9-11-07 Wants and Needs

Wants and Needs

-Wants are the things you wish you could have. Each person has wants.

-Necessary wants are Needs

Satisfying Wants and Needs w/ Goods and services

-Goods can be physically weighted or measured. (Tangible)

-Goods satisfy you wants and needs for material things that you can see or touch

-Services are tasks that people or machines perform. (Intangible)

-Services also satisfy some of your wants for things you can’t see or touch.

Unlimited Wants, limited resources

-Most people have unlimited wants for goods and services.

-The more money you make, the more goods or services you want.

-A resource is anything that people can use to make or obtain what they need or want.
-What are some examples of resource???

-The problem of unlimited wants and limited resource affects individuals, companies, and
nations.
Why???
Resources limit the number of wants people can satisfy.

Deciding on Your Resources

The decision-making process has five essential steps:

1. Identify the problem.

2. List the alternatives.
3. Determine the pros and cons.
4. Make the best decision.
5. Evaluate your decision.

What is Business?

-Business is any activity that seeks profit by providing goods or services to others.

Examples of Service business???

Business’ Motivations

-Profit is the amount of money left over after a business has paid for the cost of
producing its goods and services.
-Profit is the motivation for taking the risk to start a business.

-Companies thrive on competition, the contest between businesses to win customers.

Name MAJOR Competitors

You as a Consumer

-A consumer is a person who selects, purchases, uses, or disposes of goods or services.

-Business is aware of your changing needs and wants.

9.17.2007 Factors of Production

Factors of Production

-A shortage of resources is called scarcity.

-A basic economic problem for any society is how to manage its resources.

-To meet the wants and needs of its people, a society must produce goods and services.
-The means to produce them are called economics resources, or factors of production.

Natural Resources

-the raw materials found in nature are called natural resources.

-Natural resources become factors of production when we use them to produce goods.

-Some resource, like wheat and cattle are renewable. They can be reproduced.
-Other resources are limited, or nonrenewable, like coal, iron, and oil.

Human Resources

-The knowledge, efforts, and skills people bring their work are called human resources,
or labor.

-Labor can be skilled or unskilled, physical or intellectual.

-One of the biggest problems facing many nations today is not a shortage of labor but a
shortage of What???-Skills and knowledge

Capital Resources
-Capital resources are the things used to produce goods and services, like buildings,
materials, and equipment.
-As the wants and needs of people change, so do the needs for capital resources.

Entrepreneurial Resources

-Meeting the changing wants and needs of people requires Entrepreneurial Resources

-Entrepreneurs improve on ways to use resources, or create and produce new ones.
-A key to dealing with scarcity is to develop new resources and technologies.

9.19.2007 Types of Economic System

Types of Economic System

-Economics is the study of how a society chooses to use resources to produce and
distribute goods and services for people’s consumption.

-The two basic and opposing economic systems that have been developed are:
*Market economy
*Command economy

Market Economy

-In a market economy economic decisions are made in the marketplace according to the
laws of supply and demand.

The Market and Prices

-Price is the amount of money given or asked for when goods and services are bought or
sold.
-Demand is the amount or quantity of goods and services that consumers are willing to
buy at various prices. .
-Supply is the amount of goods and services that producers will provide at various prices

-demand and supply work together.

-when the quantity demanded and the quantity supplied meet, the price is called the
equilibrium price (equilibrium point).
Economic System

-Capitalism, or private enterprise, is a market economy system.

-In a capitalist system, resources are privately owned.

-A market economy offers incentives. –Problems with a market economy

-Examples: *Those who do not have the wanted job skills
*Profit do not get an income.
*Competition *One or two businesses control the market, thus
leading to higher prices and lower quality
products.
Command Economy

-In a command economy a central authority makes the key economic decisions.
-A command economy is also called a planned or managed economy.

Two Types of Command Economies:

Communism Socialism
-Strong command economy -Moderate command economy
-The state makes all the economic decisions. -There is some form of private enterprise.
EX: China & Cuba EX: France & Sweden

Command Economy (cont.)

Advantage
-the primary advantage of a command economy is that it guarantees everyone equal
standards of living.
-The standards of livings the amount of goods and services the average citizen can buy

Disadvantage
-Little choices of what to buy.
-No incentive for entrepreneurship when you can’t run your own business.

Mixed Economy

-Most nations have a mixed economy, a combination of a market and command

economy.
-The state takes care of people’s needs while the marketplace takes care of people’s
wants.

9.24.2007 Measuring Economic Activity

Measuring economic activity

-Economic indicators are figure used to measure economic performance.
-Economic indicators measure things like how much a country is producing, whether its
economy is growing, and how it compares to other countries.

Gross Domestic Product (GDP)

-One way of telling how well an economy is performing is to determine how many goods
and services it produces during a certain period of time.

- Gross Domestic Product (GDP): The total value of the goods and services produce in
a country in a given year.
-Economists in clued four main areas in calculating GDPL:
* Consumer goods and services
* Business goods and services
* Government goods and services
* Goods and services sold to other countries.

-The GDP doesn’t include the goods and services that aren’t reported to the government.

9.27.2007 The Business Cycle

The Business cycle

-Over long period of time economic changes seem to form patterns
-The rise and fall of economic activity over time is called business cycle

-The four phases of the business cycle are:

* Prosperity
* Recession
* Depression
* Recovery

Prosperity
- Prosperity is a peek of economic activity.
-Unemployment is low; production of goods and services is high, and new business open.

Recession
-During a recession, economic activity slows down.
-There is a general drop in the total production of goods and services, so the GDP
declines.
-the ripple effect is when a recession in one industry leads to a recession in other
industries.

Depression
-a deep recession that affects the entire economy and lasts for several years is called a
depression
-A depression can be limited to one country but usually spreads to related countries
-During a depression there is high unemployment, low production of goods and
manufacturing plants.

Recovery
- A rise in business activity after a recession or depression is called a recovery.
-During a recovery:
* The new demand for goods and services stimulates more production.
* The GDP grows
* New business open
* Production starts to increase
* People start going back to work and have money to spend again.

-A recovery can take a long time or it came happen quickly.

-During WWII, the U.S. recovered from the Great Depression much faster because of the
demand for war production.

10.1.2007 Unemployment Rate

Unemployment rate
-There are different reasons for being unemployment, including:
* Temporary
* Seasonal
* Changes in industry
* Economic slowdown

Rate of Inflation
-Inflation is general increase in the cost of goods and services
-Inflation can happen when an economy actually becomes too productive

-As the demand for goods goes up, producers raise their prices.
-To pay the higher prices, workers demands higher wages
-When wages goes up, producers raise prices again to pay for the higher wages, and so on
-This situation can spiral out of control and lead to hyperinflation

-Deflation is a general decrease in the cost of goods and services

-When an economy produces more goods than people want, it has to lower prices and cut
production

National Dept
-When the government spends more on programs than it collects in taxes, the difference
in the amount is called the budget deficit.
-If a nation spends less than its income, it has a budget surplus
-The government will probably use a surplus to:
* cut taxes
* reduce the national dept
* increase spending for certain programs

-The total amount of money a government owes is its national dept

-It the dept gets too large, a nation can become dependent on other nations or unable to
borrow any more money.