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Chapter 1. Economic Decisions. Goals. Distinguish between WANTS & NEEDS Explain the difference between goods and services Describe the economic resources used in the production of goods and services. Needs. Basic to survival Food, Water Clothing Shelter. Wants.

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Chapter 1

Chapter 1

Economic Decisions


Goals
Goals

  • Distinguish between WANTS & NEEDS

  • Explain the difference between goods and services

  • Describe the economic resources used in the production of goods and services


Needs
Needs

  • Basic to survival

    • Food, Water

    • Clothing

    • Shelter


Wants
Wants

  • Add to the quality of life

  • But not necessary for survival

  • Wants never end – once we fulfill a want, it is usually followed by another want.


Goods and services
Goods and Services

  • We satisfy our needs and wants with GOODS and SERVICES.

  • GOODS (PRODUCTS) satisfy our MATERIAL needs and wants.

  • SERVICES satisfy our wants that we can’t see or touch:

    • Going to a movie

    • Get a haircut

    • Take a swimming lesson

    • Use your cell phone


Economic resources
Economic Resources

  • Companies need resources to produce goods and services.

  • Economic resources are also called FACTORS OF PRODUCTION


3 types of resources
3 types of resources

  • Natural Resources (renewable and non-renewable)

    • Raw materials – all materials that come from the earth

    • Water, air, iron ore, gold, oil, copper, vegetables, fish


  • 2. Human Resources

    • It takes people or LABOR to turn natural resources into goods and services

      • People who run farms, factories, manage banks, design, machines, process food, announce the news on CNN, check out or groceries, police the streets, or teach business classes.


3. Capital Resources

  • Tools and equipment used to produce goods and services

    • Office building, factories, tractors, carpenters, power tools, computers, delivery trucks

    • Money used to start and run the business is also capital.


Limited resources
Limited Resources

  • Shortage of resources - In reality, we can’t have everything we want sometimes because of $$$ or because there is a lack of resources to make the product.


Scarcity
Scarcity

  • Conflict between unlimited wants and limited resources

  • Referred to as the “Basic Economic Problem”


Economic choices
Economic Choices

  • Government, Business and Consumers always face scarcity, therefore they must make important decisions about what they will produce, sell, and purchase


Making economic decisions
Making economic decisions

  • Decision Making Process

  • Define the problem

  • Identify choices

  • Evaluate the advantages and disadvantages of each choice

  • Choose

  • Act on your choice

  • Review your decision


Opportunity cost
Opportunity Cost

  • When making a decision, you must give up something to gain something else.

  • Example – You have to make a choice:

    • Go to a football game with your friends

    • Pick up an extra shift at work so that you can make some money to put towards that new car you want.

      • If you choose to work – not going to the football game with your friends would be the opportunity cost

        • What you give up to gain something else


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