Transcript Market Economy - cloudfront.net

Chapter
2
Economic Resources
and Systems
pp. 18-33
Chapter
2
Key Words
scarcity
factors of production
natural resources
human resources
capital resources
entrepreneurial
resources
economics
market economy
demand
supply
equilibrium price
command economy
mixed economy
Introduction to Business, Economic Resources and Systems
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Chapter
2
Factors of Production
A shortage of resources is called
scarcity.
A basic economic problem for any
society is how to manage its
resources.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Factors of Production
To meet the wants and needs of its
people, a society must produce goods
and services.
The means to produce them are called
economic resources, or factors of
production.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Natural Resources
•The raw materials found in nature are
called natural resources.
•Natural resources become factors of
production when we use them to produce
goods.
•The economy of many countries is based
on their natural resources.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Natural Resources
Some resources, like wheat and cattle,
are renewable. They can be
reproduced.
Other resources are limited, or
nonrenewable, like coal, iron, and oil.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Natural Resources
The amount of natural resources
available to a society has a direct
effect on its economy.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Human Resources
•The knowledge, efforts, and skills people bring
to their work are called human resources, or
labor.
•Labor can be skilled or unskilled, physical or
intellectual.
•One of the biggest problems facing many
nations today is not a shortage of labor but a
shortage of skilled labor.
Introduction to Business, Economic Resources and Systems
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2
Capital Resources
•Capital resources are the 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.
Introduction to Business, Economic Resources and Systems
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Entrepreneurial Resources
Meeting the changing wants and
needs of people requires
entrepreneurial resources.
Introduction to Business, Economic Resources and Systems
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Entrepreneurial Resources
Entrepreneurs improve on ways to use
resources, or create and produce new
ones.
A key to dealing with scarcity is to
develop new resources and
technologies.
Introduction to Business, Economic Resources and Systems
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Chapter
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Making Decisions About Production
No society has enough productive
resources available to produce
everything people want.
Every society must, therefore, make
choices.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Basic Economic Questions
Rules and regulations determine choices.
A society makes economic choices by
answering three economic questions:
• What should be produced?
• How should it be produced?
• Who should share in what is
produced?
Introduction to Business, Economic Resources and Systems
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Chapter
2
What Should Be Produced?
Deciding to use a resource for one
purpose means giving up the
opportunity to use it for something
else.
Introduction to Business, Economic Resources and Systems
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Chapter
2
How Should It Be Produced?
When a society decides what to
produce, it must also address other
types of questions, such as what
methods will be used, how many
people will work on the production,
and what will be the quality of the
items produced?
Introduction to Business, Economic Resources and Systems
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Chapter
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How Should It Be Produced?
The answers to these questions
depend on two factors.
One factor depends on how goods are
to be produced.
Another important factor is the quantity
of available resources.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Who Should Share in
What Is Produced?
This question focuses on the concept
that people can’t get everything that
they want because society doesn’t
have enough resources.
Introduction to Business, Economic Resources and Systems
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2
Who Should Share in
What Is Produced?
In most societies, people can have as
many goods and services as they can
afford to buy.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Who Should Share in
What Is Produced?
The question arises as to how a
society determines the income earned
by each individual in that society?
Introduction to Business, Economic Resources and Systems
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2
Types of Economic Systems
Economics studies how society chooses to
use resources to produce and distribute goods
and services for people’s consumption.
To use its limited resources effectively, every
nation needs an economic system.
Introduction to Business, Economic Resources and Systems
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Types of Economic Systems
The primary goal of an economic
system is to provide people with a
minimum standard of living, or quality
of life.
Introduction to Business, Economic Resources and Systems
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Chapter
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Types of Economic Systems
The two basic and opposing economic
systems that have been developed
are:
• Market economy
• Command economy
Introduction to Business, Economic Resources and Systems
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Chapter
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Market Economy
In a market economy economic decisions are
made in the marketplace according to the laws
of supply and demand.
Price is the amount of money given or asked
for when goods and services are bought or
sold.
Introduction to Business, Economic Resources and Systems
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Market Economy
•Demand is the amount or quantity of goods
and services that consumers are willing to buy
at various prices.
•The higher the price, the fewer consumers will
buy an item.
•The lower the price, the more consumers will
buy an item.
Introduction to Business, Economic Resources and Systems
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2
Market Economy
Supply is the amount of goods and
services that producers will provide at
various prices.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Market Economy
Demand and supply work together.
When the quantity demanded and the
quantity supplied meet, the price is
called the equilibrium price.
Introduction to Business, Economic Resources and Systems
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Chapter
Figure
2.2
2
VISUALIZING DEMAND AND SUPPLY
Remember these
two points: (1) The
demand curve
always falls left to
right on a graph, and
(2) the supply curve
always rises from
left to right on the
graph.
How many CDs will be
demanded at $16 a piece?
How many CDs will be
supplied at $18 a piece?
Introduction to Business, Economic Resources and Systems
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Chapter
2
Market Economy
A market economy is also called
capitalism, or private enterprise.
In a capitalist system, resources are
privately owned.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Market Economy
In a capitalist system, the primary role
of government is to support the
marketplace by removing obstacles
such as trade barriers.
Introduction to Business, Economic Resources and Systems
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The Market’s Motivations
A market economy offers incentives, such as
competition and the profit motive, to produce
more.
The constant demand for new goods and
services encourages entrepreneurship.
Introduction to Business, Economic Resources and Systems
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Chapter
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The Market’s Motivations
The problem with a market economy is that
owners and producers reap the most rewards.
Another problem with a market economy is that
unskilled workers and older adults are often
unable to afford basic needs such as health care.
Introduction to Business, Economic Resources and Systems
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Chapter
2
The Market’s Motivations
Another problem with a market
economy is that a small number of
large companies can join forces to
control the supply of products and
manipulate prices.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Command Economy
In a command economy a central
authority makes the key economic
decisions.
A command economy is also called a
planned or managed economy.
Introduction to Business, Economic Resources and Systems
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2
Command Economy
There are two types of command
economies.
In a strong command economy, such
as communism, the state makes all
the economic decisions.
Introduction to Business, Economic Resources and Systems
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2
Command Economy
In a moderate command economy, also
called socialism, there is some form of
private enterprise.
The primary advantage of a command
economy is that it guarantees everyone an
equal standard of living.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Command Economy
There are some disadvantages to a
command economy.
Since the state provides all goods and
services in a strong command
economy, there is little choice of what
to buy.
Introduction to Business, Economic Resources and Systems
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Chapter
2
Command Economy
Another disadvantage to the command
economy is that there is no incentive
for entrepreneurship when you can’t
run your own business.
Introduction to Business, Economic Resources and Systems
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2
Mixed Economy
Most nations have a mixed economy,
a combination of a market and
command economy.
The state takes care of people’s needs
while the marketplace takes care of
people’s wants.
Introduction to Business, Economic Resources and Systems
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