8/31/09. Understanding economic resources and economic systems is essential to lessening economic problems.

Transcription

1 Chapter 2 Economic Resources and Systems pp Back to Table of Contents Introduction to Business, Economic Resources and Systems Slide 2 of 64 Understanding economic resources and economic systems is essential to lessening economic problems. Introduction to Business, Economic Resources and Systems Slide 3 of 64 scarcity factors of production natural resources human resources capital resources entrepreneurial resources economics Introduction to Business, Economic Resources and Systems Slide 4 of 64 A shortage of resources is called scarcity. A basic economic problem for any society is how to manage its resources. To meet the wants and needs of its people, a society must produce goods and services. The means to produce them are called economic resources, or factors of production. Introduction to Business, Economic Resources and Systems Slide 5 of 64 Introduction to Business, Economic Resources and Systems Slide 6 of 64 1

2 The raw materials found in nature are called natural resources. Natural resources become factors of production when we use them to produce goods. The economy of many countries is based on their natural resources. Introduction to Business, Economic Resources and Systems Slide 7 of 64 Introduction to Business, Economic Resources and Systems Slide 8 of 64 Some resources, like wheat and cattle, are renewable. They can be reproduced. The amount of natural resources available to a society has a direct effect on its economy. Other resources are limited, or nonrenewable, like coal, iron, and oil. Introduction to Business, Economic Resources and Systems Slide 9 of 64 Introduction to Business, Economic Resources and Systems Slide 10 of 64 The knowledge, efforts, and skills people bring to their work are called human resources, or labor. Labor can be skilled or unskilled, physical or intellectual. One of the biggest problems facing many nations today is not a shortage of labor but a shortage of skilled labor. Introduction to Business, Economic Resources and Systems Slide 11 of 64 Introduction to Business, Economic Resources and Systems Slide 12 of 64 2

3 Capital resources are the things used to produce goods and services, like buildings, materials, and equipment. As the wants and needs of people change, so do the needs for capital resources. Introduction to Business, Economic Resources and Systems Slide 13 of 64 Introduction to Business, Economic Resources and Systems Slide 14 of 64 Meeting the changing wants and needs of people requires entrepreneurial resources. Entrepreneurs improve on ways to use resources, or create and produce new ones. A key to dealing with scarcity is to develop new resources and technologies. Introduction to Business, Economic Resources and Systems Slide 15 of 64 Introduction to Business, Economic Resources and Systems Slide 16 of What is scarcity? 2. What are the four factors of production? 3. What are some examples of capital resources? Introduction to Business, Economic Resources and Systems Slide 17 of 64 Introduction to Business, Economic Resources and Systems Slide 18 of 64 3

4 No society has enough productive resources available to produce everything people want. Rules and regulations determine choices. Every society must, therefore, make choices. Introduction to Business, Economic Resources and Systems Slide 19 of 64 Introduction to Business, Economic Resources and Systems Slide 20 of 64 A society makes economic choices by answering three economic questions: What should be produced? How should it be produced? Who should share in what is produced? Introduction to Business, Economic Resources and Systems Slide 21 of 64 Deciding to use a resource for one purpose means giving up the opportunity to use it for something else. Introduction to Business, Economic Resources and Systems Slide 22 of 64 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? Introduction to Business, Economic Resources and Systems Slide 23 of 64 This question focuses on the concept that people can t get everything that they want because society doesn t have enough resources. Introduction to Business, Economic Resources and Systems Slide 24 of 64 4

5 In most societies, people can have as many goods and services as they can afford to buy based on the income they receive. 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? Introduction to Business, Economic Resources and Systems Slide 25 of 64 Introduction to Business, Economic Resources and Systems Slide 26 of What happens to production methods when a country discovers new ways to combine economic resources? 3. In most countries, what determines how many goods and services a person can buy? Introduction to Business, Economic Resources and Systems Slide 27 of 64 Introduction to Business, Economic Resources and Systems Slide 28 of 64 Chapter 2 Economic Resources and Systems pp Back to Table of Contents Introduction to Business, Economic Resources and Systems Slide 30 of 64 5

6 market economy demand supply equilibrium price command economy mixed economy Economics studies how society chooses to use resources to produce and distribute goods and services for people s consumption. Introduction to Business, Economic Resources and Systems Slide 31 of 64 Introduction to Business, Economic Resources and Systems Slide 32 of 64 To use its limited resources effectively, every nation needs an economic system. The primary goal of an economic system is to provide people with a minimum standard of living, or quality of life. Introduction to Business, Economic Resources and Systems Slide 33 of 64 Introduction to Business, Economic Resources and Systems Slide 34 of 64 The two basic and opposing economic systems that have been developed are: Market economy Command economy In a market economy economic decisions are made in the marketplace according to the laws of supply and demand. Introduction to Business, Economic Resources and Systems Slide 35 of 64 Introduction to Business, Economic Resources and Systems Slide 36 of 64 6

7 Price is the amount of money given or asked for when goods and services are bought or sold. Demand is the amount or quantity of goods and services that consumers are willing to buy at various prices. Introduction to Business, Economic Resources and Systems Slide 37 of 64 Introduction to Business, Economic Resources and Systems Slide 38 of 64 The higher the price, the fewer consumers will buy an item. The lower the price, the more consumers will buy an item. Supply is the amount of goods and services that producers will provide at various prices. Introduction to Business, Economic Resources and Systems Slide 39 of 64 Introduction to Business, Economic Resources and Systems Slide 40 of 64 Figure 2.2 VISUALIZING DEMAND AND SUPPLY Demand and supply work together. When the quantity demanded and the quantity supplied meet, the price is called the equilibrium price. Introduction to Business, Economic Resources and Systems Slide 41 of 64 How many CDs will be demanded at $16 a piece? How many CDs will be supplied at $18 a piece? 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. Introduction to Business, Economic Resources and Systems Slide 42 of 64 7

8 Capitalism, or private enterprise, is a market economy system. In a capitalist system, resources are privately owned. In a capitalist system, the primary role of government is to support the marketplace by removing obstacles such as trade barriers. Introduction to Business, Economic Resources and Systems Slide 43 of 64 Introduction to Business, Economic Resources and Systems Slide 44 of 64 A market economy offers incentives, such as competition and the profit motive, to produce more. The profit motive is the reward for taking a risk that encourages people to start businesses. Introduction to Business, Economic Resources and Systems Slide 45 of 64 Introduction to Business, Economic Resources and Systems Slide 46 of 64 A market economy provides the individual with the freedom to choose from many different competing products, and the freedom to start a business or choose a career. The problem with a market economy is that those who do not have the wanted job skills do not get an income. Introduction to Business, Economic Resources and Systems Slide 47 of 64 Introduction to Business, Economic Resources and Systems Slide 48 of 64 8

9 Another problem in a market economy is that sometimes one or two businesses control the market, thus leading to higher prices and lower quality products. In a command economy a central authority makes the key economic decisions. A command economy is also called a planned or managed economy. Introduction to Business, Economic Resources and Systems Slide 49 of 64 Introduction to Business, Economic Resources and Systems Slide 50 of 64 There are two types of command economies. In a strong command economy, such as communism, the state makes all the economic decisions. In a moderate command economy, also called socialism, there is some form of private enterprise. Introduction to Business, Economic Resources and Systems Slide 51 of 64 Introduction to Business, Economic Resources and Systems Slide 52 of 64 The primary advantage of a command economy is that it guarantees everyone an equal standard of living. There are some disadvantages to a command economy. Since the state provides all goods and services in a strong command economy, there is little choice of what to buy. Introduction to Business, Economic Resources and Systems Slide 53 of 64 Introduction to Business, Economic Resources and Systems Slide 54 of 64 9

10 Another disadvantage to the command economy is that there is no incentive for entrepreneurship when you can t run your own business. Most nations have a mixed economy, a combination of a market and command economy. The state takes care of people s needs while the marketplace takes care of people s wants. Introduction to Business, Economic Resources and Systems Slide 55 of 64 Introduction to Business, Economic Resources and Systems Slide 56 of 64 Graphic Organizer Combination market and command economy. Economic decisions are made in the marketplace according to the laws of supply and demand. What should be produced? How should it be produced? Who should share in what is produced? Government makes all key economic decisions. Introduction to Business, Economic Resources and Systems Slide 57 of Summarize how economic decisions in the market economy are made. 2. Compare the types of economic systems. Introduction to Business, Economic Resources and Systems Slide 58 of What are the advantages and disadvantages of a command economy and a market economy? End of Chapter 2 Economic Resources and Systems pp Introduction to Business, Economic Resources and Systems Slide 59 of 64 Back to Table of Contents 10