Personal Finance Basic Economic Principles

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Basic economic principles

Basic economic principles

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  • 1. Personal Finance Basic Economic Principles
  • 2. Needs – things that are necessary for survival FOOD CLOTHES HOUSING
  • 3. Wants – things not necessary for survival but that add comfort and pleasure to our lives
  • 4.
    • Goods (also known as products) – things you can see and touch.
    • Examples?
  • 5.
    • Personal resources – time, money, skills we use to satisfy our wants
    • Economic resources – the means through which goods and services are produced
    • Natural resources – raw materials supplied by nature
  • 6.
    • Human resources (also called labor) -
    • people who work to produce goods and services.
    • Capital resources (or capital) – the tools, equipment, and buildings that are used to produce goods and services
  • 7. The basic economic problem is SCARCITY This means we have limited resources but unlimited wants.
  • 8.
    • You have to make a choice. You have $20 and have been invited to a movie with a friend but you also want to buy a new cd of your favorite group. You are also trying to save for ski trip during Christmas break.
    • What do you do?
    • Opportunity Cost:
    • The next best alternative – what a person gives up to get something.
  • 9. Decision-Making Process PACED Method
    • Identify P roblem.
    • List A lternatives (choices).
    • Select the C riteria that is most important to consider.
    • E valuate the options compared to the criteria.
    • Make a D ecision.
  • 10.