Understand the role of business in the global economy.

Transcription

1 Understand the role of business in the global economy. 1

2 Understand economic systems. 2

3 Topics Satisfying needs and wants Basic economic problem Six steps of economic decision-making Main types for economic systems Market economy self-regulating principles 3

4 Satisfying Needs and Wants 4

5 Satisfying Needs and Wants What are needs? Required in order to live. What are wants? Things that add comfort & pleasure to your life. 5

6 Need OR Want? Sandwich Ipod Tee-shirt Transportation Apartment Dishwasher Fancy restaurant meal Need Want Need (unless you already have 25!) Need (depends on the type) Need Want Want 6

7 Satisfying Needs and Wants continued What are goods? Things you can see & touch What are services? Activities that are consumed at the time they are produced. Who is the largest producer of goods and services in the world? US economy 7

8 What Do You Need To. Make A Ruler Clean Houses 8

9 Satisfying Needs and Wants continued What do businesses use to make goods and services? Economic Resources Also called Factors of Production The means through which goods & services are produced. The types of economic resources are: Natural Human Capital 9

10 Satisfying Needs and Wants continued Natural resources are raw materials produced by nature. Many natural resources are nonrenewable. Human resources are the people who contribute physical and mental energy to the production process. 10

11 Satisfying Needs and Wants continued Capital resources are the tools, equipment, and buildings that are used to produce goods and services. 11

12 Can you have everything you want? Can businesses make everything they want? Why not? 12

13 Satisfying Needs and Wants continued The basic economic problem exists due to limited resources for satisfing unlimited needs and wants. Scarcity is not having enough resources to satisfy the unlimited needs and wants. The scarcity of resources for satisfying needs and wants influences choices. 13

14 How do you decide how to use your limited resources? 14

15 Scenario: Your boss asks you to pick up an extra shift on Saturday night. You had planned on going on a date. What do you do? How do you make the decision? What are you giving up by working? What are you giving up by going on the date? 15

16 Satisfying Needs and Wants continued What is the purpose of economic decisionmaking? The process of choosing which wants, among several options, will be satisfied. What happens to choices in a tradeoff? In a tradeoff, you give up something for gaining something else. What is opportunity cost? The value of the NEXT-best alternative that you did not choose. 16

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18 Economic Decision-Making Economic decision-making is a means of choosing a course of action among several alternatives. 18

19 Economic Decision- Making continued The six steps in the economic decisionmaking process are: Defining the Problem Identifying choices Evaluating the advantages & disadvantages of each choice Choosing one choice Acting on the choice Reviewing the decision 19

20 Economic Decision-Making continued Problem: Adjust the foundation of a house Choices: * Ignore the problem * Contact companies located in the same city * Contact companies located in the next city * Contact companies located in other cities 20

21 Economic Decision-Making continued Some advantages: location of local companies companies that guarantee of services companies that provides simple explanation of necessary services Some disadvantages: prices for services location of company in next city or other cities 21

22 Economic Decision-Making continued Choosing one choice: A local company that guarantees services and provides simple explanation of services. Acting on choice: Schedule for local company to provide services of adjusting foundation of house. Reviewing decision: Routinely check on condition of foundation of house. 22

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24 Focus on Real Life (pg 17) Jiang Liang is a resident of modern-day China. His family lived for decades in a small farming community outside of Beijing. There, they faced strict government regulations on what they could and could not grow. Jiang was able to attend Beijing University, where he learned a great deal about computes. With this valuable skill, Jiang moved to Hong Kong, where he worked for a large multinational computer corporation. Jiang was surprised to learn that this company operated without any direct government oversight. The company produced as many computers as it desired and set prices at whatever level it thought best. Jiang has experienced two very different economic systems. Which seems the most like the economic system in the United States? 24

25 Economic Systems What are the three economic questions that all economies must answer? What to produce? How to produce? For whom to produce? 25

26 Economic Systems An economic system is a nation s plan for answering the three economic questions. The main types of economic systems are: Command or Communist Market Traditional Mixed 26

27 Economic Systems Command / Communist: An economic system in which the government owns major resources and dictates what is produced. China, Cuba, Laos, North Korea, Vietnam 27

28 Economic Systems Market Economy: An economics system where goods and services are owned and controlled by the people. Marketplace anywhere that goods or services exchange hands. 28

29 Economic Systems Traditional Economy: An economics system where goods and services are produced the way it has always been done (customs) and centered on family. 29

30 Economic Systems Mixed Economy: An economics system that combines the elements of a command and market economy. 30

31 Economic Systems Who owns the resources in the main types of economic systems? Command Centered on family Market Government Traditional The people Who answers the economic questions? 31

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33 United States Economic System Capitalism allows the freedom of consumption and production of goods and services. The economic system of the United States is based on capitalism. 33

34 United States Economic System continued 4 Principles of the US Economic System Private Property can own, use, or dispose of things of value Freedom of Choice can make decisions independently and must accept consequences of those decisions Profit money left from sales after all of the costs of operating a business have been paid. Competition the rivalry among businesses to sell their goods and services 34

35 What is a consumer? 35

36 Market Economy What is the role of consumers in a market economy? Consumers buy and use goods and services. Consumers decide what to buy, where to buy, from whom to buy, and what price they are willing to pay. A consumer includes individuals, businesses, and government. 36

37 What is a producer? 37

38 Market Economy continued What is the role of producers in a market economy? Producers are individuals and organizations that determine what products and services will be available for sale. They also determine what needs and wants they will satisfy and the prices they want to receive. 38

39 Market Economy continued The market economy is based on the principles of supply and demand. Demand is 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. What are some examples of consumer demand? Supply refers to the quantity of goods or services that businesses are willing and able to provide. Producers establish the quantity (supply) of goods or services that will be produced to meet the demands of consumers. What are some examples of producers of supplies? 39

40 Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western 40

41 Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western 41

42 Supply and Demand Graphs Market (equilibrium) price is the point where supply and demand are equal. Intro to Business, 6e, Thomson South-Western 42

43 Quantity (in millions) Price Quantity Quantity Demanded Supplied $50 1 million 12 million $40 3 million 10 million $30 6 million 6 million $20 10 million 4 million $10 15 million 2 million Equilibrium Point 3 $10 $20 $30 $40 $50 $60 $70 $80 Price 43