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pp. 18-33 Chapter 2   Economic Resources and Systems
Learning Objectives After completing this chapter, you’ll be able to: <ul><li>Define   scarcity. </li></ul><ul><li>List  t...
Why It’s Important Understanding economic resources and economic systems is essential to lessening economic problems.
Key Words scarcity factors of production  natural resources human resources capital resources economics entrepreneurial re...
Factors of Production  A shortage of resources is called  scarcity .  A basic economic problem for any society is how to m...
Factors of Production  To meet the wants and needs of its people, a society must produce goods and services.  The means to...
Figure 2.1 YOUR ECONOMIC REALITY AT A GLANCE The average American spends $7 a day on food. People spend less than half of ...
Natural Resources  The raw materials found in nature are called  natural resources .  Natural resources become factors of ...
Natural Resources  The economy of many countries is based on their natural resources.  Some resources, like wheat and catt...
Natural Resources  Other resources are limited, or  nonrenewable , like coal, iron, and oil.  The amount of natural resour...
Human Resources  The knowledge, efforts, and skills people bring to their work are called  human resources , or labor.  La...
Human Resources  One of the biggest problems facing many nations today is not a shortage of labor but a shortage of skille...
Capital Resources  Capital resources  are the things used to produce goods and services, like buildings, materials, and eq...
Entrepreneurial Resources  Meeting the changing wants and needs of people requires  entrepreneurial resources .  Entrepren...
Entrepreneurial Resources  A key to dealing with scarcity is to develop new resources and technologies.
Fast Review Q3. What is scarcity? Q4. What are the four factors of production? Q5. What are some examples of capital resou...
Making Decisions  About Production  No society has enough productive resources available to produce everything people want...
Basic Economic Questions  A society makes economic choices by answering three economic questions:  <ul><li>What should be ...
What Should Be Produced?  Deciding to use a resource for one purpose means giving up the opportunity to use it for somethi...
How Should It Be Produced?  When a society decides what to produce, it must also address other types of questions, such as...
Who Should Share in  What Is Produced?  This question focuses on the concept that people can’t get everything that they wa...
Who Should Share in  What Is Produced?  In most societies, people can have as many goods and services as they can afford t...
Blood Is Thicker Than Oil Occidental Petroleum Corp. is exploring for oil in Columbia. However, the U’wa people oppose oil...
The problem is more complex because the Columbian government supports the oil production, which will bring development to ...
Q6. Who has the right to the land — the U’wa people, the corporation, or the Columbian government? Analyze
Fast Review Q7. When a society chooses to use a resource for one purpose and gives up the opportunity to use it for some o...
Types of Economic Systems  Economics  studies how society chooses to use resources to produce and distribute goods and ser...
Types of Economic Systems  To use its limited resources effectively, every nation needs an economic system.  The primary g...
Types of Economic Systems  The two basic and opposing economic systems that have been developed are: <ul><li>Market econom...
Market Economy  In a  market economy  economic decisions are made in the marketplace according to the laws of supply and d...
Price  is the amount of money given or asked for when goods and services are bought or sold.  Market Economy The Market an...
Demand  is the amount or quantity of goods and services that consumers are willing to buy at various prices.  Market Econo...
The higher the price, the fewer consumers will buy an item.  The lower the price, the more consumers will buy an item.  Ma...
Supply  is the amount of goods and services that producers will provide at various prices.  Market Economy The Market and ...
Demand and supply work together.  When the quantity demanded and the quantity supplied meet, the price is called the  equi...
Figure 2.2 VISUALIZING DEMAND AND SUPPLY Remember these two points: (1) The demand curve always falls left to right on a g...
Capitalism , or private enterprise, is a market economy system.  In a capitalist system, resources are privately owned.  M...
In a capitalist system, the primary role of government is to support the marketplace by removing obstacles such as trade b...
A market economy offers incentives, such as competition and the profit motive, to produce more.  The profit motive is the ...
A market economy provides the individual with the freedom to choose from many different competing products, and the freedo...
The problem with a market economy is that those who do not have the wanted job skills do not get an income.  Market Econom...
Another problem in a market economy is that sometimes one or two businesses control the market, thus leading to higher pri...
Command Economy  In a  command economy  a central authority makes the key economic decisions.  A command economy is also c...
Command Economy  There are two types of command economies.  In a strong command economy, such as  communism , the state ma...
Command Economy  In a moderate command economy, also called  socialism , there is some form of private enterprise.  The pr...
Command Economy  There are some disadvantages to a command economy.  Since the state provides all goods and services in a ...
Command Economy  Another disadvantage to the command economy is that there is no incentive for entrepreneurship when you c...
Mixed Economy  Most nations have a  mixed economy , a combination of a market and command economy.  The state takes care o...
Graphic Organizer What should be produced? Basic Economic Questions Graphic Organizer MARKET ECONOMY Economic decisions ar...
Fast Review Q12. Summarize how economic decisions in the market economy are made. Q13. Compare the types of economic syste...
Q15.  What are some examples of renewable and nonrenewable resources? Q16.  Some stoves use corn as a heating fuel. Based ...
Q17. Why do you think other countries are interested in buying corn-burning appliances? Q18. In a command economy, how mig...
Graphs are a quick and useful way to visually communicate information. Interpreting Line Graphs Business Building Blocks L...
The left side of a graph is the  vertical axis . Interpreting Line Graphs Business Building Blocks The bottom of the graph...
Both axes display numbers and a label indicating what the numbers represent. Interpreting Line Graphs Business Building Bl...
When the dots on the graph are connected, they form a line whose location and direction reveals information about change t...
<ul><li>Read the title of the graph </li></ul><ul><li>Read the label on each axis </li></ul><ul><li>Understand the numbers...
<ul><li>Examine where the dots are located on the graph </li></ul><ul><li>Determine what the line(s) or curve(s) symbolize...
<ul><li>Compare the line(s) on the graph to both axes to determine the graph’s meaning </li></ul>How to Interpret a Line G...
pp. 18-33 End of Chapter 2   Economic Resources and Systems
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  1. 1. pp. 18-33 Chapter 2 Economic Resources and Systems
  2. 2. Learning Objectives After completing this chapter, you’ll be able to: <ul><li>Define scarcity. </li></ul><ul><li>List the four factors of production. </li></ul><ul><li>Identify the differences between market and command economies. </li></ul><ul><li>Explain why most countries prefer a mixed economy. </li></ul>
  3. 3. Why It’s Important Understanding economic resources and economic systems is essential to lessening economic problems.
  4. 4. Key Words scarcity factors of production natural resources human resources capital resources economics entrepreneurial resources market economy demand supply equilibrium price command economy mixed economy
  5. 5. Factors of Production A shortage of resources is called scarcity . A basic economic problem for any society is how to manage its resources.
  6. 6. Factors of Production To meet the wants and needs of its people, a society must produce goods and services. The means to produce them are called economic resources, or factors of production .
  7. 7. Figure 2.1 YOUR ECONOMIC REALITY AT A GLANCE The average American spends $7 a day on food. People spend less than half of that money on home-cooked meals. Recreate the table below. Insert a check mark in the appropriate square based on your eating experience in one week. Copy and paste to a Word document to complete. Q1. How do your choices influence your economic situation?
  8. 8. Natural Resources The raw materials found in nature are called natural resources . Natural resources become factors of production when we use them to produce goods.
  9. 9. Natural Resources The economy of many countries is based on their natural resources. Some resources, like wheat and cattle, are renewable . They can be reproduced.
  10. 10. Natural Resources Other resources are limited, or nonrenewable , like coal, iron, and oil. The amount of natural resources available to a society has a direct effect on its economy.
  11. 11. Human Resources The knowledge, efforts, and skills people bring to their work are called human resources , or labor. Labor can be skilled or unskilled, physical or intellectual.
  12. 12. Human Resources One of the biggest problems facing many nations today is not a shortage of labor but a shortage of skilled labor.
  13. 13. Capital Resources Capital resources are the things used to produce goods and services, like buildings, materials, and equipment. As the wants and needs of people change, so do the needs for capital resources.
  14. 14. Entrepreneurial Resources Meeting the changing wants and needs of people requires entrepreneurial resources . Entrepreneurs improve on ways to use resources, or create and produce new ones.
  15. 15. Entrepreneurial Resources A key to dealing with scarcity is to develop new resources and technologies.
  16. 16. Fast Review Q3. What is scarcity? Q4. What are the four factors of production? Q5. What are some examples of capital resources?
  17. 17. Making Decisions About Production No society has enough productive resources available to produce everything people want. Every society must, therefore, make choices. Rules and regulations determine choices.
  18. 18. Basic Economic Questions A society makes economic choices by answering three economic questions: <ul><li>What should be produced? </li></ul><ul><li>How should it be produced? </li></ul><ul><li>Who should share in what is </li></ul><ul><li>produced? </li></ul>
  19. 19. What Should Be Produced? Deciding to use a resource for one purpose means giving up the opportunity to use it for something else.
  20. 20. How Should It Be Produced? When a society decides what to produce, it must also address other types of questions, such as what methods will be used, how many people will work on the production, and what will be the quality of the items produced?
  21. 21. Who Should Share in What Is Produced? This question focuses on the concept that people can’t get everything that they want because society doesn’t have enough resources.
  22. 22. Who Should Share in What Is Produced? In most societies, people can have as many goods and services as they can afford to buy based on the income they receive.
  23. 23. Blood Is Thicker Than Oil Occidental Petroleum Corp. is exploring for oil in Columbia. However, the U’wa people oppose oil exploration on the land they have lived on for thousands of years. For them, oil is the “blood of Mother Earth.” continued
  24. 24. The problem is more complex because the Columbian government supports the oil production, which will bring development to the country. continued Blood Is Thicker Than Oil
  25. 25. Q6. Who has the right to the land — the U’wa people, the corporation, or the Columbian government? Analyze
  26. 26. Fast Review Q7. When a society chooses to use a resource for one purpose and gives up the opportunity to use it for some other purpose, what cost is involved? Q8. What happens to production methods when a country discovers new ways to combine economic resources? Q9. In most countries, what determines how many goods and services a person can buy?
  27. 27. Types of Economic Systems Economics studies how society chooses to use resources to produce and distribute goods and services for people’s consumption.
  28. 28. Types of Economic Systems To use its limited resources effectively, every nation needs an economic system. The primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.
  29. 29. Types of Economic Systems The two basic and opposing economic systems that have been developed are: <ul><li>Market economy </li></ul><ul><li>Command economy </li></ul>
  30. 30. Market Economy In a market economy economic decisions are made in the marketplace according to the laws of supply and demand.
  31. 31. Price is the amount of money given or asked for when goods and services are bought or sold. Market Economy The Market and Prices
  32. 32. Demand is the amount or quantity of goods and services that consumers are willing to buy at various prices. Market Economy The Market and Prices
  33. 33. The higher the price, the fewer consumers will buy an item. The lower the price, the more consumers will buy an item. Market Economy The Market and Prices
  34. 34. Supply is the amount of goods and services that producers will provide at various prices. Market Economy The Market and Prices
  35. 35. Demand and supply work together. When the quantity demanded and the quantity supplied meet, the price is called the equilibrium price . Market Economy The Market and Prices
  36. 36. Figure 2.2 VISUALIZING DEMAND AND SUPPLY Remember these two points: (1) The demand curve always falls left to right on a graph, and (2) the supply curve always rises from left to right on the graph. Q.10 How many CDs will be demanded at $16 a piece? Q11. How many CDs will be supplied at $18 a piece?
  37. 37. Capitalism , or private enterprise, is a market economy system. In a capitalist system, resources are privately owned. Market Economy The Market and Prices
  38. 38. In a capitalist system, the primary role of government is to support the marketplace by removing obstacles such as trade barriers. Market Economy The Market and Prices
  39. 39. A market economy offers incentives, such as competition and the profit motive, to produce more. The profit motive is the reward for taking a risk that encourages people to start businesses. Market Economy The Market’s Motivations
  40. 40. A market economy provides the individual with the freedom to choose from many different competing products, and the freedom to start a business or choose a career. Market Economy The Market’s Motivations
  41. 41. The problem with a market economy is that those who do not have the wanted job skills do not get an income. Market Economy The Market’s Motivations
  42. 42. Another problem in a market economy is that sometimes one or two businesses control the market, thus leading to higher prices and lower quality products. Market Economy The Market’s Motivations
  43. 43. Command Economy In a command economy a central authority makes the key economic decisions. A command economy is also called a planned or managed economy.
  44. 44. Command Economy There are two types of command economies. In a strong command economy, such as communism , the state makes all the economic decisions.
  45. 45. Command Economy In a moderate command economy, also called socialism , there is some form of private enterprise. The primary advantage of a command economy is that it guarantees everyone an equal standard of living.
  46. 46. Command Economy There are some disadvantages to a command economy. Since the state provides all goods and services in a strong command economy, there is little choice of what to buy.
  47. 47. Command Economy Another disadvantage to the command economy is that there is no incentive for entrepreneurship when you can’t run your own business.
  48. 48. Mixed Economy Most nations have a mixed economy , a combination of a market and command economy. The state takes care of people’s needs while the marketplace takes care of people’s wants.
  49. 49. Graphic Organizer What should be produced? Basic Economic Questions Graphic Organizer MARKET ECONOMY Economic decisions are made in the marketplace according to the laws of supply and demand. How should it be produced? Who should share in what is produced? COMMAND ECONOMY Government makes all key economic decisions. MIXED ECONOMY Combination market and command economy.
  50. 50. Fast Review Q12. Summarize how economic decisions in the market economy are made. Q13. Compare the types of economic systems. Q14. What are the advantages and disadvantages of a command economy and a market economy?
  51. 51. Q15. What are some examples of renewable and nonrenewable resources? Q16. Some stoves use corn as a heating fuel. Based upon the cost savings, do you think the price of corn is high or low?
  52. 52. Q17. Why do you think other countries are interested in buying corn-burning appliances? Q18. In a command economy, how might a limit on the availability of corn affect the people?
  53. 53. Graphs are a quick and useful way to visually communicate information. Interpreting Line Graphs Business Building Blocks Line graphs often show change over a period of time.
  54. 54. The left side of a graph is the vertical axis . Interpreting Line Graphs Business Building Blocks The bottom of the graph is the horizontal axis .
  55. 55. Both axes display numbers and a label indicating what the numbers represent. Interpreting Line Graphs Business Building Blocks Dots on the graph show numerical information.
  56. 56. When the dots on the graph are connected, they form a line whose location and direction reveals information about change through time. Interpreting Line Graphs Business Building Blocks
  57. 57. <ul><li>Read the title of the graph </li></ul><ul><li>Read the label on each axis </li></ul><ul><li>Understand the numbers on each axis, including the interval used </li></ul>How to Interpret a Line Graph Business Building Blocks
  58. 58. <ul><li>Examine where the dots are located on the graph </li></ul><ul><li>Determine what the line(s) or curve(s) symbolize </li></ul>How to Interpret a Line Graph Business Building Blocks
  59. 59. <ul><li>Compare the line(s) on the graph to both axes to determine the graph’s meaning </li></ul>How to Interpret a Line Graph Business Building Blocks
  60. 60. pp. 18-33 End of Chapter 2 Economic Resources and Systems
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