1. Development of Economic Systems
Essential question:
How can changes in the economic power of a nation like China or India affect global trade and global politics?

2. I. SCARCITY
Scarcity exists when a society does not have all the resources to produce the goods and services everyone wants.

3. THE SOLUTION: VARYING WAYS OF ECONOMIC ORGANIZATION
Communism (command economy)
Central gov’t makes all major economic decisions
Gov’t agencies determine the needs of consumers and how to meet those needs
Socialism (partial command economy)
Gov’t influences some economic decisions
Capitalism
Buyers and sellers determine what, how, and for whom goods are produced
Consumers act as “voters” for products
Note: Most countries in the world today have mixed economies

4. II. FACTORS OF PRODUCTION (RESOURCES)
In order to have a functioning economy ($$ coming in and going out), a country needs resources
Land
Natural resources - soil, water, and air
Minerals – copper, iron ore, coal, etc.
Capital
Means of production used to produce other goods
Money, factories, machinery
Labor
Human resources – people who produce the goods and services
Factory workers, sales clerks, teachers, etc.
Entrepreneurs
Businessmen and women who organize and direct factors of production
Take risks to make a profit

5. III. CHARACTERISTICS OF CAPITALISM
A. Private ownership
Depends on private ownership of property and resources
Government provides some public services (sewers, roads, etc.)
Emphasizes respect for
personal property not used
in production

6. B. Individual Initiative
Anyone can be an entrepreneur
There are no laws stopping you
Ex: Each year, thousands of US citizens create their own businesses

7. C. Competition
When there are many sellers offering the same thing, no seller can control the market price
The opposite of competition is a monopoly

8. D. Freedom of Choice
Consumers are free to buy from whatever company they want
Businesses can provide whatever goods and services they think people want (as long as they aren’t breaking laws)
Workers decide where to work and what to do

9. E. Profit or Loss
Profit = $$ business takes in – operating costs
Profits are a reward for assuming risk
Profits are earned and lost, which is the risk of having a business

10. Essential question:
How can changes in the economic power of a nation like China or India affect global trade and global politics?

11. Essential Question
As nations industrialize and become wealthier, their demand for goods increases, opening new markets for trade. Manufacturers in the US might be unable to compete with the low prices offered by competitors in those newly industrialized nations, causing some to go out of business or to press for trade barriers to protect their markets.

12. Vocab list
Add scarcity, communism, socialism, and capitalism to your vocab list for the quiz Thursday.