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Personal Finance Basic Economic Principles

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Debbie Block

The document outlines some basic economic principles including the differences between needs and wants, the types of resources used to produce goods and services, and the concept of scarcity. It also defines opportunity cost as the next best alternative given up when making a choice. Finally, it introduces the PACED method for decision making which involves identifying a problem, listing alternatives, selecting evaluation criteria, evaluating options against the criteria, and making a decision.

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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?
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
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.
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.
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Personal Finance Basic Economic Principles

  • 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. 油