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  1. 1. Our Global Economy 2-1 Economics and Decision Making 2-2 Basics of Economics 2-3 Economic Systems 2-4 Achieving Economic Development 2-5 Resources Satisfy Needs CHAPTER 2
  2. 2. LESSON 2-1 Economics and Decision Making <ul><li>GOALS </li></ul><ul><li>Describe the basic economic problem. </li></ul><ul><li>List the steps of the decision-making process. </li></ul>
  3. 3. The Basic Economic Problem <ul><li>Scarcity refers to the limited resources available to satisfy the unlimited needs and wants of people. </li></ul><ul><li>Economics is the study of how people choose to use limited resources to satisfy their unlimited needs and wants. </li></ul>
  4. 4. Making Economic Decisions <ul><li>Coping with scarcity </li></ul><ul><li>Making choices </li></ul>
  5. 5. The Decision-Making Process
  6. 6. LESSON 2-2 Basics of Economics <ul><li>GOALS </li></ul><ul><li>Describe how the market sets prices. </li></ul><ul><li>Explain the causes of inflation. </li></ul>
  7. 7. Price-Setting Activities <ul><li>Supply is the relationship between the amount of a good or service that businesses are willing and able to make available and the price. </li></ul><ul><li>Demand is the relationship between the amount of a good or service that consumers are willing and able to purchase and the price. </li></ul><ul><li>Market price is the point at which supply and demand cross. </li></ul>
  8. 8. Market Price Is Set by Supply and Demand
  9. 9. Changing Prices <ul><li>Inflation </li></ul><ul><li>Demand-pull inflation </li></ul><ul><li>Cost-push inflation </li></ul>
  10. 10. LESSON 2-3 Economic Systems <ul><li>GOALS </li></ul><ul><li>Name the three main factors of production. </li></ul><ul><li>Understand how different countries make economic decisions. </li></ul>
  11. 11. Economic Resources Satisfy Needs <ul><li>Natural resources </li></ul><ul><li>Human resources </li></ul><ul><li>Capital resources </li></ul>
  12. 12. Natural Resources <ul><li>Also known as land , these resources are the raw materials that come from the earth, from the water, and from the air. Iron ore, gold, silver, agricultural products, rivers, and oxygen are examples of natural resources. </li></ul><ul><li>These items are used in the production of goods and services consumed by individuals, businesses, and governments. </li></ul>
  13. 13. Human Resources <ul><li>Also known as labor , these resources are the people who work to create goods and services. </li></ul><ul><li>While technology has changed or eliminated certain tasks previously performed by people, new types of work are continually being created. </li></ul>
  14. 14. Capital Resources <ul><li>Also called capital , these resources include buildings, money, equipment, and factories used in the production process. </li></ul><ul><li>These items are expensive and are used over several years by business organizations. </li></ul>
  15. 15. Economic System <ul><li>The economic choices of a country relate to three basic questions: </li></ul><ul><li>1. What goods and services are to be produced? </li></ul><ul><li>2. How should the goods and services be produced? </li></ul><ul><li>3. For whom should the goods and services be produced? </li></ul>
  16. 16. Types of Economic Systems <ul><li>Command Economies </li></ul><ul><li>Market Economies </li></ul><ul><ul><li>Private property </li></ul></ul><ul><ul><li>Profit motive </li></ul></ul><ul><ul><li>Free, competitive marketplace </li></ul></ul><ul><li>Mixed Economies </li></ul>
  17. 17. LESSON 2-4 Achieving Economic Development <ul><li>GOALS </li></ul><ul><li>Describe the factors that affect economic development. </li></ul><ul><li>Identify the different levels of economic development. </li></ul>
  18. 18. Development Factors <ul><li>Literacy level </li></ul><ul><li>Technology </li></ul><ul><li>Agricultural dependency </li></ul>
  19. 19. Types of Development <ul><li>Industrialized countries </li></ul><ul><li>Less-developed countries </li></ul><ul><li>Developing countries </li></ul>
  20. 20. Levels of Economic Development <ul><li>Low literacy </li></ul><ul><li>Limited technology </li></ul><ul><li>Agricultural or mining economy </li></ul><ul><li>Improving literacy </li></ul><ul><li>Improving technology </li></ul><ul><li>Decreasing dependence on agriculture or mining </li></ul><ul><li>High literacy </li></ul><ul><li>Modern technology </li></ul><ul><li>Industrial economy </li></ul>Less- Developed Country Developing Country Industrialized Country
  21. 21. LESSON 2-5 Resources Satisfy Needs <ul><li>GOALS </li></ul><ul><li>Discuss economic principles that explain the need for international trade. </li></ul><ul><li>Identify various measures of economic progress and development. </li></ul>
  22. 22. The Economics of Foreign Trade <ul><li>Absolute advantage exists when a country can produce a good or service at a lower cost than other countries. </li></ul><ul><li>Comparative advantage exists when a country can produce a good or service with more efficiency than other countries. </li></ul>
  23. 23. Measuring Economic Progress <ul><li>Measure of Production </li></ul><ul><ul><li>Gross domestic product (GDP) </li></ul></ul><ul><ul><li>Gross national product (GNP) </li></ul></ul><ul><li>International Trade Activity </li></ul><ul><ul><li>Balance of trade </li></ul></ul><ul><ul><li>Foreign exchange rate </li></ul></ul><ul><ul><li>Foreign debt </li></ul></ul><ul><li>Other Economic Measurements </li></ul><ul><ul><li>Consumer price index (CPI) </li></ul></ul><ul><ul><li>Unemployment rate </li></ul></ul>