Essentials of Economics Three Basic Economic Questions Think About It……. If you were starting an economy from the beginning, what questions would need to be answered?

Essentials of Economics I. Three Basic Economic Questions 1. What To Produce? 2. How to Produce It/By Whom? 3. Who Do You Produce It For?

II. ECONOMIC RESOURCES 1. Natural Resources: a. commodity that people can either ………….. use or trade for other commodities b. exists without the actions of …….. Humans c. Includes what?........... sunlight, atmosphere, water, land (includes all minerals) along with all vegetation and animal life that naturally subsists d. May be processed to obtain the resources such as…….. metal ores, oil, and most forms of energy.

2. Human Resources: Your ideas???....... EFFORT SKILL KNOWLEDGE

3. CAPITAL RESOURCES: a. one of the…… Factors of Production -alongside two others...... Land and Labor b. not used up immediately in the process of …… production …..continue….. Physical tools, machines, etc….used in …… the production of Consumer goods

Factors of Production are: … Factors of Production are: …. LAND LABOR CAPITAL Capital can be considered in different forms …… Physical Capital Human Capital Financial Capital

III. Economic Systems a. The way a country answers questions about the use and distribution of its resources may be influenced by its………. -history -culture -geography -political situation -many other factors

b. ECONOMIC SYSTEM VS. GOVERNMENT SYSTEM They are different Economic System – describes a way of producing ……. Goods and services And providing a means for people to …… Receive those goods and services

Government System – system of …… Government System – system of ……. political institutions, laws and customs that a society uses to determine its ……. code of conduct

3 Economic Systems Can you name them?

TRADITIONAL ECONOMIES

3 Economic Systems Traditional Economy: Based on….. Historic traditions, habits, customs, religious beliefs Advantage? … Everyone has a role, no uncertainty, generally stable and predictable Characteristics?....... Mostly rural and agricultural, fishing, hunting/gathering Many use barter instead of money Led by the “elders”

Seen as being poor, but ……. daily needs are being met Mostly in emerging economies (Third World) in Latin America, Asia, Africa, Middle East Disadvantages? …… Discourages new ideas

2. Command Economy What do you know about Command Economies? What does this cartoon tell you about it?

2. Command Economy Economic system influenced by …… commands or instructions of a central power (govt.) - one person or small group

Command Economy (continued) Members of society ………. Carry out the demands of the central authority Two types of Command Economy today …. Strong and….. Moderate

Strong Command Economy ex’s….. North Korea and…… Cuba Common Ownership: the government ….. Owns and controls factors of production (land, capital) and in a sense….. Labor Who answers the three basic questions of Economics? The leaders in power The Political Structure of a Command Economy is called…. Communism

Advantages: …your ideas Advantages: …your ideas? In theory, the economy can make a…… Dramatic change in a short time. Disadvantages: your ideas? Consumer goods and services are low on……. List of priorities. Few of the the citizens WANTS are….. met

Moderate Command Economy Government owns most major… Moderate Command Economy Government owns most major….. Industries (railroads, steel, iron) Allow some private ….. ownership Political Structure is called….. Socialism Examples : Sweden ; France

Market Economy Why does this represent a free market economy?

Market Economy A system in which the basic economic decisions are based on ……. The actions of buyers and sellers. The market produces goods and services people are willing to buy and that will bring a profit to the sellers and producers.

Ex’s US , Japan Commonly called Capitalism Price is most important factor in determining the market outcome Regulation by the government is supposed to be….. Limited PURE MARKET CAPITALISM – Laissez-faire

Market Economy : Advantages – Adjust to change over time as consumers change…. Wants and needs Freedom for everyone … To be involved Disadvantages: Rewards only those who are… Productive Wealth is not…… Evenly distributed

Mixed Economy Economic system that is made up of…… Parts of several other economic systems No country today is completely 100% .... Traditional , command, market Every country is some form of Mixed