1. Economics: Part 1

2. MICROEconomics is…
…the study of the choices people make to satisfy their needs and wants.

3. MacroEconomics is…
…the study of the choices countries make in order to satisfy their needs and wants.

4. traditional, command, market and mixed
An Economic System is…
…the way a country produces and exchanges goods and services.
There are four types of economic systems:
traditional, command, market and mixed

5. Traditional Economy Goods and Services are traded without
exchanging money. Also called “barter”.

6. Market Economy
Production of goods and services is determined by the demand from consumers. Examples: Free Enterprise Capitalism

7. Command Economy
Production of goods and services is determined by a central government, which usually owns the means of production. Example: Communism

8. Mixed Economy
A combination of command and market economies provides goods and services so that all people will benefit. Examples include combinations of mixed and command economies.

9. Economic systems: Satisfy needs and wants with…
Goods – Things we can touch or see that satisfy our wants or needs.
Services – Actions people undertake in order to satisfy their wants and needs.

10. Economic indicators:
Resources - A country’s access to and use of resources has a major impact on its economic development.
Development requires access to raw materials, such as minerals and trees, that can be turned into useful products.
Development also requires energy resources such as coal, oil, water, natural gas, or uranium to operate factories.

11. Businesses use three types of resources to produce goods and services.
Natural
Human
Capital

12. Natural Resources
Resources that are present without human interference.
They are “gifts of nature”.
Examples include land, timber and mineral deposits.

13. Human Resources Any human effort used to produce goods and services
Examples include workers, their skills, training and education

14. Capital Resources
Include the “tools of production” which are any of the goods used to produce other goods/services.
Examples include tools, machinery and buildings.
Money used to purchase these resources is also a capital resource.

15. Identifying Resources:
NATURAL
HUMAN
CAPITAL
cotton tractor marketing degree table saw computers water driver’s license crude oil employees factory building aluminum electrician’s license land

16. *Note on REsources New technologies create new demand for resources.
Examples
Steam Engine Demand for Coal
Internal Combustion Machine Demand for Gasoline
(Cars and trucks) (petroleum)
Computer Chips Demand for Skilled Workers

17. *Note on Resources
Because resources are not distributed equally on earth, countries must TRADE with one another. More on trade later.

18. Economic indicators:
Market Sectors – Economic activities can be divided into four categories or sectors.
Primary
Secondary
Tertiary
Quaternary

19. Primary Activities Businesses involved in gathering raw materials.
Examples include agriculture, mining and forestry companies.

20. Secondary Activities
Businesses that take goods made in primary industries and change the goods into products that are useful to consumers.
Examples include automobile manufacturers and textile factories.

21. Tertiary Activities
Companies that provide business or professional services to consumers.
Examples include salespeople, teachers and doctors, banking, insurance.

22. Quaternary activities
Businesses that use skilled professionals to process information.
Examples include information research, management, and administration companies.

23. Market Sectors can be used to measure a country’s level of economic development. The more industrialized a country is, the more developed its economy.
Poorest countries have no industrialization (primary and secondary).
Next poorest countries are industrializing (primary and secondary).
Wealthier countries are postindustrial (tertiary and quaternary).

24. Identifying Levels of Activity
_____ Hershey Chocolate Company _____ Pilot Gas Station _____ Luck Stone Corporation _____ NTelos _____ Law Well Drilling Inc. _____ Fry Appraisal Co. _____Oak Lawn Cemetery _____ Walmart _____Augusta Health _____ Hollister Manufacturing

25. *Note on market sectors:
The more developed an economy is, the
greater the number and variety of market sectors
you will find.

26. Economic Indicators:
Gross National Product or GNP – Gross national Product is the total value of goods and services produced by a country in a year, both inside and outside. Gross Domestic Product or GDP – Gross domestic product includes only those goods and services produced within a country and does not include income earned outside that country.

27. Economic indicators:
GDP Per Capita – A country’s GDP divided by the number of people in that country.
Per capita income is often used as an average income, a measure of the wealth of the population of a nation, particularly in comparison to other nations.
Per capita income is often used to measure a country's standard of living.