1. WHAT IS AN ECONOMY?

2. What is Economics
The study of how people choose to use their resources.
How nations will use its resources to produce and distribute goods and services.

3. The Basic Economic Problem
The Concept of Economics Exercise

4. The Basic Economic Problem
Peoples wants and needs are unlimited
We rarely feel that our wants and needs are satisfied.
Resources used to fulfill these needs are limited.
There is never enough resources to fulfill all peoples wants and needs.

5. Scarcity
The difference between wants and needs and the resources available to meet these needs is called Scarcity.
Nations have unlimited wants and needs but limited resources – Scarcity forces the nations to make economic choices.

6. Even in The US
With all of our resources we still have people living below the poverty line and businesses go bankrupt all the time.

7. So what do we do?
Because of Scarcity. NATIONS MUST MAKE DECISIONS ON HOW TO USE ITS RESOURCES and WHAT PRODUCTS TO PRODUCE.

8. Economy or Economic System
The way a nation makes choices. These choices involve how the nation will use its resources to produce and distribute goods and services.

9. Resources All things used in producing goods and services
Factors of Production – the technical term economists use for resources

10. Resource 1 – Land
Everything on the earth in its natural state / the earth’s natural resources
Resources Include:
Everything contained in the earth or found in the sea
Coal and crude oil are examples
A lake and all the living
things in the lake are
also examples

11. Resource 2 – Labor All the people who work in the economy
Labor includes:
Full and Part-time Workers
Both the Public and the Private sector

12. Resource 3 - Capital The money needed to start and operate a business
The goods used in the production process
Infastructure
Examples are:
Factories
Office Buildings
Computers
Raw materials that are processed
into a more useful form (lumber, steel)

13. Infrastructure The physical development of a country
Things necessary for production and distribution of goods and services
Parts of the infrastructure include
Roads
Ports
Sanitation Facilities
Utilities

14. Resource 4 - Entrepreneurship
The skills of the people willing to risk their time and money to run a business
Entrepreneurs organize the other factors of production to create the goods and services desired in an economy

15. The Basic Economic Questions
Nations must answer 3 basic economic questions when deciding to use their limited resources
The way nations answer these questions define their economic system
What goods and services should be produced?
How should the goods and services be produced?
For whom should the goods and services be produced?

16. What Should Be Produced?
Consumers decide what is to be produced through purchases made in the market place.
Items that satisfy the customer’s needs and wants are purchased making the products successful
Items that do not satisfy the needs and wants of the consumer are not purchased and are not successful

17. How Should Goods and Services Be Produced?
How products will be produced is left up to the business
Businesses must be competitive
Businesses must produce quality products at lower prices than their competitors
Businesses must find the best way to produce goods and services
Businesses must also find the best way to encourage customers to purchase their products

18. For Whom Should Goods and Services Be Produced?
Those individuals with the most money are able to purchase more goods and services
To obtain money individuals work and invest