Business Chapter1

Economic Decisions

Chapter 1

Economics

• Economics- a science that studies the production, distribution, and consumption of goods and services.

Needs

• Needs – things that are necessary for survival Food & Water Clothing Shelter

Wants

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

Worksheets

• Hand out the worksheet Is it a want or a need?

Unlimited Wants

• Unlimited Wants - Wants that never end• Iowa Falls Alden High School

If we had all the money we wanted to spend for our school, what things we would like to have? Every student gets a laptop computer, Bowling alley

for PE, Outback Steak House for lunch, etc. In your notes, make a list of at least 10 things

that we don’t have at school that you would like to have at school.

WORKSHEET

• Hand out Needs and Wants Math Problems Go over it together as a class There will be a quiz over this on Friday

Every Friday there will be a QUIZ

Needs & Wants

How do people satisfy their wants and needs?

Answer

• People satisfy their wants and needs by purchasing and consuming goods and services.

Goods

• Goods – things you can see and touch Name some products

Desks Cars Etc.

Name Goods

• In your notes, write down 10 different goods.

Iowa Falls Business

• Write down the following in your notes

• Name 4 businesses in Iowa Falls or other local towns that makes a good Example - Frigidaire in Webster City

makes washers & dryers.

Services

• Services - things that satisfy our wants through the efforts of other people or equipment

• Example of some occupations: Doctors Waiters Barber/Beautician Attorneys

Services

• In your notes, write down 10 other jobs that provide a service.

Iowa Falls Business

• Name 4 businesses in Iowa Falls that provides a service.

Worksheet

• The first part Good or a Service

Economic Resources

• Economic Resources / Factors of Production – the means through which goods and services are produced.

• What is needed to make something we use. All three of these resources are necessary.

#1 Natural Resources - land #2 Humans Resources - labor #3 Capital Resources - capital

Economic Resource #1

• Natural Resources or Land– raw materials supplied by nature Example:

Farmland – Iowa $5,000 - $6,000 an acre Water - drinkable Clean air Gold Trees

In your notes, write down 5 more examples of what a natural resource is

Countries

• Go to www.google.com using Fire fox Chose Maps

Chose one country from• Europe• Asia• South America• Africa

Write them on a piece of paper and give them to me

Internet - Country Research

• Go to www.cia.gov Draw to find out which two countries to research

Research information on them• Agricultural products• Economics• Government• Demographics• Etc.

Fill out the worksheet

Power Point of Countries

• Draw to find out which country you will research

• Explain the Power Point assignment

Economic Resource # 2

• Human resources or Labor– people who work to produce goods and services. Unemployment rate is 9.7% - National Unemployment rate is 6.2% - Iowa Farmers Computer programmer Bank tellers Firemen

What Determines Amount of Wages Jobs Pay?

1. The higher the level of education, the more money you will make.

2. Those with natural ability, can command a higher wage because not many people have this ability. (such as concert musicians and professional athletes)

How much money?

3. Employers will often pay higher wages to entice workers to accept positions with unpleasant aspects, such as midnight shifts, dangerous work, etc.

4. Wages will often differ based on the cost of living in different cities; for example, the cost of living in California is higher than the cost of living in Indiana, so wages in general in California will be higher than those in Indiana.

Economic Resource #3

• Capital Resources or Capital – tools, equipment and buildings that are used to produce goods and services Examples: factories computers delivery trucks MONEY

• In your notes list 5 more examples of what a capital resource is.

Money is Considered a Capital Resource

• Example – Sue is trying to raise $40,000 to expand her store. Sue needs capital. She can get money several ways.

Loan from a bank - capital Her own money - capital Ask investors for money - capital

Worksheet

• 2nd part of the Goods and Services worksheet

Scarcity

• Scarcity is the conflict between unlimited wants and limited resources. This is the basic economic problem The government does not have enough

money to fix all the bridges that need fixing.

Think of our Government• List 5 examples of scarcity that our government

faces everyday

Scarcity of Basic Needs

• 15% of the people in this world do NOT get their basic needs met. 3rd world countries are under developed

countries• Kenya, Sudan, Ethiopia

Of the world’s 6 billion people, more than 1.2 billion live on less than $1 a day.

continued

Now, the world has 6.7 billion people1. China - 1.3 billion2. India - 1.1 billion3. U.S. - 307 million

• In 2040, it is predicted there will be 9 billion people in the world

Trade-Off

• Trade off - Giving up something to have something else you want

• If your parents gave you $100 for your birthday, and you spent it all on a new pair of shoes, what was your trade off? Example - no money to go to the movies

this month List 3 in your notes

Opportunity Cost

• Opportunity Cost - The value of any alternative that you give up when you buy something else or make another choice Example: You want the 2010 Madden football

video game and concert tickets to Dave Mathews Band. You chose the video game. Part of the “cost” of the video game is now you don’t have enough money to go to the concert. That is your opportunity cost.

Economic Systems

• Economic Systems - a nation’s plan for answering the three economic questions.

1. What goods and services will be produced?

2. How will the goods and services be produced?

3. What needs and wants will be satisfied with the goods and services produced?

Command Economy

• Command Economy - the resources are owned and controlled by the government

• Example: China Saudi Arabia Vietnam

Market Economy

• Market economy - the resources are owned and controlled by the people of the country.

• Example No country has a true market economy All countries have involvement of the

government

Mixed Economy

• Mixed economy combines elements of the command and market economies.

• Examples United States Canada Japan Italy United Kingdom

Traditional Economy

• Traditional Economy - goods and services are produced the way it has always been done.

• Examples Not any true traditional India is close

United State’s Economy

1. Mixed Economy2. We have the largest GDP in the world.

1. (we produce the most goods & services)

3. Capitalism- private ownership of resources by people (not government)

4. Free Enterprise Private enterprise - we can start and own

a business if we want.

Private Property

• The right of private property is you can own anything you want and decide what you want to do with it, as long as it does not violate the law.

Profit

• Profit is the money left from sales after all of the costs of operating a business have been paid.

Competition

• Competition if the rivalry among businesses to sell their goods and services.

Consumer

• Consumer - A person who buys and uses goods and services.

Producers

• Producers are individuals and organizations that determine what products and services will be available for sale.

Demand

• Demand is the quantity of a good or service that consumers are willing and able to buy.

Supply

• Supply refers to the quantity of a good or service that businesses are willing and able to provide.

MARKET ECONOMY

• MARKET ECONOMY Consumers set demand Producers establish supply

DEMAND AND SUPPLY

Checkpoint >>

How does the price of a product affect demand and supply?

Answer

• As prices decrease, the number of consumers willing and able to purchase the product (demand) will increase.

• As prices increase, businesses will be willing to supply larger quantities of the product.

MARKET PRICE

Checkpoint >>

How is the market price for a product determined?

Answer

• Supply, demand, and competition determine the market price for a product or service.

• The market price is the point at which supply and demand are equal.

Market Price

• Market price is the point where supply and demand are equal.

Decision Making - 6 steps

Define the ProblemList your opportunitiesDefine your

AdvantagesDisadvantages

Make your decisionAct on your decisionReview your decision

Decision Making Worksheet

• Define the problem What are you going to do after you

graduate high school?

Example

• The problem - You were driving your car too fast and you got a ticket for speeding. Now your parents are considering not letting drive anymore.

High Price of Gas

• Why is the price of gas high?1. Scarcity

The world consumes more oil than we produce

We have oil in Alaska and California but we are not allowed to drill because the land is protected by the Government for environmental purposes.

2. Hurricanes shut down refineries

Volatile Gas Prices

• July 2008 $147 a barrel for oil Gallon of gas $4.14

• October 2008 $74 a barrel of oil Gallon gas $2.75

• Why? U.S. consumers have changed their

driving habits U.S. may be headed toward a recession

Future

• Analysts say OPEC countries have been alarmed by falling oil prices and want a production cut to prop up prices - cut the supply of oil by 1- 2 million barrels a day.

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Price of Gas Around the World

• Assignment Sheet How much does a gallon cost in different

countries and in different states in the United States.

Oil Production

Which countries produce the most oil?1. Saudi Arabia - 11 million2. Russia - 10 million3. United States - 8 million4. Iran - 4 million5. Mexico - 3 million6. China - 3 million7. Canada - 3 million

Oil Consumption

Which country uses the most oil? (barrels a day)

1. United States - 21 million2. European Union - 15 million3. China - 7 million4. Japan - 5 million5. Russia - 3 million

United States

• We produce 8 million barrels a day• We consume 21 million barrels a day

• We make 3% of the world’s oil• We use 25% of the world’s oil

OPEC

• OPEC Organization of the Petroleum Exporting Countries

Saudi Arabia, Iraq, Iran, Venezuela, Kuwait, Algeria, Nigeria, Ecuador, Qatar, Libya, and Angola

They produce 35.6% of the world’s oil They control the supply of oil

They cut back the supply

Chapter 2

• Measuring Economic Activity

GDP

• GDP -Gross Domestic Product is the total dollar value of all final goods and services produced in a year.

GDP spending

1. Consumer spending2. Business spending3. Government spending4. Exports - imports to other countries

GDP

• Only final goods• If GDP increases, the country’s

economy is growing and is healthy

GDP per capita (person)

• United States is $43,000• China is $7,600• Iraq is $4,000• Norway is $57,500• India is $3,700• Canada is $35,200• Mexico is $10,600• Italy is $31,000• Liechtenstein is $118,000• Zimbabwe is $200

GDP per capita

• Generally people living in countries with higher GDP per capita tend to More things - TV’s, houses, cars Quality of life have longer life expectancies higher literacy rates better access to safe water

USA’s GDP

• Economic Report GDP is down -3.8%

2007 - $48,000 GDP per capita 2008 - $46,176 GDP per capita

Unemployment Rate

• The unemployment rate is the portion of people in the labor force who are not working.

• National Rate - 9.7%• Iowa Rate - 6.4%

Why does unemployment happen?• There is reduced demand for the

goods and services being provied by various workers.

• Example If not very many people take the bus,

bus drivers will be laid off.

WHY UNEMPLOYMENT

Personal Income

• Personal income refers to salaries and wages as well as investment income and government payments.

• This is the amount you report on your individual tax return.

Retail Sales

• Retail sales is the sales of durable and nondurable goods bought by consumers.

• Durable goods• Non-durable goods

Business Cycle

• Business cycle is the movement of the economy from one condition to another and back again.

Prosperity

Prosperity is a period in which 1. most people who want to work are

working2. Businesses produce goods and

services in record numbers3. Wages are good4. Rate of GDP growth increases

Recession

Recession is a period which1. Demand begins to decrease2. Businesses lowers production3. Unemployment begins to rise4. GDP growth slows for 2 quarters

Depression

Depression is a phase1. High unemployment2. Weak consumer sales3. Business failures

Great Depression

• 1930 - 1940• 25% unemployment• What caused it?

Banks failed The Stock market crashed

October 29,1929

Recovery

Recovery is when1. Unemployment begins to decrease2. Demand for goods and services

increase3. GDP begins to rise again

Inflation

Inflation is an increase in the general level of prices.

• Causes1. Demand for goods are greater than

the supply

Deflation

• Deflation is an decrease in the general level of prices.

Interest Rates

• Interest Rates is the cost of using someone else’s money.

• CD rate - CD’s at the bank• Mortgage rate - your mortgage on

your house• Bond rate - your rate on bonds

Simple Interest

• Worksheet on simple interest

Investmensts

• Stocks - respresents ownership in a corporation.

• Bonds - represents debt for an organization

Government Debt

• Budget Surplus - spend less than they take in (taxes)

• Budget Deficit - spend more than they take in (taxes)

• National Debt - total amount the government owes

Other kinds of debt

• Business debt - loans they have, bonds they have issued, and mortgages on property

• Consumer debt - Mortgages on homes Credit card debt Car loans All other debt

National Debt

What is our national debt? http://www.brillig.com/debt_clock/

• February 2, 2009 $10,638,683,056,845.69 Over 10 trillion dollars

Goes up around $80,000 every second

• The estimated population of the United States is 304,687,566

• so each citizen's share of this debt is $31,752.01.

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Which states produce the most oil?

Louisiana TexasCaliforniaAlaska

Iowa does not produce any oil

What is Petroleum?

• Liquid that is found underground It can thick and black as tar It can be thin as water

• Also called oil Decomposition or the remains of plants and

animal life A fossil fuel Takes millions of year to make It’s Non-renewable

• Takes millions of years to form

• To use it, it must be refined

Uses of Petroleum

What is petroleum made into? Gasoline - cars Diesel - trucks and tractors Natural Gas - heat our homes

• Propane• Kerosene

Fertilizers and pesticides Plastics

• Toys, pop bottles, car fenders• Phones, CD’s, computers

Paint

More products

Health products• Aspirin, bandages, contact lenses

Sports equipment• Basketball and footballs

Medicines Soaps Inks

Problems with Oil

• Damages the environment Air pollution

Produces carbon dioxide Contributes to global warming

Pollutes soil and water Oil spills can kills fish Refineries smell Refineries are loud

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Refineries

• Refinery is a plant where crude oil is processed and refined into more useful petroleum products

• Raw or unprocessed crude oil is not useful in the form it comes in out of the ground.



Trans-Alaska Pipeline




Alaska Pipeline

• Built in 1977• 800 miles long• Starts at the oil fields in the North

Slope and Artic Ocean• Moves oil to Valdez, Alaska

South, in the Gulf of Alaska At Valdez, Alaska oil is shipped to

refineries off the California coast

Alternative Energy

• Renewable Resource A natural resource qualifies as a

renewable resource if it is replenished by natural processes

• Reduces Our Dependence on Coal and Oil



Solar

Solar power is the energy derived directly from the sun. Converts sunlight into electricity.

Advantages• very abundant• Fastest growing type of alternative

energy• Generates no waste

Ethanol

Alcohol derived from corn, sugar cane, switch grass

Advantages• It’s renewable resource• We grow it in the U.S.• Burns cleaner than oil


Bodies

• Biodiesel is a fuel for diesel trucks, cars, buses and tractors. It is usually made from soybeans.

• Advantages It keeps our air cleaner Helps stop global warming It’s renewable It smells like french fries





Wind Power

Wind Power is the conversion of wind energy into a useful form, such as electricity, using wind turbines.

AdvantagesWind is freeDoesn’t polluteDoesn’t take up a lot of space

Hydropower

• Hydropower, hydraulic power or water power is power that is derived from the force or energy of moving water, which may be harnessed for useful purposes.

• Advantages• Dams a river• Lasts a long time• Hoover Dam



Conserve Oil

•Whenever possible, walk or bike•Carpool or take the bus•When you next buy a car, choose one that gets good mileage. •Reduce the amount of waste you produce by buying minimally packaged goods,•Insulate your walls and ceilings.•Modernize your windows.•Select the most energy-efficient models when you replace your old appliances.•Be careful not to overheat or overcool rooms

Drill in Alaska?

• ANWR - Arctic National Wildlife Refuge in Alaska’s North Slope

• Before drilling for oil can happen, congress has to approve it Why?

Federal land Preserved wildlife area



Free Market Economy

• Tends to supply what is demanded.• Consumers dictate what and how

much producers make.

Command Economy

• The government makes the economic decisions for the country.

Money

• Is referred to as the medium of exchange.

Economics

• Watch video of macro economics

Research a Career

• Choose 2 careers you may be interested in.

• Research the Career Occupation Outlook Handbook http://www.bls.gov/OCO/

• Fill out the worksheet

Entrepreneurship

• Entrepreneurship is the process of starting, organizing, managing, and assuming the responsibility for a business. Examples

Business Owners- doctors, insurance sales people,

Management – principals, bosses, shift managers, etc.

Entrepreneur

• Someone who takes a risk and start a new business.

• Bill Gates - Microsoft• Who are some others?• In your notes, list 3 other

entrepreneurs.

Entrepreneur

• Think of something you like to do You can sell a good

Bake cookies, cater meals, open a restaurant Take pictures Sell books, video games, surfboards, skis, bikes, TV’s, toys,

dogs, shoes, clothes, You can provide a service.

Fixing cars Open a gym Baby-sit You can be a band that plays music Cut hair, give manicures,

New Business

• You are going to start your own business doing something you like to do.

• You are going to be an entrepreneur.

What has Bill Gates done?

• The Bill and Melinda Gates Foundation pays for children’s immunizations all over the world.

• Results In 1960, the death rate of children was

20 million a year In 2007, the death rate of children was

10 million a year

continued

• Tobacco has become the world’s leading cause of death. 14,000 people die everyday from smoking

tobacco

• Global effort to reduce tobacco use has started. Bill & Melinda Gates have donated $125

million dollars.

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Business Chapter1

Education