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POBF 1.01: Economic Systems
- 1. Understand the Role of Business in the Global Economy. Unit 1: Economic Systems 1
- 2. Understand Economic Systems. Unit 1: Economic Systems 2
- 3. What is Economics? Satisfying needs and wants Basic economic problem Six steps of economic decision-making Main types for economic systems Market economy self-regulating principles Unit 1: Economic Systems 3
- 4. What is Economics? Satisfying needs and wants Unit 1: Economic Systems 4
- 5. Unit 1: Economic Systems 5
- 6. Classical Definition… “Economics is the science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind”. (Dictionary.com, 2012) Unit 1: Economic Systems 6
- 7. Casual Definition… “Economics is the study of choice under scarcity”. Unit 1: Economic Systems 7
- 8. Mr. Cox’s Definition… “Making choices based on the limited supply of products to satisfy unlimited desires”. What is YOUR definition of economics? Unit 1: Economic Systems 8
- 9. Really, though it’s about answering questions that often have few easy answers. What happens when oil eventually runs out? Why can’t I just get a scholarship to go to college? Why can’t the unemployed just get jobs? Why do people get so excited about interest rate changes? Why do things cost so much more than they did for our grandparents? Why do I have to buy an operating system from so few companies? Why is the price of a plane ticket so much LESS on Tuesdays? Unit 1: Economic Systems 9
- 10. Satisfying Needs and Wants Unit 1: Economic Systems 10
- 11. What are needs? What are wants? Unit 1: Economic Systems 11
- 12. Unit 1: Economic Systems 12
- 13. Unit 1: Economic Systems 13
- 14. What are goods? What are services? The United States economy is the largest producer of goods and services in the world. Unit 1: Economic Systems 14
- 15. How do businesses use economic resources to produce goods and services? The types of economic resources are: ◦ Natural ◦ Human ◦ Capital Unit 1: Economic Systems 15
- 16. What are natural What are human resources? resources? Many natural resources are nonrenewable. Unit 1: Economic Systems 16
- 17. What are capital resources? Unit 1: Economic Systems 17
- 18. What is the basic economic problem? What is scarcity? Unit 1: Economic Systems 18
- 19. For example… When oil is processed into heating oil there is less available to be used in making gasoline. This can affect the price of gasoline since the supply of crude oil (oil that has not been processed) available is more scare. Unit 1: Economic Systems 19
- 20. What is the purpose of economic decision- making? What happens to choices in a tradeoff? What is opportunity cost ? Unit 1: Economic Systems 20
- 21. Tomorrow… The Basic Economic Problem Economic Decision-Making Process Unit 1: Economic Systems 21
- 22. The basic economic problem Six steps of economic decision-making Unit 1: Economic Systems 22
- 23. What are needs ? What are wants ? What is scarcity ? Unit 1: Economic Systems 23
- 24. Unit 1: Economic Systems 24
- 25. How to satisfy our UNLIMITED wants and needs with LIMITED resources. Unit 1: Economic Systems 25
- 26. Part One: No matter what we have we ALWAYS want more (or better). Unit 1: Economic Systems 26
- 27. Regular Cell Phone Smart Phone Unit 1: Economic Systems 27
- 28. Part Two: However…there is a LIMITED amount of resources to satisfy our wants/needs. Unit 1: Economic Systems 28
- 29. Lumber Forests Unit 1: Economic Systems 29
- 30. So…choices must be made to handle these resources EFFICIENTLY. Unit 1: Economic Systems 30
- 31. The difference in the choices made are called OPPORTUNITY COSTS or TRADE-OFF’s. Opportunity costs exist when you can’t do (or have) something because of the choice you made. Unit 1: Economic Systems 31
- 32. Unit 1: Economic Systems 32
- 33. What is economic decision-making? What are the six steps of economic decision- making? 1. Defining the problem 2. Identifying choices 3. Evaluating the advantages and disadvantages of each choice 4. Choosing one choice 5. Acting on the choice 6. Reviewing the decision Unit 1: Economic Systems 33
- 34. Economic Decision-Making continued Unit 1: Economic Systems 34
- 35. Try to solve a problem 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 What choice would you make? Unit 1: Economic Systems 35
- 36. Some advantages: location of local companies, companies that guarantee of services, and companies that provides simple explanation of necessary services Some disadvantages: prices for services and location of company in next city or other cities Unit 1: Economic Systems 36
- 37. 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. Unit 1: Economic Systems 37
- 38. Main types for economic systems Market economy self- regulating principles Unit 1: Economic Systems 38
- 39. Tomorrow… Types of Economic Systems Market Economy Self- regulating Principles Unit 1: Economic Systems 39
- 40. Unit 1: Economic Systems 40
- 41. What are the three economic questions that all economies must answer? o What to produce? o How to produce? o For whom to produce? Unit 1: Economic Systems 41
- 42. What is an economic system? The main types of economic systems are: ◦ Command or Communist ◦ Market ◦ Traditional ◦ Mixed Unit 1: Economic Systems 42
- 43. Who owns the resources in the main types of economic systems? o Command o Centered on family o Market o Government o Traditional o The people Who answers the economic questions? Unit 1: Economic Systems 43
- 44. Unit 1: Economic Systems 44
- 45. • What is capitalism? • What type of economic system does the United States have? Unit 1: Economic Systems 45
- 46. The four principles of U.S. economic system are: • Private property • Freedom of choice • Profit • Competition Unit 1: Economic Systems 46
- 47. What is the role of consumers in a market economy? A consumer includes individuals, businesses, and government. Unit 1: Economic Systems 47
- 48. What is the role of producers in a market economy? Unit 1: Economic Systems 48
- 49. The market economy is based on the principles of supply and demand. ◦ What is demand? ◦ What are some examples of consumer demand? ◦ What is supply? ◦ What are some examples of how producers establish supply? Unit 1: Economic Systems 49
- 50. Intro to Business, 6e, Thomson South-Western Unit 1: Economic Systems 50
- 51. Intro to Business, 6e, Thomson South-Western Unit 1: Economic Systems 51
- 52. Market (equilibrium) price is the point where supply and demand are equal. Intro to Business, 6e, Thomson South-Western Unit 1: Economic Systems 52
Hinweis der Redaktion
- Have students, by a show of hands, answer the following questions. How many have heard the term economics ? How many have taken a course in economics? How many know what supply and demand are?
- Needs are required in order to live. Wants are things that add comfort and pleasure to your life.
- Needs are required in order to live. Wants are things that add comfort and pleasure to your life.
- Needs are required in order to live. Wants are things that add comfort and pleasure to your life.
- Goods are things that you can see and touch. Services are activities that are consumed at the same time they are produced.
- Economic resources , also called factors of production, are the means through which goods and services are produced.
- Natural resources are raw materials produced by nature. Human resources are the people who contribute physical and mental energy to the production process.
- Capital resources are the tools, equipment, and buildings that are used to produce goods and services.
- The basic economic problem exists due to limited resources for satisfying 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.
- The basic economic problem exists due to limited resources for satisfying 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.
- Economic decision-making is the process of choosing which wants, among several options, will be satisfied. Tradeoff is the process of giving up something for gaining something else. Opportunity cost is the value of the next-best alternative that you did not choose.
- Needs: Things we can not live without Wants: Things we can live without but make our lives better/easier Scarcity: How limited something is.
- Remind the students that we have an endless list of things that we need/want to make our lives the best they can be.
- As long as the old phone is functional… why do you need a new smartphone? Its not NEEDED as long as the regular phone works. Ask the class for other examples of needs or wants that they like to have satisfied.
- There are a limited amount of resources available to us.
- There are a limited amount of resources available to us.
- Example: If you buy drinks and candy on the way to school with your lunch money, your opportunity cost is missing lunch. If a company makes desks out of their lumber supply, then the opportunity costs could be the number of chairs they could have made with the same lumber.
- Economic decision-making is a means of choosing a course of action among several alternatives.
- Note: This is a cyclical process that is constantly moving since many other businesses are doing the same thing.
- All economies must answer three economic questions. What to produce? How to produce? For whom to produce?
- An economic system is a nation’s plan for answering the three economic questions.
- A command , or communist, economy is an economics system in which the government owns resources and dictates what is produced. A market economy is an economics system where goods and services are owned and controlled by the people. A marketplace is anywhere that goods or services exchange hands. In a traditional economy , goods and services are produced the way it has always been done (customs) and centered on family. A mixed economy combines the elements of the command and market economies.
- Capitalism allows the freedom of consumption and production of goods and services. The economic system of the United States is based on capitalism.
- 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.
- A consumer buys and uses goods and services. Consumers decide what to buy, where to buy, from whom to buy, and what price they are willing to pay.
- Producers are individuals and organizations that determine what products and services will be available for sale. Producers determine what products and services will be available, what needs and wants they will satisfy, and the prices they want to receive.
- Demand is the quantity of goods or services that consumers are willing and able to buy. Supply refers to the quantity of goods or services that businesses are willing and able to provide. Producers establish the quantity of goods or services that will be produced to meet the demands of consumers. Consumers set the demand for goods and services. Demand influences how much producers will supply. Use the following slides to explain supply and demand using graphs. Demand Examples: High demand for a new gaming console or electronic item causes the price to rise. Last year’s fashions go “out of style” and drop in price occurred. Supply Examples: Many companies are creating an mp3 player, therefore the price drops. Only a few companies started selling tablets, such as the iPad, so the price was high when they were introduced to the public.