Download Introduction to Business - Rantoul Township High School

Introduction to Business
Chapter 1
Economic Decisions and Systems
Warm-Up
• Answer the following in complete
sentences.
– Is there a difference between needs and
wants? Explain your answer.
Needs and Wants
• Need: things you cannot live without
– Examples
• Water, food, shelter, clothing
Wants: things you would like to have but
can live without
They add comfort and
Pleasure to life
Goods and Services
• Goods
– Things you can see and touch
• Examples: computers, food, clothes
• Services
– When someone does something for someone
• Examples: hair care, dental care, doctor visits
Economic Resources
• The means through which
goods and services are
produced
Warm-Up
• When Campbell’s Soup makes it’s
Chicken Noodle Soup, what resources to
they use to make the soup? Be specific
and list all the resources you can think of.
Natural Resources
• Raw materials supplied by nature
– Examples: lumber, coal, oil, water, animals,
crops
Human Resources
• People producing the goods and services
– Examples: farmers, factory workers, managers,
accountants, entrepreneurs
Capital Resources
• The products and money used in the
production of goods and services
– Examples: money, tools, equipment
• NOTE: Economic Resources are Limited
The Basic Economic Problem
• Scarcity
– Not having enough resources to satisfy every
need
Decision Making
• Tradeoff
– When you give up something
to have something else
Opportunity Cost
Definition: the value of your next best
alternative that you did not choose
What did you give up or not have when
making a decision to buy something or
obtain a goal?
Decision Making Process
• Specify – Determine your goal. What is
your need/want
• Search – Gather information
• Sift – Look at all options and opportunity
costs
• Select – Make a choice and act on it
• Study – Evaluate the result
Warm-up
• Identify the possible opportunity cost for
each of the following.
– Trying out for an athletic team
– Accepting a part-time job
– Studying for an important exam
– Saving money to buy a used car
– Obtaining a loan to start a business
Economic Systems
The Three Economic Questions
1. What to produce?
• Depends on resources, climate, and
education
2. How to produce?
• Skilled/unskilled labor; technology available
3. What needs and wants to satisfy?
• What is most critical
Types of Economies
• Command Economy – Government
owns most of the resources and make
most of the economic decisions.
Types of Economies
• Market Economy: People rather than the
government own the resources and run the
business.
Types of Economies
• Traditional Economy – Goods and services are
produced the same way for generations
– Countries with traditional economies do not
participate in the global economy
Does our society have any
elements of a traditional economy?
Mixed Economy
• A combination of a market economy and a
command economy.
– U.S. has a mixed economy (the dominate
economy is a market economy)
The U.S. Economic System
• Capitalism
– Private ownership of resources by individuals
not government
• Free to decide what to produce and buy
Warm-Up
• What are some disadvantages of living in
a market economy?
Four Principles of the U.S.
Economy
• Private Property
– Individuals can own,
use, or dispose of
things of value
• Freedom of Choice
– Make decisions
independently and
must accept
consequences of
those decisions
Four Principles of the U.S.
Economy
• Profit
– Formula: Price – Cost = Profit
• Price you sell the product – amount producer spends to make
product = left over profit
– Making money (Profit) is the heart of the private
enterprise system
Competition
• Contest among sellers to win customers.
How does competition affect consumers?
– Better customer service
– Good quality products
– Fair prices
Warm-Up
• What are the 5 steps in the decisionmaking process?
• List the three components of economic
resources and give an example of each.
Supply and Demand
• Consumers
– anyone who buys or uses products.
• Producers
– Individuals/organizations that determine
what products/services will be available for
sale
Demand
• Quantity of goods that consumers are
willing and able to buy
– Law of Demand
• As prices go up, demand goes down
– Example: of a cheeseburger cost $1 each we might buy
more than if they are $10 each
Demand Curve for Movies
Price
$10.50
9.00
7.50
6.00
4.50
3.00
1.50
1,000
Quantity
2,000
3,000
4,000
5,000
6,000
7,000
Supply
• Quantity of products that Producers are
willing and able to make available for sale
– Law of Supply
• As prices go up, supply goes up
• Example: if you are a supplier of computers you
might make more available at $800 than at $200
Supply Curve for Watches
Price
$105
90
75
60
45
30
15
10,000
Quantity
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Market Price
• Point at which supply and demand are
equal.
Market Price for Notebook
Computers
Price
Demand
Supply
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
300
400
500
600
700
800
Warm-up
• List the three economic resources and
give an example of each.
• List the 5 decision making steps and give
an example of each.
Warm-Up
• Explain the following terms:
– Freedom of choice
– Capitalism
– Right to private property