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Essential Standard 1.00 Understand the role of business in the global economy. 1 Slide 2 Objective 1.01 Understand economic systems. 2 Slide 3 Satisfying needs and wants Basic economic problem Six steps of economic decision-making Main types for economic systems Market economy self-regulating principles Topics 3 Slide 4 Satisfying Needs and Wants 4 Slide 5 What are needs? What are wants? 5 Slide 6 Satisfying Needs and Wants continued What are goods? What are services? The United States economy is the largest producer of goods and services in the world. 6 Slide 7 Satisfying Needs and Wants continued How do businesses use economic resources to produce goods and services? The types of economic resources are: Natural Human Capital 7 Slide 8 Satisfying Needs and Wants continued What are natural resources? Many natural resources are nonrenewable. What are human resources? 8 Slide 9 Satisfying Needs and Wants continued What are capital resources? 9 Slide 10 Satisfying Needs and Wants continued What is the basic economic problem? What is scarcity? 10 Slide 11 Satisfying Needs and Wants continued What is the purpose of economic decision-making? What happens to choices in a tradeoff? What is opportunity cost ? 11 Slide 12 Six steps of economic decision- making 12 Slide 13 Economic Decision-Making 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 13 Slide 14 Economic Decision-Making continued 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? 14 Slide 15 Economic Decision-Making continued 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 15 Slide 16 Economic Decision-Making continued 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. 16 Slide 17 Main types of economic systems 17 Slide 18 Economic Systems What are the three economic questions that all economies must answer? 18 Slide 19 Economic Systems What is an economic system? The main types of economic systems are: Command or Communist Market Traditional Mixed 19 Slide 20 Economic Systems Who owns the resources in the main types of economic systems? Command Market Traditional Who answers the economic questions? Centered on family Government The people 20 Slide 21 Market economy self-regulating principles 21 Slide 22 United States Economic System What is capitalism? What type of economic system does the United States have? 22 Slide 23 United States Economic System continued The four principles of U.S. economic system are: Private property Freedom of choice Profit Competition 23 Slide 24 Market Economy What is the role of consumers in a market economy? A consumer includes individuals, businesses, and government. 24 Slide 25 Market Economy continued What is the role of producers in a market economy? 25 Slide 26 Market Economy continued 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? 26 Slide 27 Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western 27 Slide 28 Supply and Demand Graphs Intro to Business, 6e, Thomson South-Western 28 Slide 29 Supply and Demand Graphs Market (equilibrium) price is the point where supply and demand are equal. Intro to Business, 6e, Thomson South-Western 29