Economic Resources and Systems

1. CHAPTER 2 ECONOMIC
RESOURCES & SYSTEMS
Byrns

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. 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. SCARCITY
 *Shortage of resources

5. FACTORS OF PRODUCTION
 *Production of goods and services and
everything involved in the production

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. 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. 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. SCARCITY
 Dealing with the problem of scarcity
 Developing new resources & technology (example: wind
energy/battery operated cars)

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. 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. TWO OPPOSING ECONOMIC
SYSTEMS
 *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. ECONOMIC SYSTEMS
 *Mixed economy – combination of market and
command

14. MARKET ECONOMY
 Marketplace is anywhere money changes hands
 Prices plays a big role
 Demand plays a big role

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. 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. EQUILIBRIUM PRICE
 When the quantity demanded and the quantity
supplied meet
 Price at which the amount supplied and the
amount demanded meet

18.  What resource problem is faced by all societies?
Scarcity of Resources

19.  What is the biggest labor problem facing many
countries today?
Shortage of Skilled Labor

20. TYPES OF ECONOMIC SYSTEMS
COMPARE/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. SUPPLY & DEMAND
What happens to demand as prices rise? Demand decreases
What happens to demand as prices fall? Demand increases
What happens to supply as prices rise? Supply increases
What happens to supply as prices fall? Supply decreases