2. OBJECTIVES
Define scarcity
List the four factor of production
Identify the differences between market and
command economies
Explain why most countries prefer a mixed
economy
3. KEY WORDS
Scarcity Economics
Factors of production Market economy
Natural resources Demand
Human resources Supply
Capital resources Equilibrium price
Entrepreneurial Command economy
resources Mixed economy
5. FACTORS OF PRODUCTION
*Production of goods and services and
everything involved in the production
6. FOUR FACTORS OF PRODUCTION
*Natural Resources – raw materials found in
nature
*Human Resources– people and what they
bring to the job
*Capital Resources – things used to produce
goods and services
*Entrepreneurial Resources – starting a new
business or developing new products/services
7. FOUR FACTORS OF PRODUCTION
*Natural Resources – raw materials found
in nature. 2 types of natural resources:
Renewable – can be reproduced (trees, cattle, crops)
Nonrenewable – limited (coal, oil)
The amount of resources available to a society has a
direct effect on its economy
8. SCARCITY
There are not enough available resources to
produce everything people want
Scarcity forces societies to make choices
Should it be produced – competition for resources
How should it be produced – quality of resources
Who should share in what is produced – value of
resources
9. SCARCITY
Dealing with the problem of scarcity
Developing new resources & technology (example: wind
energy/battery operated cars)
10. TYPES OF ECONOMIC SYSTEMS
*Economics – study of how society chooses to
use resources to produce and distribute goods
and services for people’s consumption (use)
11. ECONOMIC SYSTEMS
Needed to use limited resources effectively
Determine how resources will be used
Goal - provide people with a minimum standard
of living, quality of life
12. TWO OPPOSING ECONOMIC
SYSTEMS
*Market economy – economic decisions based
on law of supply & demand (capitalism/private
enterprise)
*Command economy – central authority
(government) makes the key economic decisions
(communism/socialism)
14. MARKET ECONOMY
Marketplace is anywhere money changes hands
Prices plays a big role
Demand plays a big role
15. DEMAND
*Amount of goods/services that consumers
are willing to buy at certain prices
Higher price, lower demand
Demand relationship – downward slope
Lower price, higher demand
16. SUPPLY
*Amount of goods and services that
producers will provide at various prices
Need to cover their costs (and make a profit)
Supply relationship - upward slope
Higher price = increased supply
17. EQUILIBRIUM PRICE
When the quantity demanded and the quantity
supplied meet
Price at which the amount supplied and the
amount demanded meet
18. What resource problem is faced by all societies?
Scarcity of Resources
19. What is the biggest labor problem facing many
countries today?
Shortage of Skilled Labor
20. TYPES OF ECONOMIC SYSTEMS
COMPARE/CONTRAST
Economic What influences economic Other
Systems decisions Names Advantages Disadvantages
Market Economy Market place Capitalism Competition Owners and producers get
Price Private Enterprise Profit most of the rewards
Consumers – demand Resources privately owned Manipulation
Producers – supply Monopolies/Control
Profit driven Resources privately owned -
scarcity
Command Economy Government Communism – state has Equal standard of living Less choice
total control Less crime/poverty Less innovation
Socialism – state owns
major resources,
individuals may own some
businesses
Mixed Economy Government - needs Advantages of both
Private market - wants
21. SUPPLY & DEMAND
What happens to demand as prices rise? Demand decreases
What happens to demand as prices fall? Demand increases
What happens to supply as prices rise? Supply increases
What happens to supply as prices fall? Supply decreases
Editor's Notes
Individually, as a society, and our government has to decide how to manage its resources You make choices between wants and needs – eating out vs eating at home (how do your choices affect your economic situation $$)
Go wheat, tractor harvests, labor to turn it into flour
Human –lack of skilled workers Capital – not money, but buildings, materials, equipment, delivery trucks, computer Entrepreneurs – help us deal with scarcity by developing new resources (disease resistance crops)
Human –lack of skilled workers Capital – not money, but buildings, materials, equipment, delivery trucks, computer Entrepreneurs – help us deal with scarcity by developing new resources (disease resistance crops)
Scarcity forces societies to make choices; not enough available resources to produce everything people want Land – do we keep farm land or do we build houses Quality of resources – miners; danger of the mines, mine cheaply and cut corners on safety Value – is it based on wealth
Scarcity forces societies to make choices; not enough available resources to produce everything people want Land – do we keep farm land or do we build houses Quality of resources – miners; danger of the mines, mine cheaply and cut corners on safety Value – is it based on wealth
Market economy is profit driven – desire to make more money; owners get most of the rewards Average chief executive makes more than 500 times as much as the average worker; monopolies – control market Socialism – equal standard of living, less choices, lower quality, less innovation Mixed – state takes care of people’s needs and market taeks care of people’s wants – most countries have some of each
Market economy is profit driven – desire to make more money; owners get most of the rewards Average chief executive makes more than 500 times as much as the average worker; monopolies – control market Socialism – equal standard of living, less choices, lower quality, less innovation Mixed – state takes care of people’s needs and market taeks care of people’s wants – most countries have some of each
Price is low and won’t make a profit – won’t produce; high and make a profit – will produce Profit - money left after we take care of all the expenses to produce a good/service
Producers supply more at a higher price because selling more at higher prices increases revenue