Chapter 1

Economic Decisions

And

Systems

1-1 Satisfying Needs & Wants

• Goals:

–Explain the difference between needs & wants

–Distinguish between goods and services

–Describe the types of economic resources

Chapter 1 - Economic Decisions

*Needs Vs. Wants

Needs - Necessary for survival

i.e. food, shelter, clothes

Wants - Not necessary for survival - bring comfort

i.e. stereo, television, chewing gum

*Abraham Maslow’s Hierarchy of Needs

Self Actualization Esteem Social Safety

Physiological

Maslow’s Hierarchy of Needs

PHYSIOLOGICAL OR SURVIVAL NEEDS

MOST NEEDS HAVE TO DO WITHSURVIVAL PHYSICALLY AND

PSYCHOLOGICALLY

PHYSIOLOGICAL OR SURVIVAL NEEDS

SAFETY NEEDS

ON THE WHOLE AN INDIVIDUALCANNOT SATISFY ANY LEVELUNLESS NEEDS BELOW ARE

SATISFIED

Maslow’s Hierarchy of Needs

PHYSIOLOGICAL OR SURVIVAL NEEDS

SAFETY NEEDS

LOVE, AFFECTION, AND BELONGINGNESS NEEDS

Maslow’s Hierarchy of Needs

PHYSIOLOGICAL OR SURVIVAL NEEDS

SAFETY NEEDS

LOVE, AFFECTION, AND BELONGINGNESS NEEDS

ESTEEM NEEDS

Maslow’s Hierarchy of Needs

SELF-ACTUALIZATION

NEEDFOR

MASLOW EMPHASIZES NEED FOR SELF

ACTUALIZATION ISA HEALTHY INDIVIDUAL’S

PRIMEMOTIVATION

Maslow’s Hierarchy of Needs

Maslow’s Hierarchy of Needs

SELF-ACTUALIZATION

NEEDFOR

MASLOW EMPHASIZES NEED FOR SELF ACTUALIZATION IS

A HEALTHY INDIVIDUAL’S PRIMEMOTIVATION

SELF-ACTUALIZATION MEANS ACTUALIZING

ONE’S POTENTIAL BECOMING ALL ONE ISCAPABLE OF BECOMING

Maslow’s Hierarchy of Needs

PHYSIOLOGICAL OR SURVIVAL NEEDS

SAFETY NEEDS

LOVE, AFFECTION, AND BELONGINGNESS NEEDS

ESTEEM NEEDS

SELF-ACTUALIZATION

NEED

Goods & Services

• Goods - things you can see and touch = tangible– T-Shirts, football, CDs

• Services - Efforts provided by people, equipment, or technology– Haircut, movies in a theatre

• Economic Resources (Factors of Production) - The means through which goods and services are produced (3 types)

– Natural Resources - Raw materials supplied by nature• Iron ore, gold, water, fish, etc.

– Human Resources - People who work to produce goods and services • Laborers

– Capital Resources - Tools, equipment, buildings that are used to produce goods and services

• Factories, computers, trucks, etc.• Money $ $ $ (needed to run a business)

Key Concepts

• Pg. 11• Answer #1-5

Assignment• When you are done, research each resource

that is scarce…describe the resource, why it is scarce, and statistics related to that resource.– Natural – at least 2 slides w/ pics– Human – at least 2 slides w/ pics– Capital – at least 2 slides w/ pics

• PowerPoint – AT LEAST 6 slides• Include the site you used. Cite your source!

1-2 Economic Choices

• Goals:– Understand the basic economic problem

– Explain the steps in the decision-making process

The Basic Economic Problem

SCARCITY - THE BASIC ECONOMIC PROBLEM!PRIORITIZE!

• Scarcity – not having enough resources to satisfy every need– Forces us to make choices– Implement a budget

• Economic Decision Making – the process of choosing which wants, among several options, will be satisfied.

Choices, choices, choices

• Trade – 0ff – when you give up something to have something else…

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

– The benefit you get from your choice should be greater than the benefit from the next-best choice.• Businesses carefully calculate the opportunity

costs of decisions before making a decision about how money will be invested

Decision-Making Process• Six Steps

– 1. Define the Problem• What is the central issue?• Must be defined in order to make a decision that will lead

to a solution– 2. Identify Choices

• How many are there?• What is the opportunity cost?

– The forgone benefits. What you are giving up by choosing one situation over another. i.e. Movie vs.bowling. Movie wins, bowling is the opportunity cost.

– 3. Evaluate Choices• Look at the advantages and disadvantages of each

choice/alternative

Decisions, Decisions, Decisions

– 4. Choose One• The best one for the particular time

– 5. Act on Your Choice• Just do it!

– 6. Review/Evaluate Your Decision• Did you define the problem correctly?• Did you look at all the available choices?• Did you act at the necessary time?

Decisions, Decisions, Decisions• Share a decision with me that you had to make

over the weekend.• Describe, for each decision step, what

happened1. Define the issue/problem2. Identify choices. What choices were available to

you?3. Evaluate choices. What were the pros and cons of

each option?4. What did you choose to do (choose one)?5. Act on it – no explanation needed6. How did it go (evaluate the decision)?