1. Marketing Ch. 4
World Economics

2. What is an Economy?
The way in which the nation makes economic choices.
The choice is how do we use our resources to produce and distribute goods and services.

3. Resources/Factors of Production
These are the things used in producing goods and services
Consist of land, labor, capital and entrepreneurship.

4. Factors of Production Land Labor
Everything on the earth that is in its natural state
Includes everything contained in the earth and found in the sea
Labor
Refers to the people that work
Full-time and part-time workers

5. Factors of Production Capital
Money needed to start and operate the business
Goods used in the production process
Factories, office building, and tools
Raw materials
Infrastructure (roads, ports, sanitation facilities and utilities)

6. Factors of Production Entrepreneurship
People who are willing to risk their time and money to run a business.
Organize factors of production to create the goods and services desired in our economy

7. Scarcity
Difference between wants and needs on one hand and the available resources on the other hand.
Forces everyone to make CHOICES

8. Basic Economic Questions
What goods and services should be produced?
How should we produce those goods and services?
For whom should the goods and services be produced?

9. Three Economic Systems
Market Economy (Captialist)
Command Economy (Planned)
Mixed Economy

10. Market Economics No government involvement in economic decisions
The market answers the three economic questions
Consumers decide what to produce, how to produce it, and those with more money buy more goods and services.

11. Command Economy The government answers the three economic questions.
Dictator decides what will be produced
Government runs all business
Government decides who will get what product.
Nation shares equally

12. Mixed Economy Combination of both market and command economic systems
All economies in the world today are mixed
Classification now is based on how much the government is involved
Capitalism
Socialism
Communist

13. Capitalism Practice democracy
Characterized by private ownership of businesses and marketplace competition
Examples are US and Japan

14. Socialism Most countries today
What makes it different is the amount of government involvement
Government tries to reduce the difference between the rich and the poor
Key industries are run by the government
Idea is to keep prices low and provide employment for everyone

15. Socialism Country tends to have more social services
Medical care is free along with education
Paid for by the businesses and individuals pay taxes
People tend to pay higher taxes
Examples: Germany, Great Britain, Sweden, Austria, and France

16. Communist Countries have totalitarian form of government
Government runs everything in one party
Everyone shares common economic and political goals
Those able to work are assigned jobs
Examples are: Cuba and North Korea

17. Privatization
Process of selling government-owned business to private individuals
Why do the governments sell the businesses?

18. When is an economy successful?
Nations look to see how they are doing
They look at economic measurements
They look at the business cycle
Standard of Living

19. Economic Measurements
Productivity
Is the output per worker hours
Measured over a period of time (week, month, year)
Ways in which to increase productivity
Invest in new equipment or facilities
Allows workers to work more efficiently
Provide additional training or financial incentive
Reduce the work force and increase responsibility

20. Economic Measurements
Gross Domestic Product (GDP)
Keeping track of an entire nations production output
It is a measurement of the goods and services produced using labor and property located in the country
Gross National Product (GNP)
Looks at what's produced in this country and abroad by our companies

21. Economic Measurement Standard of Living
Is a measurement of the goods and services that a nation's people have
Reflects the quality of life
Inflation
Rising prices
When prices rise, the money people have does not get them as much
Government raises interest rates which reduces everyone’s ability to buy
Opposite would be deflation

22. Economic Measurement Standard of Living Consumer Price Index (CPI)
Measures the change in price over a time of goods and services used by the average household
Unemployment
Charts the number of people will and able not working

23. The Business Cycle Prosperity Period of economic growth
Low unemployment
Increase in output of goods and services
High consumer spending

24. The Business Cycle Recession Period of economic slowdown
Unemployment begins to rise
Fewer goods and services are produced
Consumer spending decreases

25. The Business Cycle Recovery
Period of renewed economic growth following a recession or depression
Reduced unemployment
Increased consumer spending
Moderate expansion by businesses

26. The Business Cycle Depression Period of prolonged and deep recession
Consumer spending is very low
Unemployment is very high
Production of goods and services are down significantly
Poverty results because people are out of work

27. Government Influences
Taxation has a strong bearing on what happens in an economy
Interest rate control spending