Chapter 3.1

 Identify the resources (factors of production) that are used to satisfy wants and needs.  Explain how scarcity affects the availability of economic goods and services.  Explain what an economy is.  Discuss advantages and disadvantages of different types of economic systems.  Discuss how an economic system addresses the questions (what is to be produced, how it is to be produced, and for whom).

 The organized way a nation provides for the needs and wants of its people  How a nation uses its resources

 All the things used to produce goods and services  Land  Labor  Capital  Entrepreneurship

Land Example Labor Example Capital Example Entrepreneurship Example

1. Land  Everything contained in the earth or found in the seas  CoalClimate  Crude OilGeography  Fish  Trees and Plants

2. Labor  All people who work  Full-time and part-time  Well-educated  Well-trained

3. Capital  Money to start and operate a business  Goods used in production  Buildings and factories  Tools and computers  Raw materials that have been processed into more useful form  Infrastructure

 The physical development of a country  Roads and Ports  Sanitation and Utilities  Telecommunications

4. Entrepreneurship  The skills of people who are willing to invest time and money to run a business  Organize factors of production to create goods and services  Employers

 List one of each type of resource that is used in the production of the following goods and services.  Automobiles  Land  Labor  Capital

 Potted plants  Land  Labor  Capital  Hair Cut  Land  Labor  Capital

 Automobiles  Land – ore to produce steel for auto frames  Labor – production line workers  Capital – production line robots

 Potted plants  Land – potting soil  Labor –nursery employees/gardeners  Capital -- greenhouses  Hair Cut  Land –salon/shop site  Labor – hairdresser/barber  Capital – scissors, combs, hairdryers

 Which resource – land, labor or capital is the most important to a nation’s economic success? Explain the reasons for your choice.

 The difference between the wants and needs and available recourses  Unlimited wants and needs for growth and development  Limited resources  Forces Nations to make Choices

 What or Which goods and services should be produced?  How should the goods and services be produced?  For whom should the goods and services be produced?

What to Produce? How to Produce? For Whom to Produce? Market Economy What to Produce? How to Produce? For Whom to Produce? Command Economy

Traditional Economy  Traditions and rituals answer the basic questions  Answers often based on cultural or religious practices and ideals that are passed from generation to generation

Market Economy or Free Enterprise System  No government involvement in economic decisions  What to produce? – Consumers decide  How to produce? – Business/competitive  For whom to produce? – people with money

Command Economy  The government makes economic decisions  What to produce? – dictator or central government decides  How to produce? – government owns means of production  For whom to produce? – government decides

Mixed Economies – no pure traditional, market or command economies  United States – mixed economy leaning toward market economy  Government involvement through laws and regulations  Protect food, air and water, unsafe products  Labor laws – age and minimum wage  Social programs – welfare and Medicaid

 Profit is the driving force in a market economy.  What element takes the place of profit in a command economy?  How well does this alternative work?

 Make a T-Graphic for each political philosophy (Capitalism, Communism and Socialism)  One side of the graphic will list the advantage of the political philosophy  The other side of the graphic will list the disadvantages of the political philosophy

Advantages of Capitalism Disadvantages of Capitalism

Advantages of Communism Disadvantages of Communism

Advantages of Socialism Disadvantages of Socialism

Capitalism  Associate with democracy  Political power in hands of people  More than one political party  Free to elect candidates  Motive for producing goods and services is to sell them for a profit  United States and Japan

Communism  Authoritarian government controls factors of production  No private ownership of property or capital  Theory – goods owned in common (by government) are available to all as needed and society is classless

 No unemployment – assigned jobs  Government decided education needed  Housing assigned as needed  Food & housing prices subsided to keep low  Medical care is free

 No financial incentive to increase productivity  Food shortages  Substandard medical care  Cuba, North Korea, China  China allowing more free enterprise practices

Socialism  System on its way to the communist ideal of a classless society  Today most have democratic political institutions  Main Goal: meet basic needs for all and to provide employment for many

 Cradle to Grave  Medical Care and Education is free or low cost  Pension system and elderly care  Businesses and individuals pay high taxes  Government runs key industries  Canada and Sweden

 Privatization – government selling state owned businesses

 Infrastructure  Educated labor force  Foreign investments

 Political power in hands of people  Free elections/free to elect candidate of your choice/you can run for office  More than one political party  Profit is the motive for business/productivity

 Unemployment  No guaranteed pensions  Medical costs not subsidized  Education costs not subsidized

 Free medical care  Free education  Subsidized housing costs  Subsidized food costs  No unemployment

 No private ownership of property  No productivity incentive  Government often assigns jobs  Government controls factors of production  Substandard medical care  Food shortages  Government decides education needs  Government decides housing needs

 Designed to meet basic needs of citizens  Designed to provide employment to all  Medical care is free or low cost  Education is free or low cost  Elderly Care (Cradle to Grave coverage)  Pension system

 Services paid for by high taxes on individuals and businesses  Government runs key industries  Health care can have long waiting lists

 Explain why the United States economy is considered a mixed economy.