Unit 2 3ºESO

1. Unit 2 The economic
organization of society
By Ángel Ramos

3. Natural resources and raw material
• Overexploitation

4. Capital
Physical capital
Financial capital
Human capital

5. Types of production

6. Economic agents
The circular flow of income

7. Economic sectors
• Primary sector
– Produce food for consumption and raw material
for industry
– Agriculture, livestock farming, fishing, forestry,
mining.
– In wealthy countries is the smallest sector.

8. • Secondary sector
– Transform raw material into manufactures
products.
– Industry, construction, exploitation of energy
sources.
– In developed economies this sector has more rate
of employment than primary sector, but far away
from the tertiary.

9. • Tertiary sector
– Provides services to the population or to companies.
– Healthcare, education, transport, trade, culture…
– Is the main sector in developed countries and the
fastest growing in the world.
– Includes a lower-end tertiary sector of poorly paid
jobs: cleaners, fast food workers, street vendors…

10. • Quaternary sector
– Based on activities related to creation, distribution
of information, research and investigation…
– Workers need special training and high level of
expertise.

11. Economic systems: Subsistence
• Characteristics of societies with low levels of
development.
• Produce to meet their basic needs
• In case of surplus goods, sold or exchanged
locally

12. Economic systems: Capitalism
• Theoreticians:
– Adam Smith and David Ricardo.
• Characteristics:
– Defends free competition between
individuals and companies (also
called “Free market” system)
– Based on the law of supply and
demand: The market regulate
itself, depending on the needs of
the people. (“The invisible hand”)
– The means of production are
privately owned
– Started with the Industrial
Revolution (18th Century), is the
most widespread system in the
world today.

13. • Advantages of Capitalist system:
– Freedom of market: to produce and consume.
– Efficiency: The prices regulate production and
consumption.
– Allows social upgrading
• Disadvantages of capitalist system:
– Unequal distribution of wealth: could increase the
gap between poor and rich.
– The law of supply and demand isn’t always
respected: Big companies tend to control the
markets and fix the prices.
– Search of maximum benefit: Generates
overexploitation of resources and relocation of
industry.

14. Economic systems: Planned economy
• Theoreticians: Karl Marx and Friedrich Engels
• Main characteristics:
– The state own the means of production and controls all aspects in
economy: decides what, when, how, and how much to produce.
– The state decide how much the goods and services will cost, and what
to do with the profits.
– The private property in production is cancelled. The companies are
owned by the state.
– The objective is to provide goods and services for all the people.
– Created in 19th Century was widespread for many decades in the 20th
century. Today only exists in few states, that are slowly opening to the
private sector. (China, North Korea, Cuba, Vietnam…)
K. Marx
F. Engels

15. • Advantages of the planned economy system:
– Equal distribution of income: Guarantee free health care
system, education and housing for all the people.
– The workers have guaranteed job and fair salaries.
• Disadvantages:
– Total control of the state: The incentives are eliminated,
therefore workers and companies don’t look for
productivity, it generates inefficiency.
– Excessive bureaucracy: To control the whole economy in
the country = inefficiency
– Lack of freedom in economic decisions: The state
monopolizes the life of the population.

16. Economic systems: Mixed economy
• Theoretician: John Maynard Keynes.
• Characteristics:
– Includes elements of capitalism and planned
economy.
– Free market is allowed
– The state relocates and distribute the wealth.
– Guarantee basic services for the population:
Healthcare, education, social protection…
– It is the most widespread system in the advanced
economies of the world.

17. The EU and the economic crisis
• The recession that began in 2007 has weakened
the economy of the EU.
• Consecuences:
– Weak economic growth.
– Very low inflation: cosecuence of the recession.
– Growth of the unemployment rate in some countries.
– Massive public debt.

18. • Nowadays the EU faces the challenge of leaving
the economic crisis.
• From 2015 a combination of favorable factors
have begun to benefit some european
economies:
– The oil prices remain relatively low: estimulate the
production.
– The depreciation of the Euro against the dollar
favoured exports. But reduced imports

19. THE EMU
• The Economic and Monetary Union is the integration of 19 countries of the EU into
a common market that uses a single curency: The Euro.
• The main authority of the EMU is the European Central Bank (ECB) with the
headquater in Frankfurt (Germany) its current president is Mario Draghi.
• The function of the ECB is to set the monetary policies of the Eurozone and to keep
the inflation under control.

20. Economic future of the UE
• How is Spain responding the crisis?
• Do you consider that the EU has already
overcome the crisis?
• How is the EU responding the crisis? (Ex. D)

21. Case of study: The TTIP

22. Economic crisis
• Are the following statements true or false? Correct the false ones.
– In the capitalist system a period of growth is followed by a period of
stability, then another period of growth.
– We can classify crisis according to their severity: depression, recession
or downturn.
– A drop in consumption forces companies to increase production and
hire more employees.
– In our economic system it is possible to avoid the cyclical fluctuations of
the economy.
– International economic and political institutions employ professionals
to introduce measures that will soften the effects of crisis.

25. Read and analyse graphs and diagrams
• Observation:
– What kind of diagram is it: Graph, bar chart, map…
– What information is represented in the diagrams?
– Where has the information come from?
• Description:
– How is the information represented? Describe what can you see: axes/sections, colours and its
meanings, different numbers…
– What is trying to highlight the source?
• Analysis:
– Describe the information represented: Highest figures, lowest figures, make comparisons
between different periods and data.
• Conclusion:
– Your opinion about this figures, possible solutions.