Transcript I am at my wit’s end.

ECONOMICS
Scarcity
 A word economists use to describe the
conflict between people’s desires and
limited resources.
 The foundation for all economics.
Economic systems
• Describes how a country’s economy is
organized
• Every country, rich or poor, has an
economic system
• Every country has a scarcity of productive
resources (natural resources, labor
resources, and capital resources)
• Need an economic system to determine
how to use their productive resources
Three basic questions
 All economic systems must answer 3
basic questions:
1. What to produce?
2. How to produce?
3. For whom to produce?
Economic Systems
 Market System – Citizens and
businesses make most economic
decisions. Government plays a limited
role.
 Ex. U.S., Canada, Mexico, U.K.
 Command System – Government
decides how many of which goods are
produced and sets the price.
 Ex. Communist governments (North Korea
and Cuba).
Economic Systems cont.
 Traditional System – social roles and culture
determine how goods and services are
produced, what prices and individual incomes
are, and which consumers are allowed to buy
certain goods.
 Ex. Family’s status may determine whether they can
own a tractor.
Mixed economy
 No country has a pure economic system
 Most are mixed economies, although they
are closer to one type of economic system
than another
Economic Systems
Pure
Command
Pure
Market
United Kingdom
79%
Russia
51%
Pure
Command
Germany
71%
Pure
Market
Gross Domestic Product
 GDP – gross domestic product – tells the
total value of the goods and services that
a country produces each year. This is one
way to measure a country’s economy.
 https://www.cia.gov/library/publications/the
-world-factbook/rankorder/2004rank.html
Four Factors of Production
 Natural Resources – raw materials such as
land, water, forests, and minerals.
 Labor Resources – workers with skills and
experience to make goods or provide services.
 Capital Resources – machines, factories, and
supplies
 Entrepreneurs – People who bring natural
resources, labor resources, and capital
resources together to produce goods and
services.
Factors of Production for a Music CD
Entrepreneur
(owner of recording
studio and factory)
Labor Resources
(musicians, sound technicians,
producer, factory manager,
factory workers)
Natural Resources
(materials to
manufacture CDs)
Music CD
Capital Resources
(recording equipment, studio,
factory and manufacturing
equipment)
What to
produce?
How to produce? For whom to
produce?
United Kingdom
Largely service
based – also
agriculture
Industries have
much freedom
Private sector
produces goods
and services for
domestic and
international
markets
Germany
Primarily exportbased;
manufacturing
Largely private
businesses –
increasing amount
of government
involvement (E
Germany still
behind)
Exports for global
markets, W
Germany still
sends billions of
dollars to E
Germany to help
them catch up
Russia
Russian govt is
still largely
involved and has
to approve some
deals
Difficult to make
large scale
changes;
modernization is
slow in agriculture
and factories
Low tax rates but
high tariffs and
minimal prot