Essential Standard 1 00 Understand the role of

Essential Standard 1. 00 Understand the role of business in the global economy. 1

Objective 1. 01 Understand economic systems. 2

Topics • • • Satisfying needs and wants Basic economic problem Six steps of economic decision-making Main types for economic systems Market economy self-regulating principles 3

Satisfying Needs and Wants 4

Satisfying Needs and Wants • What are needs? • What are wants? 5

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. 6

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 7

Satisfying Needs and Wants continued • What are natural resources? • What are human resources? Many natural resources are nonrenewable. 8

Satisfying Needs and Wants continued What are capital resources? 9

Satisfying Needs and Wants continued • What is the basic economic problem? • What is scarcity? 10

Satisfying Needs and Wants continued • What is the purpose of economic decision-making? • What happens to choices in a tradeoff? • What is opportunity cost ? 11

Six steps of economic decisionmaking 12

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 13

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? 14

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 15

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. 16

Main types of economic systems 17

Economic Systems What are three economic questions that all economies must answer? 18

Economic Systems • What is an economic system? • The main types of economic systems are: – Command or Communist – Market – Traditional – Mixed 19

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? 20

Market economy self-regulating principles 21

United States Economic System • What is capitalism? • What type of economic system does the United States have? 22

United States Economic System continued The four principles of U. S. economic system are: • Private property • Freedom of choice • Profit • Competition 23

Market Economy • What is the role of consumers in a market economy? • A consumer includes individuals, businesses, and government. 24

Market Economy continued What is the role of producers in a market economy? 25

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? 26

Supply and Demand Graphs Intro to Business, 6 e, Thomson South-Western 27

Supply and Demand Graphs Intro to Business, 6 e, Thomson South-Western 28

Supply and Demand Graphs Market (equilibrium) price is the point where supply and demand are equal. Intro to Business, 6 e, Thomson South-Western 29