Intro to Business Chapter 2

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Economic Resources and Systems

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  • 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
  • Intro to Business Chapter 2

    1. 1. CHAPTER 2 ECONOMICRESOURCES & SYSTEMSByrns
    2. 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. 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
    4. 4. SCARCITY *Shortage of resources
    5. 5. FACTORS OF PRODUCTION *Production of goods and services and everything involved in the production
    6. 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. 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. 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. 9. SCARCITY Dealing with the problem of scarcity  Developing new resources & technology (example: wind energy/battery operated cars)
    10. 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. 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. 12. TWO OPPOSING ECONOMICSYSTEMS *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)
    13. 13. ECONOMIC SYSTEMS *Mixed economy – combination of market and command
    14. 14. MARKET ECONOMY Marketplace is anywhere money changes hands Prices plays a big role Demand plays a big role
    15. 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. 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. 17. EQUILIBRIUM PRICE When the quantity demanded and the quantity supplied meet Price at which the amount supplied and the amount demanded meet
    18. 18.  What resource problem is faced by all societies? Scarcity of Resources
    19. 19.  What is the biggest labor problem facing many countries today? Shortage of Skilled Labor
    20. 20. TYPES OF ECONOMIC SYSTEMSCOMPARE/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. 21. SUPPLY & DEMANDWhat happens to demand as prices rise? Demand decreasesWhat happens to demand as prices fall? Demand increasesWhat happens to supply as prices rise? Supply increasesWhat happens to supply as prices fall? Supply decreases

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