Personal Finance Basic Economic Principles

Needs – things that are necessary for survival FOOD CLOTHES HOUSING

Wants – things not necessary for survival but that add comfort and pleasure to our lives

Goods (also known as products) – things you can see and touch. Examples?

Goods (also known as products) – things you can see and touch.

Examples?

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

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

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

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

The basic economic problem is SCARCITY This means we have limited resources but unlimited wants.

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.

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.

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.

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.