Bell-Ringer You have decided to open a pizza restaurant With your group, make a list of the things that you will need to open your business You are starting from nothing. List everything you think you will require before you can open the doors and start serving your customers. You have five minutes to write as many as you can think of

Economy What is it and why is it?

Objective Describe, in general terms, the functioning of a market-based economic system

Classroom Rules Comply with all federal, state and district policies Do not do anything that creates unsafe or unhealthy conditions in my classroom Do not do anything that interferes with your learning Do not do anything that interferes with anyone else’s learning Do not let anyone else interfere with your learning

Classroom Procedures Bring and use the proper materials at the proper time No gum or food Do not talk except when the activity permits or when you have a question (raise your hand first). Stay in your seat unless you have permission Do not do work from other classes unless you have permission Listen carefully to instructions, execute them to the best of your ability, and ask if you do not understand them Participate in the lesson by doing the correct activity at the correct time: listen, ask questions, discuss, read, write, research.

Vocabulary Traditional Economy Market Economy Command Economy Mixed Economy Goods and Services Factors of Production Natural Resources Labor Resources Capital Resources Entrepreneurs Inputs Wants and Needs Supply and Demand Market Scarcity Subsidy

Goal of Economies The goal of every economy is to satisfy the needs of the members of the group and as many of their wants as possible Needs – the things you must have for survival (food, water, shelter, etc.) – if you do not get them, you will probably die Wants – the things you would like to have, but your survival does not depend on your having them Wants and needs are satisfied by the answers to the basic economic questions

Basic Economic Questions What shall we produce? How shall we produce it? How much shall we produce? Included in some lists, not included in others – it’s related to the first “how” Who gets it?

Economic Systems All economic systems answer the basic questions Four common systems: Traditional Economy – not relevant to the lesson; we’ll come back to it in later lessons Market Economy – often called “capitalism” Command Economy – often called “communism” or “socialism”, but the two are different – more on that in a later lesson Mixed Economy – has elements of both market and command economies

Differences in Economic Systems The big difference between the systems is who answers the basic economic questions When individuals answer all of the questions, the system is called “capitalist” or “market economy” Individuals do not vote on the question; they answer it through a system called “supply and demand” in an imaginary place called a “market” When government answers all or most of the questions, the system is called “communist” or “command economy” “Mixed” systems are between those two extremes Most economies are mixed; most governments help answer “how shall we make it?” in the form of rules and regulations and “what shall we produce?” in the form of subsidies

Factors of Production Factors of Production are the general categories of inputs needed to produce goods and services Natural Resources – the land and raw materials needed to produce the goods and services Labor Resources – the knowledge and physical effort needed to produce the goods and services Capital Resources – money; can also be human-made materials, but it’s purchased with money Entrepreneur – the person who puts the other three resources together to produce the goods and services

Scarcity All resources are limited; there are not enough resources to satisfy everyone’s wants Because there is not enough for everyone, who answers “what shall we produce?” and “who gets it?” shows a difference in priority (importance)

Differences in Priorities In a market system, the primary focus is on satisfying individual wants and needs Upside: creativity, ingenuity and hard work are usually rewarded Downside: economic inequality Factors of Production are usually owned by individuals In a command system, the primary focus is on satisfying group wants and needs Upside: more economic equality Downside: little incentive to be creative, ingenious or hard- working Factors of Production are usually owned by the government

Activity Take the list that you made in the bell-ringer activity and categorize the items on the list into Natural Resources Capital Resources Labor Resources You are the entrepreneur, so you don’t need to list that. Your group has five minutes to complete your list At the end of that time, groups will compare their categories

Pizza Restaurant Entrepreneur Natural Resources Labor Resources You Natural Resources The land your restaurant is on Labor Resources Your employees Capital Resources Building Furniture Tables, chairs, counters, etc. Equipment Ovens, kitchen equipment, pots, pans, utensils, etc. Ingredients Flour, yeast, cheese, toppings, etc.

Factors and Free Market Systems What shall we produce? Pizza You answered that question How shall we produce pizza? Put the ingredients together according to your recipe, using the equipment and ingredients you bought. You answered the question How much pizza shall we produce? As much as customers will pay for. You and your customers answered the question Who gets it? Whoever will pay for it Why are you doing it? Because you expect that you will make money.