Intro. to Business Name ____________

Ch. 2 - Economic Resources & Systems Date _____________

What is Economics?

n When you were in the middle of doing something have you ever had a shortage of resources?

Factors of Production = Economic Resources

n Scarcity -

n A basic economic problem for any society is…

n 4 Factors of Production:

n Natural Resources

The economy of many countries is based on its natural resources.

n Saudi Arabia…

n Many Latin American countries…

n Other countries have few natural resources…

Renewable vs. Nonrenewable Resources

Renewable Resources

Nonrenewable Resources

Human Resources

n Skilled vs. Unskilled Labor

n U.S. is experiencing a shortage in nurses.

– 78 million baby boomers will begin turning 65 in a decade.

– What is going to happen?

Capital Resources

Entrepreneurial Resources

n The key to dealing with scarcity –

– Example: Pioneer Hi-Bred & DuPont are developing and improving insect resistant corn to protect against corn rootworm, which is a costly expense to farmers.

Fast Review – pg. 22

n What is scarcity?

n What are the four factors of production?

n What are some examples of capital resources?

Making Decisions About Production

Basic Economic Questions

n What and how much…

n How should…

n Who should…

What & how much should be produced?

n Example: Land be used to grow wheat or corn but it cannot also be a site of a factory, park, etc.

How should it be produced?

n What methods will be used?

n 2 Important Factors to Consider:

– How the goods are to be produced?

– Quantity of available resources?

• Example: In a country where there are workers but very little capital resources, it’s probable that little equipment and larger amounts of labor are used in producing goods.

Who should share in what is produced?

Fast Review – pg. 23

n 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?

n What happens to production methods when a country discovers new ways to combine economic resources?

n In most countries, what determines how many goods and services a person can buy?

Types of Economic Systems

n Economics –

n Primary goal of an economic system –

n Opposing Economic Systems:

Market Economy ( , )

n Economic decisions are made according to the laws of _______________ & ________________.

n Price –

Demand

Supply

n Equilibrium Price –

Supply & Demand Curve pg. 24

Market Economy ( , )

n Governmental control is ______________.

– Goal of Government:

n Examples: ____________________ & ____________________

Market Economy Motivators

n Profit Motive -

n Competition -

Problem with Market Economy

n Great ___________ in the midst of ___________.

– An average CEO makes 500 times as much money as an average blue collar worker.

Command Economy ( , )

n A ___________________ makes key economic decisions.

n 2 Types:

– Strong Command Economy – _________________

– Moderate Command Economy - ________________

Strong Command Economy

n AKA - _____________________

n Examples:

Moderate Command Economy

n AKA – __________________

n Examples:

Advantages of Command Economy

Disadvantages of a Command Economy

Mixed Economy

n Combination of a _________________ & _______________ economy.

Fast Review – pg. 27

n What is an economic system?

n What is the difference between a market economy and a command economy?

n What are the advantages and disadvantages of a command economy and a market economy?