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
LESSON 2-1 Economics and Decision Making
Describe the basic economic problem.
List the steps of the decision-making process.
The Basic Economic Problem
Scarcity refers to the limited resources available to satisfy the unlimited needs and wants of people.
Economics is the study of how people choose to use limited resources to satisfy their unlimited needs and wants.
Making Economic Decisions
Coping with scarcity
The Decision-Making Process
LESSON 2-2 Basics of Economics
Describe how the market sets prices.
Explain the causes of inflation.
Supply is the relationship between the amount of a good or service that businesses are willing and able to make available and the price.
Demand is the relationship between the amount of a good or service that consumers are willing and able to purchase and the price.
Market price is the point at which supply and demand cross.
Market Price Is Set by Supply and Demand
LESSON 2-3 Economic Systems
Name the three main factors of production.
Understand how different countries make economic decisions.
Economic Resources Satisfy Needs
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.
These items are used in the production of goods and services consumed by individuals, businesses, and governments.
Also known as labor , these resources are the people who work to create goods and services.
While technology has changed or eliminated certain tasks previously performed by people, new types of work are continually being created.
Also called capital , these resources include buildings, money, equipment, and factories used in the production process.
These items are expensive and are used over several years by business organizations.
The economic choices of a country relate to three basic questions:
1. What goods and services are to be produced?
2. How should the goods and services be produced?
3. For whom should the goods and services be produced?
Types of Economic Systems
Free, competitive marketplace
LESSON 2-4 Achieving Economic Development
Describe the factors that affect economic development.
Identify the different levels of economic development.
Types of Development
Levels of Economic Development
Agricultural or mining economy
Decreasing dependence on agriculture or mining
Less- Developed Country Developing Country Industrialized Country
LESSON 2-5 Resources Satisfy Needs
Discuss economic principles that explain the need for international trade.
Identify various measures of economic progress and development.
The Economics of Foreign Trade
Absolute advantage exists when a country can produce a good or service at a lower cost than other countries.
Comparative advantage exists when a country can produce a good or service with more efficiency than other countries.