1. Economic Resources and Systems
Chapter 2 Day 1

2. What is Economics?
Simply put, economics is the study of making choices

3. Why do we need Economics?
We need economics because, we as individuals and as a society, experience scarcity (of raw materials) in relationship to our ever-growing needs and wants

4. Economics examines how we make choices
A new car or college tuition?
More schools or more highways?
More free time or more income from work?
Buy gas or eat for a month?
It gives us a way of understanding how to make best use of natural resources, machinery, and people’s work efforts

5. A basic economic problem for any society is how to manage its resources

6. A resource is anything people can use, such as fuel, labor, or money, to make or obtain what they need or want

7. Unlimited wants vs. limited resources
Scarcity
A scarcity is a shortage of resources to satisfy the wants and needs of its people
Unlimited wants vs. limited resources
Name a resource that is scarce

8. Examples of Scarcity
Oil
Nurses
Water
Flu Vaccine
Skilled Workers
Time

9. Factors of Production
Components necessary to produce a society’s goods and services
Natural Resources
Human Resources
Capital Resources
Entrepreneurial Resources

10. Natural Resources Raw materials found in nature
Basic elements that can be combined in various ways to create goods
Nylon – synthetic material derived from coal, water, and air
Natural resources become factors of production when used to produce goods

11. Renewable Resource
Can be reproduced
Wheat
Cattle
Corn

12. Nonrenewable Resource
Limited
Coal
Iron
Crude Oil

13. Human Resources
The knowledge, efforts, and skills people bring to their work
Teachers
Coal miners
Bank managers
Farmers

14. Capital Resources Things used to produce goods and services Buildings
Materials
Equipment

15. Entrepreneurial Resources
Entrepreneurs recognize the need for new goods and services
They improve on ways to use resources, or create and produce new ones

16. Types of Economic Systems
Market economy
Command economy
Mixed economy
Part 2 Notes Tomorrow

17. Market Economy
Economic decisions are made in the marketplace according to the laws of supply and demand

18. Demand
The amount or quantity of goods and services that consumers are willing to buy at various prices
How many new release video games would you buy if each one costs….
$90?
$45?
$15?

19. Quantity of New Release Video Games Demanded
Demand Curve for CDs
Quantity of New Release Video Games Demanded

20. Supply
The amount of goods and services that producers will provide at various prices
If you were a business owner, how many new release video games would you produce if you could sell them for…
$90?
$45?
$15?

21. Quantity of New Release Video Games Supplied
Supply Curve for CDs
Quantity of New Release Video Games Supplied

22. Equilibrium Price
When the quantity demanded and the quantity supplied meet

23. Quantity of New Release Video Games
Equilibrium Price
Supply
Equilibrium Price P1
Demand Q1
Quantity of New Release Video Games

24. The Law of Supply and Demand in Action
“China Addicted to Oil, Too?”
CBS News Reported 4/20/2006
“Food Chain Economics”
CBS News Reported 7/20/2007

25. Capitalism Private enterprise system Resources are privately owned
You can own your own home
Your own land
Your own business
Government control is minimal
Primary role of government is to support the marketplace by removing obstacles such as trade barriers

26. Incentives Competition Profit motive
Businesses compete for customers by producing better and cheaper products
Constant demand for new goods and services encourages entrepreneurship
Profit motive
The desire to make more money
Incentive to work harder and longer if you can make more money

27. Problem Owners and producers reap the most rewards.
Unskilled workers and older adults are often unable to afford basic needs such as health care

28. Command Economy Planned or managed economy
A central authority, usually the government, makes the key economic decisions
Communism
State controls all the resources for the common good
Socialism
State owns major resources and makes key economic decisions
However, individuals may own some businesses

29. Advantages Guarantees everyone an equal standard of living
The state provides you with a job, a place to live, and health care
Goods and services are distributed evenly

30. Disadvantages Little choice of what to buy
Goods that aren’t considered necessities are not available
Prices are fixed so there is no incentive to produce a better product
Wages are fixed
Doctors earn the same as an unskilled worker

31. Mixed Economy A combination of a market and command economy
The state takes care of people’s needs while the market takes care of their wants
The United States is said to have a mixed economy because privately owned businesses and government both play important roles.