Economics
Production, Consumption and
Distribution
Four Questions all
Economic Systems
must Address
Four Questions All Economic Systems
must address…

l 

What is produced?
*Production*
Goods and services must satisfy the...
Four Questions All Economic Systems
must address…
l 

HOW should these goods be produced?

*Factors of Production*
1. 
2....
Four Questions All Economic Systems
must address…
For WHOM are the goods and services
produced?
*Distribution*
Getting the...
Four Questions All Economic Systems
must address…
HOW MANY goods and services should be
produced?
*Consumption*
Make enoug...
Supply and Demand
Supply and Demand…
l 
l 

l 

Scarcity is the inability to satisfy all wants at
the same time due to limited resources
...
Scarcity
Choices
Price
Supply and Demand determine price
through their interaction
l 

DEMAND: is the
amount of a good or
service that consumers...
LAW OF SUPPLY :
Businesses will provide more products
when they can sell them at higher prices

LAW OF DEMAND:
Buyers will...
Incentives

l 
l 
l 

Incite or motivate
Change economic
behavior
Something that spurs
someone into action:
sale, coupo...
Resources, Scarcity &
Opportunity Cost
Good
l 
l 
l 
l 

Anything that can be grown or manufactured
(made)
Food
Clothes
Cars
Service
l 
l 
l 
l 

Something a person does for someone else
in exchange for money or value.
Doctor
Hairdresser
waite...
Resources
l 
l 
l 
l 

Natural
Human
Capital
Combine to make goods and services
Our Basic Economic Problem…
People have Unlimited Wants
l 
l 
l 
l 
l 
l 
l 

Food
Clothing
Shelter
Schools
Hospitals
Cars
Transportation
But Resources are Limited
l 
l 
l 
l 
l 
l 
l 

Land
Soil
Minerals
Fuels
People
Money
Technology
Scarcity
l 
l 

The inability to satisfy all wants at the same
time;
the NEEDS are greater than the
RESOURCES
Since resources are LIMITED consumers and
producers must make CHOICES
l 

CHOICE: selecting
from a set of
alternatives

l...
*Scarcity forces us to choose which
needs and wants to satisfy with
available resources.
*Scarcity affects decisions
conce...
Production: (sellers)

Consumption (buyers)

*Combining resources to
make goods and
services.

*Using goods and
services

...
SELLER

Buyer
Economic Systems
Command Economy
l 

l 

l 

The central government
makes decisions and
determines how
resources will be used.
The centr...
Socialism
Allows for wider range of free enterprise along with
government-run activities
l  3 goals:
– 
– 
– 

The equal ...
Mixed Economy
l 
l 

l 

l 
l 

Most common type of
economic system
Government and individuals
share the decision mak...
Free Market Economy
l 
l 

l 
l 

Also known as capitalism
or free enterprise
Private ownership of
property and resour...
Money left
over after
all business
expenses
have been
paid.

COMPETITION
PROFIT

FREE
MARKETS

Markets are
allowed to oper...
Economics Presentation
Economics Presentation
Economics Presentation
Economics Presentation
Economics Presentation
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Economics Presentation

  1. 1. Economics
  2. 2. Production, Consumption and Distribution Four Questions all Economic Systems must Address
  3. 3. Four Questions All Economic Systems must address… l  What is produced? *Production* Goods and services must satisfy the consumers wants and desires
  4. 4. Four Questions All Economic Systems must address… l  HOW should these goods be produced? *Factors of Production* 1.  2.  3.  Capital Land Labor Combine the factors of production to make or produce the goods and services
  5. 5. Four Questions All Economic Systems must address… For WHOM are the goods and services produced? *Distribution* Getting the goods and services from producer to consumer l 
  6. 6. Four Questions All Economic Systems must address… HOW MANY goods and services should be produced? *Consumption* Make enough to have a large profit and still have consumer demand. How many is determined by supply and demand. l 
  7. 7. Supply and Demand
  8. 8. Supply and Demand… l  l  l  Scarcity is the inability to satisfy all wants at the same time due to limited resources Choices must be made as to what to produce, how much to produce and who will receive what is produced. PRICE: Mechanism to decide who gets goods and services. The amount that satisfies both producers for profit and consumers for value.
  9. 9. Scarcity
  10. 10. Choices
  11. 11. Price
  12. 12. Supply and Demand determine price through their interaction l  DEMAND: is the amount of a good or service that consumers are willing and able to buy at a certain price l  SUPPLY: is the amount of a good or service that producers are willing and able to sell at a certain price.
  13. 13. LAW OF SUPPLY : Businesses will provide more products when they can sell them at higher prices LAW OF DEMAND: Buyers will demand more products when they can buy them at lower prices
  14. 14. Incentives l  l  l  Incite or motivate Change economic behavior Something that spurs someone into action: sale, coupons, etc.
  15. 15. Resources, Scarcity & Opportunity Cost
  16. 16. Good l  l  l  l  Anything that can be grown or manufactured (made) Food Clothes Cars
  17. 17. Service l  l  l  l  Something a person does for someone else in exchange for money or value. Doctor Hairdresser waiter
  18. 18. Resources l  l  l  l  Natural Human Capital Combine to make goods and services
  19. 19. Our Basic Economic Problem…
  20. 20. People have Unlimited Wants l  l  l  l  l  l  l  Food Clothing Shelter Schools Hospitals Cars Transportation
  21. 21. But Resources are Limited l  l  l  l  l  l  l  Land Soil Minerals Fuels People Money Technology
  22. 22. Scarcity l  l  The inability to satisfy all wants at the same time; the NEEDS are greater than the RESOURCES
  23. 23. Since resources are LIMITED consumers and producers must make CHOICES l  CHOICE: selecting from a set of alternatives l  OPPORTUNITY COST: what is given up when the choice is made.
  24. 24. *Scarcity forces us to choose which needs and wants to satisfy with available resources. *Scarcity affects decisions concerning what and how much to produce, how goods and services will be produced and who will get what is produced
  25. 25. Production: (sellers) Consumption (buyers) *Combining resources to make goods and services. *Using goods and services *Available resources and consumer preference determine what is produced *Consumer preference and price determine what is purchased
  26. 26. SELLER Buyer
  27. 27. Economic Systems
  28. 28. Command Economy l  l  l  The central government makes decisions and determines how resources will be used. The central government owns property and resources. Businesses are not run for profit. l  l  l  l  l  Businesses are not run for profit. No competition Lack of consumer choice The government sets the prices of goods and services. China, North Korea, Cuba
  29. 29. Socialism Allows for wider range of free enterprise along with government-run activities l  3 goals: –  –  –  The equal distribution of wealth & economic opportunity Society’s control, through its government, of all major decisions of production Public ownership of most land, factories, and other means of production. Democratic Socialism – people have basic human rights and elect their political leaders, even though government controls certain industries.
  30. 30. Mixed Economy l  l  l  l  l  Most common type of economic system Government and individuals share the decision making process Individuals and businesses make decisions for the private sector Individuals own the means of production Government makes plans for the public sector l  l  l  l  Government guides and regulates production of goods and services offered. A greater government role than in a free market economy Most effective economy for providing goods and services U.S. and most Western European countries are mixed economies
  31. 31. Free Market Economy l  l  l  l  Also known as capitalism or free enterprise Private ownership of property and resources (owned by individuals) Individuals and businesses make profits Individuals and businesses compete l  l  l  l  Economic decisions are made by supply and demand Profit is a motivator for productivity No government involvement Consumer sovereignty: buyers determine what is produced
  32. 32. Money left over after all business expenses have been paid. COMPETITION PROFIT FREE MARKETS Markets are allowed to operate without undue interference from the government. Money, goods and services flow continuously among individual households, businesses and the government The U.S. economy is a MIXED ECONOMY CONSUMER SOVEREIGNTY Rivalry between businesses for the same customers; results in better quality Individuals can own the means of production & property without undue government interference PRIVATE PROPERTY Consumers determine what goods and services are produced by what they buy
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