Business Essentials

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TopicsSatisfying needs and wantsBasic economic problemSix steps of economic decision-makingMain types for economic systemsMarket economy self-regulating principles

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The difference between must and must haves.

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Satisfying Needs and WantsWhat are needs?What are wants?

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Satisfying Needs and Wants continuedWhat are goods? What are services? The United States economy is the largest

producer of goods and services in the world.

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Satisfying Needs and Wants continuedHow do businesses use economic resources

to produce goods and services?The types of economic resources are:

NaturalHumanCapital

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Satisfying Needs and Wants continuedNatural 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.

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Satisfying Needs and Wants continued

Capital resources are the tools, equipment, and buildings that are used to produce goods and services.

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Satisfying Needs and Wants continuedThe 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.

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Satisfying Needs and Wants continued

What is the purpose of economic decision-making?

What happens to choices in a tradeoff?

What is opportunity cost ?

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Economic Decision-MakingEconomic decision-making is a means of

choosing a course of action among several alternatives.

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Economic Decision-Making continuedThe six steps in the economic decision- making

process are:Defining the problemIdentifying choicesEvaluating the advantages and disadvantages

of each choiceChoosing one choiceActing on the choiceReviewing the decision

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Economic Decision-Making continuedSolve a problem

Problem: Adjust the foundation of a houseChoices: Ignore the problem

Contact companies located in the same city

Contact companies located in the next city

Contact companies located in other cities

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Economic Decision-Making continuedSome 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

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Economic Decision-Making continuedChoosing 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.

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Economic Decision-Making continuedReviewing decision: Routinely check on

condition of foundation of house.

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Economic SystemsWhat are the three economic questions that all

economies must answer?

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Economic SystemsAn economic system is a nation’s plan for

answering the three economic questions.

The main types of economic systems are:Command or CommunistMarketTraditionalMixed

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Economic SystemsWho owns the resources in the main

types of economic systems?Command

Market

Traditional

Who answers the economic questions?

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Centered on family

Government

The people

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United States Economic System continuedThe four principles of U.S. economic system

are: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.

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United States Economic System continuedProfit – 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.

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Market EconomyWhat is the role of consumers in a market

economy?

A consumer includes individuals, businesses, and government.

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Market Economy continuedWhat is the role of producers in a market

economy?

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Market Economy continuedThe 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.What are some examples of consumer demand?

Market Economy continuedSupply refers to the quantity of goods or

services that businesses are willing and able to provide.

What are some examples of producers of supplies?

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Supply and Demand Graphs

Intro to Business, 6e, Thomson South-Western

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Supply and Demand Graphs

Intro to Business, 6e, Thomson South-Western

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Supply and Demand GraphsMarket (equilibrium) price is the point

where supply and demand are equal.

Intro to Business, 6e, Thomson South-Western