1. WHAT IS AN ECONOMY?

2. Economy or Economic System
The way a nation makes choices. These choices involve how the nation will use its resources to produce and distribute goods and services.

3. Resources All things used in producing goods and services
Factors of Production – the technical term economists use for resources

4. Resource 1 – Land
Everything on the earth in its natural state / the earth’s natural resources
Resources Include:
Everything contained in the earth or found in the sea
Coal and crude oil are examples
A lake and all the living
things in the lake are
also examples

5. Resource 2 – Labor All the people who work in the economy
Labor includes:
Full and Part-time Workers
Both the Public and the Private sector

6. Resource 3 - Capital The money needed to start and operate a business
The goods used in the production process
Examples are:
Factories
Office Buildings
Computers
Raw materials that are processed
into a more useful form (lumber, steel)

7. Resource 4 - Entrepreneurship
The skills of the people willing to risk their time and money to run a business
Entrepreneurs organize the other factors of production to create the goods and services desired in an economy

8. Infrastructure The physical development of a country
Things necessary for production and distribution of goods and services
Parts of the infrastructure include
Roads
Ports
Sanitation Facilities
Utilities

9. Scarcity
The difference between wants and needs and the resources available to meet these needs is called Scarcity.
Nations have unlimited wants and needs but limited resources – Scarcity forces the nations to make economic choices.

10. The Basic Economic Questions
Nations must answer 3 basic economic questions when deciding to use their limited resources
The way nations answer these questions define their economic system
What goods and services should be produced?
How should the goods and services be produced?
For whom should the goods and services be produced?

11. What Should Be Produced?
Consumers decide what is to be produced through purchases made in the market place.
Items that satisfy the customer’s needs and wants are purchased making the products successful
Items that do not satisfy the needs and wants of the consumer are not purchased and are not successful

12. How Should Goods and Services Be Produced?
How products will be produced is left up to the business
Businesses must be competitive
Businesses must produce quality products at lower prices than their competitors
Businesses must find the best way to produce goods and services
Businesses must also find the best way to encourage customers to purchase their products

13. For Whom Should Goods and Services Be Produced?
Those individuals with the most money are able to purchase more goods and services
To obtain money individuals work and invest