2Economy 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.
3Resources All things used in producing goods and services Factors of Production – the technical term economists use for resources
4Resource 1 – LandEverything on the earth in its natural state / the earth’s natural resourcesResources Include:Everything contained in the earth or found in the seaCoal and crude oil are examplesA lake and all the livingthings in the lake arealso examples
5Resource 2 – Labor All the people who work in the economy Labor includes:Full and Part-time WorkersBoth the Public and the Private sector
6Resource 3 - Capital The money needed to start and operate a business The goods used in the production processExamples are:FactoriesOffice BuildingsComputersRaw materials that are processedinto a more useful form (lumber, steel)
7Resource 4 - Entrepreneurship The skills of the people willing to risk their time and money to run a businessEntrepreneurs organize the other factors of production to create the goods and services desired in an economy
8Infrastructure The physical development of a country Things necessary for production and distribution of goods and servicesParts of the infrastructure includeRoadsPortsSanitation FacilitiesUtilities
9ScarcityThe 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.
10The Basic Economic Questions Nations must answer 3 basic economic questions when deciding to use their limited resourcesThe way nations answer these questions define their economic systemWhat goods and services should be produced?How should the goods and services be produced?For whom should the goods and services be produced?
11What 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 successfulItems that do not satisfy the needs and wants of the consumer are not purchased and are not successful
12How Should Goods and Services Be Produced? How products will be produced is left up to the businessBusinesses must be competitiveBusinesses must produce quality products at lower prices than their competitorsBusinesses must find the best way to produce goods and servicesBusinesses must also find the best way to encourage customers to purchase their products
13For Whom Should Goods and Services Be Produced? Those individuals with the most money are able to purchase more goods and servicesTo obtain money individuals work and invest