Chapter 1: Basic Economic Concepts

Wants and needs determine what products and services businesses provide.
- $Wants$ are things that you do not have to have to survive, but would like to have.
- $Needs$ are things that you must have in order to survive.
- The basic needs of people include food, water, shelter, and clothing.
A group of people may share the same wants.
- A business may want an advanced computer system.
- Although these wants are shared, they are considered private wants
- Individual people also have private wants.
Public wants are wants that are widely shared by many people.
- Examples include highways, public libraries, and parks.
- Local, state, and federal governments satisfy public wants.
Businesses provide goods and services to satisfy wants and needs.
- $Goods$ are physical products.
- $Services$ are tasks that businesses perform for consumers.

The more money you make, the more goods or services you can buy.
However, few people have enough resources to satisfy all of their wants.
$Resources$ are items that people can use to make or obtain what they need or want.
- Resources limit the number of needs and wants people can satisfy.
To make the best use of limited resources, determine what your needs are and satisfy them first.

You can make the most of your resources by making the best choices about what to buy.
The decision-making process can help you make good choices.
- It helps you to identify and consider your various alternatives and their consequences before you make a final decision.

1. Identify the situation 2. Identify possible courses of action 3. Determine the pros and cons 4. Make a decision 5. Evaluate your decision

The longer a decision will affect your life, the more you need to evaluate your options and consider the possible consequences.
Businesses must make thoughtful decisions that are consistent with their goals.
Most companies allow managers to make routine decisions independently.
Higher-level business managers usually make more important decisions that affect the future of their companies.

$Business$ is any commercial activity that seeks profit by providing goods and services to others in exchange for money.
$Profit$ is the money left over after a business has paid the cost of providing its goods and services.
Businesses provide consumers and other businesses with necessities, such as food, clothing, housing, medical care, and transportation.
- Businesses also provide goods and services that make life easier and better.
For entrepreneurs, owning a business also offers an opportunity to earn a good living.
Profit is the reward for satisfying the needs and wants of consumers and businesses.
The wealth created by businesses benefits the entire community because businesses pay taxes and provide jobs.
Companies thrive on $competition$ , the contest between businesses to win customers.
- Competition is possible because companies have the freedom to produce the products they think will be the most profitable.
The result is that goods and services are produced and sold at the lowest possible cost.
For companies to successfully compete in the global economy, they must offer quality products with outstanding service at competitive prices.

Some business activities are:
- identify opportunities for products or services;
- evaluate the demand for products or services;
- obtain start-up money and operating capital;
- manage the production of goods and/or services;
- market the goods and/or services;
- keep records to satisfy government requirements and improve processes.
Some business activities should be supported by market research.
$Market research$ is the act of gathering and analyzing information about the wants, needs, and preferences of consumers in a certain market.
- Market research provides information that can help a business identify opportunities, analyze demand, and respond to consumer demand for goods and services.

A $consumer$ is a person who uses goods or services.
Businesses also affect consumers when they modify or discontinue products.
The decision to stop manufacturing products is often because there is a decreasing demand for them.
Businesses affect you as a wage earner.
Consumers also affect businesses.
Consumers decide what kinds of goods and services they want and where they will buy them.
To avoid failure, a business can modify its products, services, and business practices to satisfy consumers.