Economic Decisions Fri. September 2, 2011. Today’s Objectives Distinguish the difference between wants and needs Explain the difference between goods.

Economic DecisionsFri. September 2, 2011

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Today’s Objectives

Distinguish the difference between wants and needs

Explain the difference between goods and services

Describe economic resources used in the production of goods and services

Understand how scarcity applies to economics

Economic Decisions

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Economics Defined

o Study of producing, distributing, and consuming goods and services

o Involves decisions regarding the use of resources

oDecisions are made byIndividuals (consumers)Businesses (producers)Societies (government)

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The Economy’s Driving Force

WANTS

o Things you would like to have

o Non-essential, but add to quality of life

o Also referred to as a luxury

NEEDS

o Things necessary for basic living

o Essential to human life; required for survival

o Includes basic food, water, shelter, clothing

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What satisfies our wants?

Goods are things you can see & touch.

Services are satisfied through the efforts of other people or by equipment.

In order to create goods or to provide a service, you need resources.

Goods & Services WS

Economic Resources

Click icon to add picture

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Resources Are Limited

o Resources are limited. They limit the number of wants and needs that people can satisfy.

o Most consumers in the U.S. can satisfy their basic needs.

o Most people have unlimited wants. We have to make choices.

Basic Needs

+Unlimited

Wants

Economic Resources

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Scarcity

oShortage of resources

oConflict between unlimited wants and limited resources

[ Society’s Wants & Needs ] – [ Available Resources ]

Your Wants & Needs

Your Income

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Price Gouging

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Economic Choices

Economic Decision

Opportunity Cost

Potential Lost

Things Given Up

Your choice

o A trade off occurs when a choice is made between two or more options.

o The opportunity cost is everything you gave up by choosing one option instead of another.

Factors of ProductionThe means through which goods and services are produced are called factors of production.

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Economic Choices

Humans must make

choices that influence how

resources are used to meet

needs and wants.

Example: U.S. oil supply

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Factors of Production

NaturalResources

Capital Resources

HumanResources

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Worksheet

o You can work in pairs or by yourself.

oDefine each factor in your own words.

o List one or two examples of each factor of production.

oDecide why each resource is limited.

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Natural Resources

o Raw materials found in nature

o Examples include… Wind Water Minerals Plant life

o Limitations

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Human Resources

o Human effort used for production

o Work force includes everyone willing and able to work

o Limitations

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Capital Resources

o Physical capital includes other items required for production Real Estate /

Buildings Machinery Tools

o Limitations

The Decision-Making Process

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Think about it!

Economic decisions determine how resources are used to fulfill wants and needs.

How does the government decide which wants and needs should be fulfilled for society?

How do businesses decide which wants and needs to fulfill for consumers?

What process do you follow to decide how you should use your resources (money) for wants/needs?

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Economic Decision-Making

This is the process of choosing which wants will be satisfied. The decision can be made

by following six steps…

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Decision-Making Process

1. Define problem.2. Identify alternative

solutions.3. Evaluate advantages /

disadvantages of each solution.

4. Choose the best alternative.

5. Take action on the choice.

6. Review the decision.

Decision-MakingHandout

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SUMMARY

Definition of economics

Wants vs. Needs

Goods & Services

ScarcityFactors of

productionDecision-

Making Process

Economic Questions