Basic Economic Concepts

1. Basic Economic Concepts Chapter 1

2. A Look at Wants and Needs Chapter 1 Section 1

3. Scenario • Suppose you have $10 to spend. • You can go to the movies OR buy lunch, but not both. • Which is a want and which is a need? • What is the difference?

4. Wants • Determine goods and services that a business provides. • Things that are not necessary for survival • Example: New computer, bike, movies, etc. • Question: What is something you brought to school today that is a want?

5. Needs • Determines goods and services a business will provide. • Things you must have for survival • Example: Food, water, shelter, clothing

6. Public vs Private Public Wants Private Wants Individual/personal Furniture, computer, etc. Satisfied by: individual people • Shared by many people • Highways, state parks, etc. • Satisfied by: government

7. Goods and Services Goods Services Satisfy wants and needs Tasks that businesses perform for consumers. People or machines Examples: insurance, tourism, banking, education • Satisfy wants and needs • Physical products • Examples: groceries, telephones, clothing

8. Resources • Items that people can use to obtain what they want or need. • Examples: Money, fuel, labor

9. How can resources limit your ability to satisfy wants and needs?

10. Decision-Making Process • Used to make the most of your resources • Make good choices • Identify and consider your various alternatives

11. Decision-Making Process • Step 1: Identify the situation • Step 2: Identify possible courses of action • Step 3: Determine the pros and cons • Step 4: Make a decision • Step 5: Evaluate your decision

12. Decision-Making Process Example • Step 1: • I only have $10 to spend. I am hungry but I really want to go to the movies. Each will cost $10. • Step 2: • Go to the movies, eat lunch, go home and eat, rent a movie • Step 3: • I will see the movie, I won’t be hungry, I can eat at home and still see a movie – but I won’t be able to spend time with my friends.

13. Decision-Making Process Example • Step 4: • I am going to rent a movie and go home for lunch. • Step 5: • Always evaluate!

14. Business Activities Chapter 1 Section 2

15. How to Define Business • Business is any commercial activity that seeks profit by providing goods and services to others in exchange for money. • Profit is the money left over after a business has paid the cost of providing its goods and services.

16. The Motive of Business: To Make a Profit • Businesses supply with the motivation to make a profit • Need profit to survive • Profit is the reward for satisfying the needs and wants of consumers and businesses. • Wealth provided by businesses benefits the entire community – pay taxes and provide jobs.

17. The Significance of Competition • Companies thrive on competition • Competition is the contest between businesses to win customers • Competition exists because companies have the freedom to produce the products they think will be the most profitable. • Quality products, outstanding services, competitive prices

18. Business Activities • During product or service development: • Identify opportunities • Evaluate the demand • Obtain start up capital (money) • Manage the production of goods/services • Market the goods and/or services • Keep records

19. Market Research • The act of gathering and analyzing information about the wants, needs, and preferences of consumers in a certain market. • Provides information to meet the demands of business activity.

20. Business and You • You are considered a consumer • The person who uses goods or services. • Businesses affect consumers when they modify or discontinue products. • Consumers affect business because they decide what kinds of goods and services they want to buy. • To avoid failure, a business must modify products, services, and business practices to satisfy the consumer.