Chapter 17 (pgs.445FL1-471) The Economic System

Chapter 17 Section 1(pgs.450-459) The Economic System at Work Essential Question: What are the different factors that determine economic Decisions?

Economic Systems (pgs.450-452) Economic Systems help people create and obtain the goods and services. There are different types of economic systems. The Need for Economic Systems (pg. 450) How people create and obtain these goods and services is determined by economic system’s. People have needs and wants for goods and services. Needs are basic materials people need for survival. Examples: food, water, shelter, clothing, etc. Wants are materials not needed for survival. Examples: cell phones, cars, televisions, computers, etc. The process of satisfying wants is called the want-satisfaction chain.

Economic Systems (pgs.450-452) Types of Economic Systems (pg.452) There 3 basic types of economic systems: Traditional, Command, and Market. Traditional: economic decisions are based on how economic activity was performed in the past. If the area historically produced by farming, they remain farming. Command: economic decisions are determined by the government. The government tells people what, how many, and the value of what they produce. Command economies are tied to communist countries.

Economic Systems (pgs.450-452) Market Economy: economic are made by people looking out for their own best interests. Market Economy is based on freedom. People are free to own property, start businesses, buy and sell products they choose. The right to buy and sell products you choose is called a free market. Free Market: an economic system in which buyers and sellers are free to exchange goods and services as they choose. In a free market, competition amongst sellers not government policy is the main factor in setting prices. Most countries, including the United States use a market economy. Most countries today use a mix of these 3 systems and rely on a number of profitable industries (a diverse economy) to build a strong, stable economy. How do single-resource and diversified economies differ?

Life in a Market Economy (pgs.453-456) Market economy’s success depends upon people’s desire to make a profit. Profit: the income a person or business has left after paying its expenses. People can not obtain goods and services in a market economy without having a profit. Competition for Resources (pg.453) Competition encourages action. Competition keeps prices down. Sellers benefit from buyer competition when there is a scarcity. Scarcity: the problem of limited resources. Scarcity occurs when buyers want more product than there is available.

Life in a Market Economy (pgs.453-456) Choice (pg.453) Choices are force for both buyers and sellers in a market economy when there is scarcity. Scarcity plays a role in determine the cost of a product. Supply and Demand (pgs.453-455) Law of Supply: an economic rule that states that business will provide more products when they can sell them at higher prices and fewer products when they must sell them at lower prices. The higher the supply, the lower the cost. The lower the supply, the higher the cost. Law of Demand: an economic rule that states that buyers will demand more products when they can buy them at lower prices and fewer products when they must buy them at higher prices. The lower the demand, the lower the cost. The higher demand, the higher the cost.

Life in a Market Economy (pgs.453-456) Free Enterprise (pg.455) Free Enterprise: principle that business owners in a free market are allowed to run their businesses in any way they see fit, with little government interference. The free-enterprise system allows businesses the opportunity to make huge profits or huge losses Business mistakes can be very costly in a free-enterprise system Competition in a free enterprise system encourages innovation by the need to improve products and business models Capitalism (pg.455) America’s economy is largely driven by capitalism. Capitalism: an economic system based on private ownership of the means of production. Capitalism offers people freedom by ownership of their products and innovation along with investment ownership in other’s innovation and products

Life in a Market Economy (pgs.453-456) Monopolies (pg.455) When there is no product competition in a economy a monopoly can occur. Monopoly: a company that controls all production of a good and service. The U.S. Government regulates business practices to encourage competition and has the power to break up monopolies

The U.S. Economic System (pgs.456-458) Economic freedom was a foundational idea of America’s Founding Fathers. America’s Founders believed economic freedom would allow citizens to accumulate wealth that would limit governmental power. Throughout American Government History, they have added regulations to protect consumers and competition, ensuring economic freedom. A Mixed Economy (pgs.456-457) Like many countries, America is a mixed economy. A mixed economy is primarily a market economy, but with some features of traditional and command economic system. America is a market-command economic system Being the command feature, the U.S. Government involves itself in our dominant market economic system to protect consumers, competition, workers’ safety, worker discrimination, the natural environment, and to help control prices. How are supply, demand, and free enterprise key to a market economy? The U.S. Economic System (pgs.456-458)

The U.S. Economic System (pgs.456-458) American Business (pg.457-458) In America’s early history most businesses were small. Many small businesses grew into large businesses by taking loans from banks, people, or other businesses. A cycle of new large businesses loaning out money to new small businesses was created that still occurs today and has made the American economy grow into a world leader. The mixture of large and small business in the U.S. is cited to why the economy is still strong today. What is the U.S. economy like today? mot bular

Chapter 17 Section 3 (pgs.466-469) Making Business Decisions Essential Question: What do businesses Consider about the 4 factors of production when making business decisions?

Factors of Production (pgs.466-468) All businesses must evaluate the cost they paid in these 4 areas when making business decisions about producing goods. Natural Resources Capital Labor Entrepreneurship Natural Resources (pgs.466-467) Natural Resources: any natural materials that are used by humans, such as water, petroleum, minerals, forests, and animals. Businesses must consider what is available to make products and the location between their product supplies, business offices, and potential customers.

Factors of Production (pgs.466-468) Capital (pg.467) Capital: money invested in business; also, property and equipment used to produce goods or services. Business must consider how much money they invest into equipment that makes their product or products. The better the equipment, the greater quality and or productivity Labor (pgs.467-468) Labor: human effort used to make goods and services. Businesses must consider how many people they want working for them and how much they want to pay them. The better pay, the smarter and more committed employees. Entrepreneurship (pg.468) Entrepreneur: a business owner. Entrepreneurs must decide how much of the own money, time, effort, and resources they are going to invest into their businesses. Also, they must decide how little or big of risks they’re going to take in their business Why is labor considered a factor of production?

The Government’s Role (pg.469) The U.S. Government does tell businesses health and safety, environmental, selling practices, non-discrimination, workers rights standards standards they must follow and what taxes they must pay. The U.S. Government does not tell businesses what to make or how much to charge. Why does the government need to regulate businesses in the United States, and how does it do so?