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POBF 1.01: Economic Systems

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POBF 1.01: Economic Systems

  1. 1. Understand the Role of Business in the Global Economy. Unit 1: Economic Systems 1
  2. 2. Understand Economic Systems. Unit 1: Economic Systems 2
  3. 3.  What is Economics? Satisfying needs and wants Basic economic problem Six steps of economic decision-making Main types for economic systems Market economy self-regulating principles Unit 1: Economic Systems 3
  4. 4.  What is Economics? Satisfying needs and wants Unit 1: Economic Systems 4
  5. 5. Unit 1: Economic Systems 5
  6. 6. Classical Definition…“Economics is the science thatdeals with the production,distribution, and consumptionof goods and services, or thematerial welfare of humankind”.(Dictionary.com, 2012) Unit 1: Economic Systems 6
  7. 7. Casual Definition…“Economics is the study ofchoice under scarcity”. Unit 1: Economic Systems 7
  8. 8. Mr. Cox’s Definition…“Making choices based on thelimited supply of products tosatisfy unlimited desires”. What is YOUR definition of economics? Unit 1: Economic Systems 8
  9. 9. Really, though it’s about answering questions that often have few easy answers.What happens when oil eventually runs out?Why can’t I just get a scholarship to go to college?Why can’t the unemployed just get jobs?Why do people get so excited about interest rate changes?Why do things cost so much more than they did for our grandparents?Why do I have to buy an operating system from so few companies?Why is the price of a plane ticket so much LESS on Tuesdays? Unit 1: Economic Systems 9
  10. 10. SatisfyingNeeds and Wants Unit 1: Economic Systems 10
  11. 11. What are needs?What are wants? Unit 1: Economic Systems 11
  12. 12. Unit 1: Economic Systems 12
  13. 13. Unit 1: Economic Systems 13
  14. 14. What are goods?What are services?The United States economy is thelargest producer of goods andservices inthe world. Unit 1: Economic Systems 14
  15. 15.  How do businesses use economic resources to produce goods and services? The types of economic resources are: ◦ Natural ◦ Human ◦ Capital Unit 1: Economic Systems 15
  16. 16.  What are natural  What are human resources? resources? Many natural resources are nonrenewable. Unit 1: Economic Systems 16
  17. 17. What are capital resources? Unit 1: Economic Systems 17
  18. 18.  What is the basic economic problem? What is scarcity? Unit 1: Economic Systems 18
  19. 19. For example…When oil is processed into heating oil there is less available to be used in making gasoline. This can affect the price of gasoline since the supply of crude oil (oil that has not been processed) available is more scare. Unit 1: Economic Systems 19
  20. 20.  What is the purpose of economic decision- making? What happens to choices in a tradeoff? What is opportunity cost ? Unit 1: Economic Systems 20
  21. 21. Tomorrow…The Basic Economic ProblemEconomic Decision-MakingProcess Unit 1: Economic Systems 21
  22. 22.  The basic economic problem Six steps of economic decision-making Unit 1: Economic Systems 22
  23. 23.  What are needs ? What are wants ? What is scarcity ? Unit 1: Economic Systems 23
  24. 24. Unit 1: Economic Systems 24
  25. 25. How to satisfy ourUNLIMITED wants and needs withLIMITED resources. Unit 1: Economic Systems 25
  26. 26. Part One:No matter what wehave we ALWAYS wantmore (or better). Unit 1: Economic Systems 26
  27. 27. Regular Cell Phone Smart Phone Unit 1: Economic Systems 27
  28. 28. Part Two:However…there is aLIMITED amount ofresources to satisfy ourwants/needs. Unit 1: Economic Systems 28
  29. 29. Lumber Forests Unit 1: Economic Systems 29
  30. 30. So…choices mustbe made to handlethese resourcesEFFICIENTLY. Unit 1: Economic Systems 30
  31. 31. The difference in the choicesmade are called OPPORTUNITYCOSTS or TRADE-OFF’s.Opportunity costs exist when youcan’t do (or have) somethingbecause of the choice you made. Unit 1: Economic Systems 31
  32. 32. Unit 1: Economic Systems 32
  33. 33.  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 Unit 1: Economic Systems 33
  34. 34. Economic Decision-Makingcontinued Unit 1: Economic Systems 34
  35. 35. Try to solve a problemProblem: Adjust the foundation of a houseChoices: 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? Unit 1: Economic Systems 35
  36. 36.  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 Unit 1: Economic Systems 36
  37. 37.  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. Unit 1: Economic Systems 37
  38. 38.  Main types for economic systems Market economy self- regulating principles Unit 1: Economic Systems 38
  39. 39. Tomorrow…Types of Economic SystemsMarket Economy Self-regulating Principles Unit 1: Economic Systems 39
  40. 40. Unit 1: Economic Systems 40
  41. 41. What are the three economicquestions that all economies must answer?o What to produce?o How to produce?o For whom to produce? Unit 1: Economic Systems 41
  42. 42.  What is an economic system? The main types of economic systems are: ◦ Command or Communist ◦ Market ◦ Traditional ◦ Mixed Unit 1: Economic Systems 42
  43. 43.  Who owns the resources in the main types of economic systems? o Command o Centered on family o Market o Government o Traditional o The people Who answers the economic questions? Unit 1: Economic Systems 43
  44. 44. Unit 1: Economic Systems 44
  45. 45. • What is capitalism?• What type of economic system does the United States have? Unit 1: Economic Systems 45
  46. 46. The four principles of U.S. economic system are:• Private property• Freedom of choice• Profit• Competition Unit 1: Economic Systems 46
  47. 47.  What is the role of consumers in a market economy? A consumer includes individuals, businesses, and government. Unit 1: Economic Systems 47
  48. 48. What is the role of producers in a marketeconomy? Unit 1: Economic Systems 48
  49. 49. The market economy is based on theprinciples 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? Unit 1: Economic Systems 49
  50. 50. Intro to Business, 6e, Thomson South-Western Unit 1: Economic Systems 50
  51. 51. Intro to Business, 6e, Thomson South-Western Unit 1: Economic Systems 51
  52. 52. Market (equilibrium) price is the pointwhere supply and demand are equal. Intro to Business, 6e, Thomson South-Western Unit 1: Economic Systems 52

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