Transcript CHAPTER 2 Our Global Economy

CHAPTER
2
Our Global Economy
2-1
2-2
2-3
2-4
2-5
Economics and Decision Making
Basics of Economics
Economic Systems
Achieving Economic Development
Resources Satisfy Needs
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LESSON 2-1
Economics and Decision Making
GOALS
 Describe the basic economic
problem.
 List the steps of the decisionmaking process.
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The Basic Economic Problem
 Scarcity refers to the limited resources
available to satisfy the unlimited needs
and wants of people.
 Economics is the study of how people
choose to use limited resources to satisfy
their unlimited needs and wants.
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Making Economic Decisions
 Coping with scarcity
 Making choices
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The Decision-Making Process
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LESSON 2-2
Basics of Economics
GOALS
 Describe how the market sets
prices.
 Explain the causes of inflation.
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Price-Setting Activities
 Supply is the relationship between the amount
of a good or service that businesses are willing
and able to make available and the price.
 Demand is the relationship between the amount
of a good or service that consumers are willing
and able to purchase and the price.
 Market price is the point at which supply and
demand cross.
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Market Price Is Set by Supply and
Demand
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Changing Prices
 Inflation
 Demand-pull inflation
 Cost-push inflation
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LESSON 2-3
Economic Systems
GOALS
 Name the three main factors of
production.
 Understand how different countries
make economic decisions.
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Economic Resources Satisfy Needs
 Natural resources
 Human resources
 Capital resources
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Natural Resources
 Also known as land, these resources are
the raw materials that come from the
earth, from the water, and from the air. Iron
ore, gold, silver, agricultural products,
rivers, and oxygen are examples of natural
resources.
 These items are used in the production of
goods and services consumed by
individuals, businesses, and governments.
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Human Resources
 Also known as labor, these resources are
the people who work to create goods and
services.
 While technology has changed or
eliminated certain tasks previously
performed by people, new types of work
are continually being created.
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Capital Resources
 Also called capital, these resources
include buildings, money, equipment, and
factories used in the production process.
 These items are expensive and are used
over several years by business
organizations.
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Economic System
The economic choices
of a country relate to
three basic questions:
1. What goods and
services are to be
produced?
2. How should the
goods and services
be produced?
3. For whom should the
goods and services
be produced?
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Types of Economic Systems
 Command Economies
 Market Economies
 Private property
 Profit motive
 Free, competitive marketplace
 Mixed Economies
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LESSON 2-4
Achieving Economic Development
GOALS
 Describe the factors that affect
economic development.
 Identify the different levels of
economic development.
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Development Factors
 Literacy level
 Technology
 Agricultural dependency
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Types of Development
 Industrialized countries
 Less-developed countries
 Developing countries
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Levels of Economic Development
LessDeveloped
Country
 Low literacy
 Limited
technology
 Agricultural or
mining
economy
Developing
Country
Industrialized
Country
 Improving
literacy
 Improving
technology
 Decreasing
dependence
on agriculture
or mining
 High literacy
 Modern
technology
 Industrial
economy
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LESSON 2-5
Resources Satisfy Needs
GOALS
 Discuss economic principles that
explain the need for international
trade.
 Identify various measures of
economic progress and
development.
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The Economics of Foreign Trade
 Absolute advantage exists when a
country can produce a good or service at a
lower cost than other countries.
 Comparative advantage exists when a
country can produce a good or service
with more efficiency than other countries.
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Measuring Economic Progress
 Measure of Production
 Gross domestic product (GDP)
 Gross national product (GNP)
 International Trade Activity
 Balance of trade
 Foreign exchange rate
 Foreign debt
 Other Economic Measurements
 Consumer price index (CPI)
 Unemployment rate
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