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Unit 6: Business, Factors, & Economies Chapters 18, 19, & 26.

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Presentation on theme: "Unit 6: Business, Factors, & Economies Chapters 18, 19, & 26."— Presentation transcript:

1 Unit 6: Business, Factors, & Economies Chapters 18, 19, & 26

2 4 Types of Economic Systems Market Economy/ Capitalism – Characteristics: private citizens own factors of production – Businesses make there own decisions Supply & demand set the price, and producers & consumers base their decisions on prices Decentralized – Decisions based on all people within the economy – Economy runs by itself because no one coordinates decisions. Make sure market is competitive through government regulations. Government handles the side effects, that influence third parties High Per Capita GDP

3 4 Types of Economic Systems Command Economy/ Controlled Economy/ Communism/ Socialism – Characteristics: People have little say so on how economy functions – Decisions made by central government All resources owned by government People have less economic freedom because controlled by government – Fewer choices Have planning agencies to make decisions & control all parts of the economy Grows slow because of inefficiency Low Per Capita GDP

4 4 Types of Economic Systems Mixed Economy – Most countries under this economic system – Characteristics: Private ownership of property People make decisions based on: themselves and government intervention & regulations Traditional Economy “do it the way it has always been done” – Decisions based on custom or habit

5 Scarcity Helps society through trade and the formation of new industries & inventions. Causes fundamental economic problems because: – Not enough productive resources, to produce all of societies goods and services that cover each individuals wants and needs. Reasons why consumers have to make choices among alternatives (opportunity cost).

6 Factors of Production Natural Resources Labor – Varies in size due to: population, immigration, education, war & disease. – Affects quantity & quality

7 Factors of Production Capital/ Capital Goods – Results of production – Satisfy wants indirectly by helping production of consumer goods (directly) Entrepreneurs – Innovative people willing to take risk, to gain a profit. – Driving force of the USA economy, because we use the factors of production to produce new products.

8 Gross Domestic Product (GDP) Only consider the final count, new products. – Reasons: cannot double count Measuring the GDP can help compare the number of goods & services produced and get an idea of its worth.

9 Gross Domestic Product (GDP) Important indicator of the standards of living – If the GDP grows faster than the population, then there will be more goods & services for people to enjoy – Higher GDP will cause increases in standards of living

10 Business Cycle/ Circular Flow Chart Each aspect of the cycle is affected by: – Consumers Earn the income in the factor markets – Businesses People receive their income and they spend it on the product market – Uses to pay for natural resources, labor, capital, etc. – Resources are used to produce more products to sell – Governments Produces and purchases goods – Foreign Markets Goods & services USA buys & sells to other countries

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