1.01 Scarcity and Economic Systems (Chapter 2) Resources Economic Systems

Unlimited Wants…But… Limited Resources We talked a little about resources yesterday. Goods and services are possible because of resources. A resource is anything that people can use to make or obtain what we want or need.

However… A society might not have enough goods or services for the wants and needs of its people. This is called… A basic economic problem for any society is how to manage its resources.

Resources 1.Natural Resources – The raw materials found in nature from the earth, water, or air. 2.Human Resources – The knowledge, efforts, and skills people bring. 3.Capital Resources – Things used to produce goods and services. (buildings, tools, materials, and equipment) 4.Entrepreneurial Resources – An initiative to combine natural, human, and capital resources to produce goods or services.

Natural Resources Renewable – Can be replaced –Wheat –Cattle Non-renewable – Cannot be replaced –Coal –Iron –Oil The amount of natural resources available to a society has a direct effect on its economy.

Human Resources Businesses often call their Personnel Department their Human Resources Department.

Capital Resources Tools Equipment Buildings

Entrepreneurial Resources The initiative to combine natural, human and capital resources to produce goods or services.

Types of Economic Systems Economics – The study of 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 to determine how resources will be used.

Economic Systems Traditionalism Communism Socialism Capitalism

Traditionalism An economy in which people do things the way they have always been done. Advantages: Everyone has a role in the economy. Economic life is stable and community life continuous. Disadvantages: Discourages new ideas and ways of doing things. Growth is limited, so this economy falls behind other kinds of economies. Main Countries: Societies living in rain forests of Latin America, parts of Africa, and the Middle East.

Communism An economy in which the government makes ALL economic decisions. Advantages: Can make a dramatic change in a short time on production of goods. Each person is provided with a job with certain medical and social services. Disadvantages: Consumer goods and services rank low on the list of priorities for that country. Few consumer wants are met. A lack of incentive to work hard. (No competition among businesses.) Limits individual’s choice to make his or her own economic decisions. Main Countries: North Korea, China, and Cuba are some of the countries considered to be communistic.

Socialism An economic system in which the government owns major industries (like railroad systems, steel, and iron) but allows for private ownership of other businesses. Advantages: Individuals are provided with medical services, lifelong welfare services, and social security benefits to everyone. Disadvantages: Workers are taxed at an extremely high rate to pay for all that the government provides. This high tax rate discourages private business. The high tax rate also lessens consumers’ disposable income to make for fewer choices in the marketplace. Main Countries: Sweden and France are both considered to be socialistic economy countries.

Capitalism An economic system where the basic economic decisions are based on the actions of individual people and businesses participating in many different markets. Advantages: Produces goods and services that people want or need and that will bring a profit to the sellers. Freedom of choice. Price plays an important role in the market place. Competition ensures that prices stay low. Government does not dictate what, how, or for whom to produce. Disadvantages: The wealth of the economy is not evenly distributed. Main Countries: The United States, Japan, Canada, and Great Britain are considered capitalistic.