1. Chapter 3 – Political and Economic Analysis
Unit 2 - Economics

2. 3.1 What is an economy?
The organized way a nation provides for the needs and wants of its people.
A nation chooses how to use its resources to provide and distribute good and services
A country’s resources determine economic activities such as manufacturing, buying, selling, transporting, and investing.

3. Resources
Resources
All the things used in producing goods and services
Economists use the term Factors of Production when they talk about resources
The factors of production comprise 4 categories:
Land, Labor, Capital, and Entrepreneurship

4. Land
Land includes everything contained in the earth or found in the seas.
Ex. Coal and Crude Oil are natural resources
Natural resources are used as raw material for making goods and creating services that are marketed to customers.
Climate and geography can also be an example

5. Labor Labor refers to all the people who work.
It includes:
Full/part time
Managers
Professionals in both private and public sectors
Economies with well trained, well educated labor have an advantage over other nations in attracting business

6. Capital Includes money to start and operate a business.
Also includes the goods in the production process

7. Infrastructure Capital includes infrastructure
Which is the physical development of a country
Includes roads, ports, sanitation, facilities, and utilities, especially telecommunications

8. Entrepreneurship
Refers to the skills of people who are willing to invest their time and money to run a business
They organize factors of production to create the goods and services that are part of an economy

9. Economics and the Shopping Mall
The local shopping mall is a good place to observe economic principals.
Labor is represented by salespeople
Capital is the money that was invested in manufacturing products and selling them
What are examples of the other 2 factors of production (land and entrepreneurship)?
The location of the mall for land, business owners for entre.

10. Scarcity
The difference between wants and needs and available resources

11. How does an Economy Work?
Nations must answer three basic questions when deciding how to use their limited resources.
Which goods and services should be produced?
How should the goods and services be produced?
For whom should the goods and services be produced?
Dubai Example
Location
60 Minutes Video
Pictures

12. Traditional Economies
Traditions and rituals answer the basic questions of what, how, and for whom.
Answers are also based on:
Cultural
Religious practices
ideals (passed from one generation to the next)

13. Market Economies
There is no government involvement in economic decisions
The government lets the market answer the three basic economic questions
What
How
For Whom

14. Command Economy
A country’s government makes economic decisions and decides what, when, and how much will be produced and distributed.
The government controls the factors of productions and makes all decisions about their use.

15. Capitalism Marketplace competition and private ownership of business
Government is concerned about
People
Cares for those that cannot care for themselves
United States and Japan are examples

16. Communism Government controls the factors of production
No private ownership of property or capital
The theory
Goods owned in common are available to all as needed
Very few left
Cuba, North Korea, and China are examples

17. Socialism
Originally referred to a system that was on its way to turning communist.
The main goal is to meet basic needs for all and to provide employment for many
Canada, Germany, and Sweden

18. 3.2 Understanding the Economy
The Economy and Marketing
If you are a marketer and you want to perform a useful SWOT analysis you need to consider the economic factors that will influence your marketing plan.

19. When is an economy successful?
A healthy economy has three goals:
Increase productivity
Decrease unemployment
Maintain stable prices
All nations analyze their economies to keep track of how well they are doing
How is the US economy now?

20. Producers and Consumers
A nation's economy is the production and consumption of goods (food, clothes, cars) and services (repairs, lawn-mowing, haircuts) in that nation
Anybody producing or consuming things in a country plays some role in the economy.
­Production and consumption are intertwined.

21. Supply and Demand
The ultimate goal of producers is to make money
Consumers may want to satisfy their wants and needs by buying products
Producers are the ones who actually set prices, but they do so based on the behavior of consumers.

22. Supply and Demand Cont.
If nobody buys a product at a particular price, the producer knows the price is too high.
If some consumers buy it, but not enough to buy everything produced, producers must either decrease the price or decrease the supply.

23. Supply and Demand Cont.
The willingness of consumers to pay for products is known as demand.
Even if there is constant high demand for a product (toilet paper, for example), individual producers need to keep the price down or consumers will just buy it from a competitor.

24. Business Cycle The recurring changes in economic activity Expansion
When the economy is flourishing, sometimes referred to as a period of prosperity
Recession
A period of economic slowdown that lasts for at 6 months
Depression
A period of prolonged recession

25. Recession
A recession is a prolonged period of time when a nation's economy is slowing down, or contracting. Such a slow-down is characterized by a number of different trends, including:
People buying less stuff
Decrease in factory production
Growing unemployment
Slump in personal income
An unhealthy stock market
By the conventional definition, this slow-down has to continue for at least six months to be considered a recession.

26. Assignment
Page 69
#21-25
Page 70
#29-30

27. The Great Depression
Video - American History: America's Economy: Sorrow and Hope
Questions:
What were some causes of the great depression?
What happened to the residents of the dust bowl?