Chapter 1

Satisfying needs and wants

• Need: Things that are required in order to live• Wants: Things that comfort and pleasure to

your life• Good: Things that you can see and touch• Services: Activities that are consumed at the

same time they are produced

OPPORTUNITY COST

• Economic decision-making-process of choosing which wants, among several options, will be satisfied

• Tradeoff-when you give up something to have something else

• Opportunity cost- the value of the next-best alternative that you did not choose

The Decision Making Process

• Define the problem• Identify the choices• Evaluate the pros and cons of the choices• Choose one• Act on your choice• Review your decision

3 Economic Questions

• What to produce• How to produce • For whom to produce

•Command Economy-resources are owned and controlled by the government

•Market Economy- resources are owned and controlled by the people of the country

• Traditional economy-goods and services are produced the way it has always been done

•Mixed economy-combines elements of the command and market economies

• Capitalism-private ownership of resources by inividuals rather than by their government

• Competition-rivalry among businesses to sell their goods and services

• Profit-is the money left from sales after all of the cost of operating business has been paid

Supply and Demand

• Consumer: A person who buys and uses goods and services• Producers: Individual and

organizations that determine what products and services will be available for sale

• Demand: Quantity of a good or service that consumers are willing and able to buy

• Supply: quantity of a good or service that business is willing and able to provide

•Market price: point where supply and demand are equal