1. Economic Resources and Systems Chapter 2 pp. 18-33

2. Introduction to Business, Economic Resources and SystemsSlide 2 of 77 Learning Objectives After completing this chapter, you’ll be able to: 1.Define 1.Define scarcity. 2.List 2.List the four factors of production. continued

3. Introduction to Business, Economic Resources and SystemsSlide 3 of 77 Learning Objectives After completing this chapter, you’ll be able to: 3.Identify 3.Identify the differences between market and command economies. 4.Explain 4.Explain why most countries prefer a mixed economy.

4. Introduction to Business, Economic Resources and SystemsSlide 4 of 77 Why It’s Important Understanding economic resources and economic systems is essential to lessening economic problems.

5. Introduction to Business, Economic Resources and SystemsSlide 5 of 77 Key Words scarcity factors of production natural resources human resources capital resources entrepreneurial resources economics continued

6. Introduction to Business, Economic Resources and SystemsSlide 6 of 77 Key Words market economy demand supply equilibrium price command economy mixed economy

7. Introduction to Business, Economic Resources and SystemsSlide 7 of 77 Economic Resources Chp 2.1 pg 23 Define the term scarcity? A shortage of resources is called scarcity. What is basic economic problem for any society? Ans: How to manage its resources.

8. Introduction to Business, Economic Resources and SystemsSlide 8 of 77 Factors of Production Q: What is meant by factors of production? Ans: The means to produce goods and services are called economic resources, or factors of production.

9. Introduction to Business, Economic Resources and SystemsSlide 9 of 77 Figure 2.1 YOUR ECONOMIC REALITY AT A GLANCE The average American spends $7 a day on food. People spend less than half of that money on home-cooked meals. Recreate the table below. Insert a check mark in the appropriate square based on your eating experience in one week. How do your choices influence your economic situation?

10. Introduction to Business, Economic Resources and SystemsSlide 10 of 77 Factors of production 1. Natural Resources The raw materials found in nature are called natural resources. Natural resources become factors of production when we use them to produce goods.

11. Introduction to Business, Economic Resources and SystemsSlide 11 of 77 Natural Resources The economy of many countries is based on their natural resources.

12. Introduction to Business, Economic Resources and SystemsSlide 12 of 77 Natural Resources Renewable resources: Resources which can be reproduced like wheat and cattle, are renewable. Non Renewable Resources: Resources are limited or cannot be reproduced,like coal, iron, and oil.

13. Introduction to Business, Economic Resources and SystemsSlide 13 of 77 Natural Resources The amount of natural resources available to a society has a direct effect on its economy.

14. Introduction to Business, Economic Resources and SystemsSlide 14 of 77 2. Human Resources The knowledge, efforts, and skills people bring to their work are called human resources, or labor.

15. Introduction to Business, Economic Resources and SystemsSlide 15 of 77 Human Resources Labor can be skilled or unskilled, physical or intellectual.

16. Introduction to Business, Economic Resources and SystemsSlide 16 of 77 Capital Resources Capital resources are the things used to produce goods and services For Example: buildings, materials, and equipment.

17. Introduction to Business, Economic Resources and SystemsSlide 17 of 77 Capital Resources As the wants and needs of people change, so do the needs for capital resources.

18. Introduction to Business, Economic Resources and SystemsSlide 18 of 77 Entrepreneurial Resources Meeting the changing wants and needs of people requires entrepreneurial resources. Entrepreneurs improve ways to use resources, or create and produce new ones

19. Introduction to Business, Economic Resources and SystemsSlide 19 of 77 Fast Review 1.What is scarcity? 2.What are the four factors of production? continued

20. Introduction to Business, Economic Resources and SystemsSlide 20 of 77 Fast Review 3.What are some examples of capital resources?

21. Introduction to Business, Economic Resources and SystemsSlide 21 of 77 Making Decisions About Production No society has enough productive resources available to produce everything people want. Every society must, therefore, make choices.

22. Introduction to Business, Economic Resources and SystemsSlide 22 of 77 Basic Economic Questions Rules and regulations determine choices.

23. Introduction to Business, Economic Resources and SystemsSlide 23 of 77 Chp 2.2 Q: How society makes economic choices? Q: what are the three economic questions? What should be produced? How should it be produced? Who should share in what is produced?

24. Introduction to Business, Economic Resources and SystemsSlide 24 of 77 What Should Be Produced? Opportunity cost: Deciding to use a resource for one purpose means giving up the opportunity to use it for something else.

25. Introduction to Business, Economic Resources and SystemsSlide 25 of 77 How Should It Be Produced? When a society decides what to produce, it must also address other types of questions, such as what methods will be used, how many people will work on the production, and what will be the quality of the items produced?

26. Introduction to Business, Economic Resources and SystemsSlide 26 of 77 How Should It Be Produced? The answers to these questions depend on two factors. One factor depends on how goods are to be produced. Another important factor is the quantity of available resources.

27. Introduction to Business, Economic Resources and SystemsSlide 27 of 77 Who Should Share in What Is Produced? This question focuses on the concept that people can’t get everything that they want because society doesn’t have enough resources.

28. Introduction to Business, Economic Resources and SystemsSlide 28 of 77 Who Should Share in What Is Produced? In most societies, people can have as many goods and services as they can afford to buy.

29. Introduction to Business, Economic Resources and SystemsSlide 29 of 77 Who Should Share in What Is Produced? The question arises as to how a society determines the income earned by each individual in that society?

30. Introduction to Business, Economic Resources and SystemsSlide 30 of 77 Blood Is Thicker Than Oil Occidental Petroleum Corp. is exploring for oil in Columbia. However, the U’wa people oppose oil exploration on the land they have lived on for thousands of years. For them, oil is the “blood of Mother Earth.” continued

31. Introduction to Business, Economic Resources and SystemsSlide 31 of 77 The problem is more complex because the Columbian government supports the oil production, which will bring development to the country. continued Blood Is Thicker Than Oil

32. Introduction to Business, Economic Resources and SystemsSlide 32 of 77 Who has the right to the land—the U’wa people, or the Columbian government? Analyze

33. Introduction to Business, Economic Resources and SystemsSlide 33 of 77 Fast Review 1.When a society chooses to use a resource for one purpose and gives up the opportunity to use it for some other purpose, what cost is involved? continued

34. Introduction to Business, Economic Resources and SystemsSlide 34 of 77 Fast Review 3.In most countries, what determines how many goods and services a person can buy?

35. Introduction to Business, Economic Resources and SystemsSlide 35 of 77 Types of Economic Systems Economics The study of how individuals and groups of individuals strive to satisfy their needs and wants by making choices Economic Systems: Are the methods used by societies to distribute the rsourcses.

36. Introduction to Business, Economic Resources and SystemsSlide 36 of 77 Market Economy In a market economy economic decisions are made in the marketplace according to the laws of supply and demand.

37. Introduction to Business, Economic Resources and SystemsSlide 37 of 77 Types of Economic Systems The primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.

38. Introduction to Business, Economic Resources and SystemsSlide 38 of 77 Q: who own the resources in a capitalist system? Ans: Resources are privately owned. A market economy is also called capitalism, or private enterprise.

39. Introduction to Business, Economic Resources and SystemsSlide 39 of 77 Advantages of Market Economy: Offers incentives, such as competition and the profit motive, to produce more. The constant demand for new goods and services encourages entrepreneurship. Disadvantages of Market Economy: Uneven distribution of income Owners and producers reap the most rewards.

40. Introduction to Business, Economic Resources and SystemsSlide 40 of 77 Demand is the amount or quantity of goods and services that consumers are willing to buy at various prices. Market Economy The Market and Prices

41. Introduction to Business, Economic Resources and SystemsSlide 41 of 77 Supply is the amount of goods and services that producers will provide at various prices. Market Economy The Market and Prices

42. Introduction to Business, Economic Resources and SystemsSlide 42 of 77 The higher the price, the fewer consumers will buy an item. The lower the price, the more consumers will buy an item. Market Economy The Market and Prices

43. Introduction to Business, Economic Resources and SystemsSlide 43 of 77 Figure 2.2 VISUALIZING DEMAND AND SUPPLY Remember these two points: (1) The demand curve always falls left to right on a graph, and (2) the supply curve always rises from left to right on the graph. How many CDs will be demanded at $16 a piece? How many CDs will be supplied at $18 a piece?

44. Introduction to Business, Economic Resources and SystemsSlide 44 of 77 Q: what is meant by equilibrium price? When the quantity demanded and the quantity supplied meet, the price is called the equilibrium price. Price is the amount of money given or asked for when goods and services are bought or sold.

45. Introduction to Business, Economic Resources and SystemsSlide 45 of 77 Types of Economic Systems Q: what are the two basic and opposing economic systems? Market economy Command economy

46. Introduction to Business, Economic Resources and SystemsSlide 46 of 77 Graphic Organizer What should be produced? What should be produced? Basic Economic Questions Graphic Organizer MARKET ECONOMY Economic decisions are made in the marketplace according to the laws of supply and demand. How should it be produced? How should it be produced? Who should share in what is produced? Who should share in what is produced? COMMAND ECONOMY Government makes all key economic decisions. MIXED ECONOMY ECONOMY Combination market and command economy.

47. Introduction to Business, Economic Resources and SystemsSlide 47 of 77 Command Economy In a command economy a central authority makes the key economic decisions. A command economy is also called a planned or managed economy.

48. Introduction to Business, Economic Resources and SystemsSlide 48 of 77 Advantages of Command Economy: Guarantees everyone an equal standard of living Disadvantages of Command Economy: There is little choice of what to buy There is no incentive for entrepreneurship when you can’t run your own business. Highly skilled and low skilled workers may earn the same wages

49. Introduction to Business, Economic Resources and SystemsSlide 49 of 77 Mixed Economy : Mixed Economy : An economy that contains both private and public enterprises The state takes care of people’s needs while the marketplace takes care of people’s wants.

50. Introduction to Business, Economic Resources and SystemsSlide 50 of 77 H.W 1.What is the difference between a market economy and a command economy? continued

51. Introduction to Business, Economic Resources and SystemsSlide 51 of 77 Fast Review 3.What are the advantages and disadvantages of a command economy and a market economy?

52. Introduction to Business, Economic Resources and SystemsSlide 52 of 77 What are some examples of renewable and nonrenewable resources? continued

53. Introduction to Business, Economic Resources and SystemsSlide 53 of 77 Some stoves use corn as a heating fuel. Based upon the cost savings, do you think the price of corn is high or low? continued

54. Introduction to Business, Economic Resources and SystemsSlide 54 of 77 Why do you think other countries are interested in buying corn- burning appliances? continued

55. Introduction to Business, Economic Resources and SystemsSlide 55 of 77 In a command economy, how might a limit on the availability of corn affect the people?

56. Introduction to Business, Economic Resources and SystemsSlide 56 of 77 Graphs are a quick and useful way to visually communicate information. continued Interpreting Line Graphs Business Building Blocks Line graphs often show change over a period of time.

57. Introduction to Business, Economic Resources and SystemsSlide 57 of 77 The left side of a graph is the vertical axis. continued Interpreting Line Graphs Business Building Blocks The bottom of the graph is the horizontal axis.

58. Introduction to Business, Economic Resources and SystemsSlide 58 of 77 Both axes display numbers and a label indicating what the numbers represent. continued Interpreting Line Graphs Business Building Blocks Dots on the graph show numerical information.

59. Introduction to Business, Economic Resources and SystemsSlide 59 of 77 When the dots on the graph are connected, they form a line whose location and direction reveals information about change through time. continued Interpreting Line Graphs Business Building Blocks

60. Introduction to Business, Economic Resources and SystemsSlide 60 of 77 Read the title of the graph Read the label on each axis Understand the numbers on each axis, including the interval used continued How to Interpret a Line Graph Business Building Blocks

61. Introduction to Business, Economic Resources and SystemsSlide 61 of 77 Examine where the dots are located on the graph Determine what the line(s) or curve(s) symbolize continued How to Interpret a Line Graph Business Building Blocks

62. Introduction to Business, Economic Resources and SystemsSlide 62 of 77 Compare the line(s) on the graph to both axes to determine the graph’s meaning How to Interpret a Line Graph Business Building Blocks

63. End of Chapter 2 Economic Resources and Systems