Satisfying Needs and Wants 1 Satisfying Needs and

Satisfying Needs and Wants 1

Satisfying Needs and Wants • What are needs? – Things that are required in order to live – Food, water, clothing, clean air, shelter • What are wants? – Things that add pleasure or comfort to your life – Movies, sports cars, luxury homes 2

Satisfying Needs and Wants • What are needs? – Things that are required in order to live – Examples: Food, water, clothing, clean air, shelter • What are wants? – Things that add pleasure or comfort to your life – Movies, sports cars, luxury homes 3

Satisfying Needs and Wants Needs and wants are satisfied by purchasing goods and services. • What are goods? – Products that you can see and touch. – Examples: Pencils, cell phones, shoes • What are services? – Activities that are consumed at the same time the are produced. – They are intangible, which means they have no physical characteristics. – Examples: haircut, taxi ride, car wash • The United States economy is the largest producer of goods and services in the world. 4

Satisfying Needs and Wants Economic resources, also called factors of production, are the means through which goods and services are produced • The types of economic resources are: – Natural – Human – Capital 5

Satisfying Needs and Wants • Natural resources are raw • Human resources are the materials supplied by nature people producing goods and from the air, the earth, and services. They contribute water. physical and mental energy • Examples: Water, trees, oil, to the production process. minerals • Examples: Factory • What is the difference workers, farmers, truck between renewable and non drivers, sales people renewable resources? – Renewable can be replaced, like trees – Nonrenewable can’t be replaced, like oil 6

Satisfying Needs and Wants Capital resources are the tools, equipment, and buildings and money that are used to produce goods and services. Examples: Hammers, buildings, cash, bulldozers, ovens 7

Satisfying Needs and Wants Entrepreneurial resource is the initiative to take a risk and combine capital, human and natural resources to develop a new product or a new business Examples: Sam Walton (Wal-Mart), Bill Gates (Microsoft) 8

Satisfying Needs and Wants continued THE BASIC ECONOMIC PROBLEM: Limited resources and unlimited wants and needs • What is the relationship between scarcity and the basic economic problem? – Scarcity is not having enough resources to satisfy every need or want. – Scarcity IS the economic problem. • As individuals and nations, we must make CHOICES about how to use our resources and this requires DECISION-MAKING. 9

Satisfying Needs and Wants • What is the economic decision-making process? – It is choosing which wants and needs, among several options, will be satisfied. – Remember, because of scarcity, all wants and needs cannot be met. • What happens to choices in a tradeoff? – A tradeoff is when you give up something to have something else. – Example: You can’t purchase the new Iphone you had been saving for because you spent $150 on last minute concert tickets last weekend. • What is opportunity cost ? – It is the value of what you give up in a trade off; the value of the next best alternative you did not choose. 10

Six steps of economic decision-making 11

Economic Decision-Making The six steps in the economic decision- making process are: 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 12

Economic Systems • All nations face the basic economic problem of scarcity of resources. • An economic system is a nation’s plan for how their available resources will be used to meet the needs and wants of its citizens. • The main types of economic systems are: – Command – Market – Traditional – Mixed 13

Economic Systems • Each nation’s economic system answers 3 main questions: – What goods and services will be produced? – How will those goods and services be produced? – For whom will goods and services be produced? 14

Economic Systems Command Economy • An economics system in which the government owns resources and dictates what is produced • Who answers the 3 economic questions? – The government • Examples: Cuba, North Korea 15

Economic Systems Market Economy • An economics system where goods and services are owned and controlled by the people of the country. • Who answers the 3 economic questions? – Individuals through buying and selling of goods and services in the marketplace (anywhere that goods and services are exchanged) • Examples: United States, Japan 16

Economic Systems Traditional Economy • An economic system in which goods & services are produced the way they always have been (customs) & centered on meeting the basic needs of each family • Who answers the 3 economic questions? – Each family • Examples: Third world countries in South America and Africa 17

Economic Systems Mixed Economy • Combines the elements of the command market economies. • Varying degrees of government involvement in the marketplace • China, Canada, France 18

The United States Economic System • Businesses and individuals answer the 3 major economic questions, so it is considered a market economy. • Other concepts of the U. S. economy – Capitalism: Refers to the private ownership of resources by individuals rather than the government – Free enterprise or private enterprise: Businesses can decide what to produce and consumers can decide what to purchase 19

The Principles of the U. S. Economic System • Private property – We can own, use, or dispose of things of value • Freedom of choice – We can make decisions independently but we must accept consequences of those decisions. (The government only regulates choice when individual decisions may harm others. ) • Profit – money left from sales after all of the costs of operating a business have been paid. – To make a profit is the reason people and businesses take risks! • Competition – the rivalry among businesses to sell their goods and services. – Competition forces businesses to keep costs low, provide good customers service and search for new ideas. 20

Supply and Demand Consumers: • buy and use goods and services • include individuals, businesses, and government. Consumers decide: • what to buy, where to buy, and from whom to buy • what price they are willing to pay. 21

Supply and Demand Producers: • individuals and organizations that determine what products and services will be available for sale • invest resources and take risks to make a profit 22

Supply and Demand The market economy is based on the principles of supply and demand. Demand: the quantity of goods or services that consumers are willing and able to buy. – Consumers set the demand for goods and services. – Demand influences how much producers will supply. – Examples: i. Pods, a restaurant that sells good food at a low price 23

Supply and Demand The market economy is based on the principles of supply and demand. Supply refers to the quantity of goods or services that businesses are willing and able to provide. – Producers establish the quantity of goods or services that will be produced to meet the demands of consumers. – Example: If people really want a product and are willing to pay a high price for it, a business will make enough to meet the consumers’ needs. If there is heavy competition and a low price, businesses are less likely to want to offer the product for sale. 24

Supply and Demand Graphs Market (equilibrium) price is the point where supply and demand are equal. – Consumers are satisfied with the price they have to pay – Businesses are satisfied with the profit they are making Intro to Business, 6 e, Thomson South-Western 25