1. Chapter 2 Economic Resources and Systems
Intro To Business

2. Economic Resources Making Economic Decisions
Scarcity – The inability to satisfy all of everybody’s wants .
Individuals, businesses, and countries face a lack of resources
Principle of Scarcity – there are limited resources for satisfying unlimited wants and needs.
Factors of Production
All economic resources necessary to produce a society’s goods and services
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3. Economic Resources Factors of Production Natural Resources
Raw Materials from nature that are used to produce goods
Trees, water, grains, cattle, coal
Renewable Resources- can be reproduced
Wheat and cattle
Non Renewable Resources- Limited
Ex. Coal, iron, oil
Labor Resources
People who make the goods and services for which they are paid.
Labor can be skilled or unskilled, physical or intellectual.

4. Economic Resources Capital Resources Entrepreneurial Resources
Things used to produce goods and services (Capital Goods)
Tractor, Delivery Truck, Computers, Medical Supplies
Entrepreneurial Resources
Individuals who start and direct businesses to produce goods and services to satisfy needs and wants
Used by people who recognize opportunities and start businesses
Entrepreneur – An individual who undertakes the creation, organization, and ownership of a business
Entrepreneurship- The process of recognizing a business opportunity, testing the market and gathering the resources necessary to start and run a business.

5. Questions Why do all nations face the problem of scarcity?
Identify one similarity and one difference between labor and entrepreneurial resources?
Describe the four factors of production

6. Economic Systems
Economics – The study of how individuals and groups of people strive to satisfy their needs and wants by making choices
Basic Economic Questions
What should be produced?
Deciding to use a resource for one purpose means giving up the opportunity to use it for something else.
This is the opportunity cost.
How should it be produced?
Methods and labor used as well as the quality of the items produced.
Who should share in what is produced?
In most societies people can have as many goods and services as they can afford to buy
The amount of income they receive determines how many goods and services they can have.
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7. Different Types of Economies
Economic System
The methods societies use to distribute resources.
Command Economy
Economic system in which a central authority makes the key economic decisions
The government dictates what will be produced, how it will be produced, and who will get the goods.
Higher skilled workers earn the same as low-skilled workers
Socialism – Moderate Command Economy
The state owns the major Resources
Mixed Economy
An economy that contains both private and public enterprises
Combines elements of both capitalism and socialism.

8. Different Types of Economies
Market Economy
Economic system where economic decisions are made in the marketplace.
Marketplace – Where buyers and sellers meet to exchange goods and services .
Also called Private enterprise system, free enterprise system, or capitalism.

9. Different Types of Economies
Market Economy continued:
Relationship between Price, Supply and Demand
Price – Amount of money given or asked for when goods and services are bought and sold
Supply – Amount of goods and services that producers provide at a various price
Demand – Amount or quantity of goods and services that consumers are willing to buy at various prices
The higher the price, the less consumers will buy. The lower the price, the more the consumers will buy.
Equilibrium Price – Is the point at which the quantity demanded and the quantity supplied meet. At any other price you would either have a surplus or shortage

10. Typical Demand/Supply Curve

11. Demand and the Price Effect
Price Elasticity of Demand- is a measurement of the impact of the price effect. It indicates a buyer’s eagerness to buy a good or service.
Elastic vs. Inelastic Demand D2 D1
Price
Quantity

12. Demand and the Price Effect
Factors that Affect the Elasticity of Demand: - Availability of Substitutes - Percentage of Budget - Time
Elastic Demand
Inelastic Demand
Many Substitutes
Few Substitutes
Expensive(require High % of Budget)
Inexpensive
Time to Plan or Adjust
Must Buy Now

13. Questions How does a market system decide what will be produced?
In a market system, what determines how many goods and services an individual can buy?
Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true?