that are consumed as they are produced

• The United States economy is the largest producer of goods and services in the world.

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Satisfying Needs and Wants

• How do businesses use economic resources* to produce goods and services?

• The types of economic resources are:– Natural– Human– Capital

(Economic resources are the means in which goods and services are produced--also called factors of production.)

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Satisfying Needs and Wants

• 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

Capital resources are the tools, equipment, and buildings that are used to produce goods and services.

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Satisfying Needs and Wants

• The basic economic problem exists due to limited resources for satisfying 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

• 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 decision-making

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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

The six steps in the economic decision- making 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

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

• 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

• 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

• Reviewing decision: Routinely check on condition of foundation of house.

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