[ 2.1 ] The Three Key Economic Questions

[ 2.1 ] The Three Key Economic Questions Learning Objectives Identify the three basic economic questions that all societies must answer. Describe the economic goals that determine how a society answers the three economic questions. Define the characteristics of a traditional economy.

[ 2.1 ] The Three Key Economic Questions Key Terms economic system Factor payments Profit safety net standard of living Innovation traditional economy

Three Basic Economic Questions When you go to a supermarket, you see rows of shelves stacked with a variety of foods and products. But suppose the government limited your choice to just one brand of cereal and one brand of soap. Or what if the only goods available to you were what you and your neighbors could grow or make yourselves? All of these examples represent ways different societies have dealt with the challenge of meeting people’s needs and wants.

Three Basic Economic Questions What Goods and Services Should Be Produced? How Should Goods and Services Be Produced? Who Consumes the Goods and Services That Are Produced?

Three Basic Economic Questions In the United States, transactions like the one shown here help determine what goods and services are produced, how they are produced, and who consumes them. Describe How is this transaction helping to answer the three basic economic questions?

Three Basic Economic Questions This illustration shows two different approaches to the question of how to combine the factors of production. Analyze Information Which approach is most efficient? Explain your answer.

Economic Goals of Society Different societies answer the three economic questions based on the importance they attach to various economic goals. These goals include efficiency, freedom, security, equity, and growth. All societies pursue each of these goals to some degree.

Economic Goals of Society Efficiency Freedom Security Equity Growth Conflicting Economic Goals Traditional Economies

Economic Goals of Society In recent years, many retailers have turned to the Internet to sell their goods and services. Describe How might the use of the Internet help achieve the economic goal of efficiency?

Economic Goals of Society Household income rose between 1976 and 2011 at all five income levels—but not at equal rates. Analyze Graphs Which income group saw the greatest change?

Quiz: Three Basic Economic Questions How is a society’s economic system defined? A. by how it answers the three basic economic questions B. by the decisions it makes about who consumes goods and services C. by the resources it uses to produce goods and services D. by the trade-offs it accepts in order to produce goods and services

Quiz: Economic Goals of Society Which economic goal reflects the desire of individuals to make their own choices about owning property or becoming entrepreneurs? A. efficiency B. freedom C. security D. equity