Transcript Ch2 - Economic Resources and Systems

Chapter
2
Economic Resources
and Systems
Mr. Manning
pp. 20-35
LEARNING OBJECTIVES
After completing this chapter, you’ll
be able to:
1. Explain how scarcity requires
individuals and nations to make
decision about resources.
2. Describe the four factors of
production.
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WHAT IS ECONOMICS?
• Economics studies how society
chooses to use resources to
produce goods and services (G&S)
for people’s consumption
• Scarcity – occurs when there is a
shortage of resources
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Slide 3
ECONOMIC RESOURCES
4 FACTORS OF PRODUCTION
1) Natural Resources
2) Labor Resources
3) Capital Resources
4) Entrepreneurial Resources
Examples: (1) wheat that grows, (3)
tractor to harvest it, (2) labor to turn it
into flour
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1) NATURAL RESOURCES
• Raw materials found in nature, used
to produce goods
• Renewable resources - wheat and
cattle; can be reproduced
• Nonrenewable resources – limited;
coal, iron, and oil
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1) …NATURAL RESOURCES
• The economy of many countries is
based on their natural resources
Examples:
– Saudi Arabia – oil
– Latin America – coffee
– Japan – limited resources, get them
elsewhere, trade technology
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2) LABOR RESOURCES
• Knowledge, efforts, and skills
people bring to their work
• Labor can be skilled or unskilled,
physical or intellectual
• One of the biggest problems facing
many nations today is a shortage of
SKILLED labor
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3) CAPITAL RESOURCES
• Things used to produce goods and
services, like buildings, materials,
and equipment.
• As the wants and needs of people
change, so do the needs for capital
resources.
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??????????????????????
• The economy of many countries is based on
what?
– Their natural resources.
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4) ENTREPRENEURIAL
•
Entrepreneur – a person who recognizes a
business opportunity and assumes the risks
of starting a business
•
Entrepreneurs improve on ways to use
resources, or create and produce new ones
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4) …ENTREPRENEURIAL
A key to dealing with scarcity is to
develop new resources and
technologies.
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???????????????????????
•
What are the four factors of production?
1.
2.
3.
4.
Natural Resources
Labor Resources
Capital Resources
Entrepreneurial Resources
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Slide 12
HOMEWORK
• Rd. Pages 27-31
• Review questions 1-3
Chapter 2 - Economic Resources and Systems
Slide 13
LEARNING OBJECTIVES
After completing this chapter, you’ll
be able to:
1. Identify the differences between
market and command economies.
2. Describe the 3 basic economic
questions every country must
answer.
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Slide 14
????????????????????
• How can countries deal with the issue of
scarcity (think entrepreneurial resources)?
– By developing new resources and technologies
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3 ECONOMIC QUESTIONS
1) What should be produced?
2) How should it be produced?
3) Who should share in what is
produced? (Who gets the goods?)
A society answers these questions to
help decide what to do with their
resources
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1) What Should Be Produced?
Deciding to use a resource for one purpose means giving
up the opportunity to use it for something else
(tradeoff or opportunity cost)
2) How should it be produced
“Goods” depend on…
1) HOW goods are to be produced
2) QUANTITY of available resources
A Society must also ask:
• What methods will be used? How many people will
work on the
production? What will be the quality of the items
produced?
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3) Who Should Share in What Is Produced?
“people can’t get everything that they want
because society doesn’t have enough
resources”
Most societies - people can have as many
goods and services as they can afford to
buy
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??????????????????????
•
What are the three economic questions
that every society must ask itself?
1. What should be produced?
2. How should it be produced?
3. Who should share in what is produced?
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TYPES OF ECONOMIC SYSTEMS
• Every nation needs an “economic
system” to use its resources effectively
• Goal of an economic system - provide
people with a minimum standard of
living, or quality of life
2 Basic Opposing Systems:
Market Economy vs. Command Economy
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Market Economy (Capitalism)
• Market Economy (aka Capitalism) –
resources are privately owned
• You can own your own home, land,
own business
• Government control is minimal, their
role is to SUPPORT (Ex: remove trade
barriers)
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Market Economy (Capitalism)
• Economic decisions are made in the
marketplace according to the laws of
supply and demand
• Price - amount of money given
or asked for when G&S are
bought or sold
Lower the price = more bought
Higher the price = fewer bought
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Market Economy (Capitalism)
• Supply - amount of G&S that
producers will provide at various prices
• Demand - amount or quantity of G&S
that consumers are willing to buy at
various prices
• Equilibrium Price - When the quantity
demanded equals the quantity supplied
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Market Economy (Capitalism)
The demand curve always falls left to right on a graph
The supply curve always rises from left to right on the graph.
How many CDs will be demanded
at $16 a piece?
Chapter 2 - Economic Resources and Systems
How many CDs will be supplied
at $18 a piece?
Slide 24
Market Economy (Capitalism)
Supply and Demand Curve
PRICE
$
QUANTITY
#
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Market Economy (Capitalism)
• offers incentives (competition, profit) to
produce more
• constant demand for new G&S
encourages entrepreneurship
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Market Economy (Capitalism)
• owners and producers reap the most
rewards
• unskilled workers and older adults are
often unable to afford basic needs such
as health care
• companies can join forces to control
the supply of products and manipulate
prices
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Market Economy (Capitalism)
• Profit motive can become an end in
itself rather than a means to improve the
good for all
What do you think are some examples
of countries that have a Market
Economy?
Examples: U.S. and JAPAN
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???????????????????
• What is the point called where supply meets
demand?
– The equilibrium price
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Command Economy
• Command economy - a “central
authority” makes the key economic
decisions, also called a planned or
managed economy
2 Types
COMMUNISM vs.
SOCIALISM
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Slide 30
Command Economy
• COMMUNISM – (strong command
economy) the state makes all the
economic decisions
Example: China, Cuba, Africa, Latin America
• SOCIALISM – (moderate command
economy) there is some form of
private enterprise
Example: France, Sweden
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Command Economy
• guarantees everyone an equal
standard of living
• there is little choice of what to buy,
state provides everything
• no incentive for entrepreneurship
when you can’t run your own business
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Mixed Economy
Mixed Economy - combination of a
Market and Command economy
• The State takes care of people’s
needs while the marketplace takes
care of people’s wants
Example: U.S. 
• Gov – Defense & Education
• Marketplace – Cars, Computers, Fast Food
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Graphic Organizer
Graphic
Organizer
Basic
Economic
Questions
MARKET ECONOMY
Economic decisions are made in the marketplace
according to the laws of supply and demand.
MIXED
ECONOMY
Combination
market and
command
economy.
What should
be produced?
How should it
be produced?
Who should
share in
what is
produced?
COMMAND ECONOMY
Government makes all key economic decisions.
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????????????????????????
• What are the two types of command
economies?
– Socialism and Communism
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HOMEWORK
• PG. 32
#2-5
Chapter 2 - Economic Resources and Systems
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Questions to Study for the Quiz
1. What is an economic system?
2. What is the difference between a market
economy and a command economy?
3. What are the advantages and disadvantages of
a command economy and a market economy?
4. What are some examples of renewable and
nonrenewable resources?
5. In a command economy, how might a limit on
the availability of corn affect the people?
6. Knowing the Vocabulary/Key Words.
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End of Chapter
2
Economic Resources and Systems