MP_2 WHAT IS AN ECONOMY Powerpoint.ppt

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WHAT IS AN ECONOMY?
Economy or Economic System
The way a nation
makes choices.
These choices
involve how the
nation will use its
resources to produce
and distribute goods
and services.
Resources
All things used in producing goods
and services
 Factors of Production – the technical
term economists use for resources

Resource 1 – Land


Everything on the earth in its natural
state / the earth’s natural resources
Resources Include:
–
–
–
Everything contained in the earth or found
in the sea
Coal and crude oil are examples
A lake and all the living
things in the lake are
also examples
Resource 2 – Labor


All the people who
work in the
economy
Labor includes:
–
–
Full and Part-time
Workers
Both the Public
and the Private
sector
Resource 3 - Capital



The money needed to start and operate
a business
The goods used in the production
process
Examples are:
–
–
–
–
Factories
Office Buildings
Computers
Raw materials that are processed
into a more useful form (lumber, steel)
Resource 4 - Entrepreneurship


The skills of the people
willing to risk their time
and money to run a
business
Entrepreneurs organize
the other factors of
production to create the
goods and services
desired in an economy
Infrastructure



The physical development of a
country
Things necessary for
production and distribution of
goods and services
Parts of the infrastructure
include
–
–
–
–
Roads
Ports
Sanitation Facilities
Utilities
Scarcity
The difference between wants and
needs and the resources available to
meet these needs is called Scarcity.
Nations have unlimited wants and
needs but limited resources –
Scarcity forces the nations to make
economic choices.
The Basic Economic Questions


Nations must answer 3 basic economic
questions when deciding to use their
limited resources
The way nations answer these questions
define their economic system
–
–
–
What goods and services should be produced?
How should the goods and services be
produced?
For whom should the goods and services be
produced?
What Should Be
Produced?



Consumers decide what is to
be produced through
purchases made in the market
place.
Items that satisfy the
customer’s needs and wants
are purchased making the
products successful
Items that do not satisfy the
needs and wants of the
consumer are not purchased
and are not successful
How Should Goods and
Services Be Produced?





How products will be produced is left up to the
business
Businesses must be competitive
Businesses must produce quality products at lower
prices than their competitors
Businesses must find the best way to produce goods
and services
Businesses must also find the best way to encourage
customers to purchase their products
For Whom Should Goods and
Services Be Produced?


Those individuals with
the most money are able
to purchase more goods
and services
To obtain money
individuals work and
invest

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