Unit 5: Ch. 13 – 15 Foundations of Economics

Chapter 13 What Is an Economy?

Section 1: Why Societies Have Economies *Key Idea* In an economic system, scarce resources are used to produce and distribute goods and services that satisfy people’s needs and wants.

The Want - Satisfaction Chain 1. Human wants… 2. Require people to combine resources of land, labor, and capital… 3. In the process of production… 4. Which results in goods and services… 5. Which go through distribution… 6. To make goods available for consumption… 7. Which results in want satisfaction.

Section 2: Basic Economic Decisions *Key Economic Questions* 1. What should we produce (make)? 2. How much should we produce? 3. How will we produce it? 4. Who will have the opportunity to consume it?

Section 3 Three Types of Economies Traditional Economy Basic economic decisions are made based on long-established patterns of behavior that are unlikely to change Example: An African tribe who lives on hunting animals and gathering fruit

Command Economy The government owns or controls the factors of production and makes basic economic decisions Example: Ancient Egyptian Pharaoh’s and the building of the pyramids

Market Economies Private individuals own the factors or production and are free to make their own choices about production, distribution, and consumption Example: The U.S.’s economic system

Chapter 13 Review Questions Why do societies have economies? Explain how a person goes from having an economic want to actually getting what they want? What are some basic economic questions you should ask before starting a business? How is a Command Economy different than a Market Economy?

Ch. 13 Assessment Page 372 Complete # 1 – 11 Reviewing Key Terms Write out the sentence with correct term underlined. Comprehension and Critical Thinking Write out the question and your response. * Turn in for a grade when completed.