Unit 1. Needs are essential Everyone Needs – food & water – Clean air – Shelter In today's society other needs include: – Good education – Employment.

Unit 1

ECONOMICS

NEEDS AND WANTS

• Needs are essential• Everyone Needs– food & water– Clean air– Shelter

• In today's society other needs include:– Good education– Employment– Safety

NEEDS AND WANTS

• Wants add to the quality of life• Most products purchased do more than meet

your needs, they make your life easier and more comfortable.

• Our country, economic status, lifestyle, and jobs determine whether something is a need or a want.

GOODS AND SERVICES

• Goods satisfy your wants and needs for material things that you can see or touch.

• Services also satisfy wants and needs but must be provided to you at the time you want to consume them.

BUSINESS

• Consumers decided which products and services to purchase and where to purchase them.

• Businesses decide what products and services to produce.

• ________ is the motivation of business

THE ECONOMIC PROBLEM

• Having unlimited wants and needs but limited resources is known as the basic economic problem.

• The basic economic problem results from scarcity.

ECONOMIC RESOURCES

• The means by which goods and services are produced are known as economic resources.

• Economic resources are also known as factors of production.

• There are 3 kinds of economic resources:– Natural Resources– Human Resources– Capital Resources

ECONOMIC RESOURCES

• Natural Resources– Raw material supplied by nature.• Water• Air• Lumber• Minerals• Oil• Animals

ECONOMIC RESOURCES

• Human Resources– The people who produce goods and services• Owners, managers, employees of a business• Factory Workers• Farmers• Entrepreneurs

ECONOMIC RESOURCES

• Capital Resources– Products and money used in the production of

goods and services• Buildings• Equipment• Machinery• Supplies• Money

ECONOMIC QUESTIONS

• All nations of the world face the basic economic problem. Each country must decide how the available resources will be used to meet the wants and needs of its people.

ECONOMIC QUESTIONS

• All economies must answer 3 economic questions:1. What goods and services will be produced?

2. How will the goods and services be produced?

3. Which needs and wants will be satisfied with the good and services produced?

The Decision Making Process

• The decision making process helps consumers and businesses to carefully calculate the opportunity cost of decisions before actually making the decisions as well as helping select the most satisfying alternatives from a set of choices.

Decision Making Process

1. Define the Problem2. Identify the Choices3. Evaluate the advantages and disadvantages

of each choice4. Make a decision5. Act on your decision6. Review your decision

TYPES OF ECONOMIC SYSTEMS

• A nations plan for answering the 3 economic questions is called its economic system

• The main types of economic systems in the world today are– Market Economy– Command Economy– Traditional Economy– Mixed Economy

COMMAND ECONOMY

• An economy in which resources are owned and controlled by the government.

• North Korea , Cuba

• Communism is a command economy

MARKET ECONOMY

• An economy in which the resources are owned and controlled by the people of the country

• America, Germany, Canada, Hong Kong

TRADTIONAL ECONOMY

• An economy in which goods and services are produced the way they have always been produced.

• Amish, Inclusive Native American communities

• Less developed countries which do not participate in global trading generally have a traditional economy.

MIXED ECONOMY

• An economy that combines elements of different economies

• Most economies are truly mixed economies

THE UNITED STATES ECONOMIC SYSTEM

• Another name for the economic system in the United States is capitalism which refers to the private ownership of resources by individuals rather than by government.

• 4 principles U.S. economic system is based on are:

1. Right to own private property2. Freedom of choice3. Right to make a profit4. Freedom of competition

SUPPLY AND DEMAND

• Understanding demand tells a business what type and what quantity of products and services to supply.

• Prices are affected by the relationship between supply and demand.

• When demand is high the price will tend to go up.• If there is a large supply price will tend to

remain low.

BUSINESS CYCLE

• Economic activities move in cycles.

• The movement of the economy from one condition to another and back again is called a business cycle which reflects the recurring ups and downs of GDP.

BUSINESS CYCLE

• The 4 phases of the business cycle:1. Prosperity• Most people are working, production and demand are

high, wages are good, GDP is growing

2. Recession• Demand decreases, unemployment rises, GDP growth

slows for 2 or more quarters

3. Depression• High unemployment, weak sales, business failures, GDP

falls rapidly

4. Recovery• Unemployment decreases, demand increases, GDP

slowly begins to rise.