Chapter 1Chapter 1Economic Decisions and Economic Decisions and SystemsSystems

Key TopicsKey Topics

Satisfying Needs and WantsEconomic ChoicesEconomic SystemsSupply and Demand

Needs and Wants*Needs and Wants*

What are some products that you would like to have?

Are they essential to your everyday lives?◦Needs

Things that are required in order to live.

◦Wants Things that add comfort and pleasure to your

life.

What you buy…..What you buy…..Satisfies your needs and wants

◦Goods Physical Items

◦Services Activities

Producing Goods/ServicesProducing Goods/ServicesEconomic Resources

◦Resources used to produce goods/services.

4 Factors of Production◦Natural◦Human◦Capital ◦Entrepreneurial

Resources are limited ◦# of Goods and Services Produced

Economic ProblemsEconomic ProblemsIndividuals and businesses have

_____________ wants and needs…..School’s for example….

◦Cut back on certain classes and extracurricular activities because a budget is low.

Scarcity◦Not having enough resources to satisfy

every need.

It’s Your ChoiceIt’s Your Choice

To choose between the things that you need to have and want…◦“Live within your means”

Economic Choices◦Process of choosing which wants, among

several options will be satisfied.

Making Economic DecisionsMaking Economic Decisions

Process of choosing which wants, among several wants being considered, will be satisfied.

Understanding the process will allow for your decision making to be easier and possibly better…..

Bell RingerList and Explain….

◦4 Factors of Production

Basic Economic ProblemsScarcity

◦Not having enough resources to satisfy every need.

◦Affects everyone….some more than others

Our Choices…◦Are resulted from scarcity◦Economic Decision-Making

Process of choosing which wants, among several options will be satisfied

Decision Making Process*Decision Making Process*

1. Define the problem2. Identify your choices3. Evaluate the advantages and

disadvantages4. Make a choice……….5. Act on your choice6. Review your decision

Define the ProblemThe problem must be clearly

defined in order to make a decision that will lead to a satisfying solution.

Identify the ChoicesIdentify all possibly scenarios.

Evaluating Advantages/DisadvantagesWeigh out the choices

◦Pros vs. ConsBuying HD Television or Saving

$2500◦Which would you choose?????

Make a Choice and Act on it….Each choice you make has

consequences.How might the choice you make

affect you later?

No matter what….◦You will think about to the what ifs…

Review your decisionReview how that decision

affected you…Would you do it again?Did you follow the steps of the

decision making process?Was there a better alternative?

The AlternativesTrade-Off

◦When you give up something to have something else.

Opportunity Cost◦The value of the next-best

alternative.

Types of Business Types of Business DecisionsDecisionsProgrammed Decisions

◦ These are standard decisions which always follow the same routine. As such, they can be written down into a series of fixed steps which anyone can follow. They could even be written as computer program

Non-Programmed Decisions◦ These are non-standard and non-routine. Each

decision is not quite the same as any previous decision.

Types of Business Types of Business DecisionsDecisionsStrategic Decisions

◦ These affect the long-term direction of the business Whether to take over Company A or Company B

Tactical Decisions◦ These are medium-term decisions about how to

implement strategy What kind of marketing to have, or how many extra staff to

recruit?

Operational Decisions◦ These are short-term decisions (also called

administrative decisions) about how to implement the tactics Which firm to use to make deliveries?

Levels of Decision-MakingLevels of Decision-Making

Good decision-making comes from:

1. Training of managers in decision-making skills.

2. Good information in the first place.3. Management skills in analyzing

information and handling its shortcomings.

4. Experience and natural ability in decision-making.

5. Risk and attitudes to risk.

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