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ECONOMICS AND DECISION MAKING

2-1. LESSON. GOALS. ECONOMICS AND DECISION MAKING. Describe the basic economic problem. List the steps of the decision-making process. The Basic Economic Problem. Scarcity refers to the limited resources available to satisfy the unlimited needs and wants of people.

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ECONOMICS AND DECISION MAKING

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  1. 2-1 LESSON GOALS ECONOMICS AND DECISION MAKING Describe the basic economic problem. List the steps of the decision-making process.

  2. The Basic Economic Problem • Scarcity refers to the limited resources available to satisfy the unlimited needs and wants of people. • Economics is the study of how people choose to use limited resources to satisfy their unlimited needs and wants.

  3. Review decision Define problem Take action Identify alternatives Evaluate alternatives Make choice The Decision-Making Process 6 1 5 2 4 3

  4. 2-2 LESSON GOALS BASICS OF ECONOMICS Describe how the market sets prices. Explain the causes of inflation.

  5. Price-Setting Activities • Supply is the relationship between the amount of a good or service that businesses are willing and able to make available and the price. • Demand is the relationship between the amount of a good or service that consumers are willing and able to purchase and the price. • Market price is the point at which supply and demand cross.

  6. Market Price Supply and Demand Demand Supply

  7. Changing Prices • Inflation • Demand-pull inflation • Cost-push inflation

  8. 2-3 LESSON GOALS ECONOMIC SYSTEMS Name the three main factors of production. Understand how different countries make economic decisions.

  9. Economic Resources Satisfy Needs • Natural resources • also known as land • Human resources • also known as labor • Capital resources • also known as capital

  10. Types of Economic Systems • Command Economies • Market Economies • Private property • Profit motive • Free, competitive marketplace • Mixed Economies

  11. 2-4 LESSON GOALS ACHIEVING ECONOMIC DEVELOPMENT Describe the factors that affect economic development. Identify the different levels of economic development.

  12. Development Factors • Literacy level • Technology • Agricultural dependency

  13. Types of Development • Industrialized countries • Less-developed countries • Developing countries

  14. Less-Developed Country Developing Country Industrialized Country Levels of Economic Development • Low literacy • Limited technology • Agricultural or mining economy • Improving literacy • Improving technology • Decreasing dependence on agriculture or mining • High literacy • Modern technology • Industrial economy

  15. 2-5 LESSON GOALS RESOURCES SATISFY NEEDS Discuss economic principles that explain the need for international trade. Identify various measures of economic progress and development.

  16. The Economics of Foreign Trade • Absolute advantage exists when a country can produce a good or service at a lower cost than other countries. • Comparative advantage exists when a country can produce a good or service with more efficiency than other countries.

  17. Measuring Economic Progress • Measure of Production • Gross domestic product (GDP) • Gross national product (GNP) • International Trade Activity • Balance of trade • Foreign exchange rate • Foreign debt • Other Economic Measurements • Consumer price index (CPI) • Unemployment rate

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