2 Economy – the organized way a nation provides for the needs and wants of its people Resources – all the things used in producing goods and services.Factors of production - Land, Labor, Capital, EntrepreneurshipLand – everything contained in the earth or found in sea; these naturalresources are used as the raw material in making goods and creatingservices that are marketed to customers.Labor- all the people who workCapital – money to start and operate a business. Includes the goods usedin production process. Without capital marketers would not have thefunds or resources to develop, advertise and transport goods. It alsoincludes infrastructure ( physical development of a country such as roads,ports, sanitation, utilities, telecommunications.Entrepreneurship – skills of people who are willing to invest time andmoney to run a business. These are the employers of a populationScarcity – the difference between the wants and needs, and availableresources
3 How does an economy work?? 3 basic questions have to be answered1. Which goods and services should be produced?2. How should the goods and services be produced?3. For whom should the goods and services be produced?3 types of economiesTraditional- An underdeveloped economy in which communities useprimitive tools and methods to harvest and hunt for food, often resultingin little economic growth. Traditional economies are often found inrural regions with high levels of subsistence farming. Countries that evolvetheir economies past the traditional level often develop into marketeconomies or command economies.Market – A system of allocating resources based only on the interaction ofmarket forces, such as supply and demand. A true market economy is freeof governmental influence, collusion and other external interference.
4 Command- An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods andservices are produced and how they are distributed. The former Soviet Unionwas an example of a command economy. Also called a centrallyplanned economy.Mixed EconomiesEconomic system in which both the private enterprise and a degree of state monopoly(usually in public services, defense, infrastructure, and basic industries) coexist. All moderneconomies are mixed where means of production are shared between the private andpublic sectors. Also called dual economy.Capitalism- Economic system based (to a varying degree) on private ownershipof the factors of production (capital, land, and labor) employed in generation ofprofits. It is the oldest and most common of all economic systems and,in general, is synonymous with free market system.
5 Communism – Economic and social system in which all (or nearly all) property and resources are collectively owned by a classless society and not by individual citizens.Based on the 1848 publication 'Communist Manifesto' by two German politicalphilosophers, Karl Marx ( ) and Friedrich Engels ( ), it envisionedcommon ownership of all land and capital and withering away of the coercive power ofthe state. In such a society, social relations were regulated each according to his ability, toeach according to his needs. Differences between manual and intellectual laborand between rural and urban life were to disappear, opening up the way for unlimiteddevelopment of human potential. In view of the above, there has never been a trulycommunist state although the Soviet Union of the past and China, Cuba, and North Koreaof today stake their claims.Socialism- Economic system which is based on cooperation rather than competition andwhich utilizes centralized planning and distribution. Socialism was originally based inthe working class and has generally been opposed to capitalism. Socialists have advocatednationalization (government ownership and control) of natural resources, basic industries,banking and credit institutions, and public utilities. Although the ultimate aim of earlysocialists was a communist or classless society later socialists have increasinglyconcentrated on social reforms within capitalism.
6 Labor Productivity – output per worker hour that is measured over a defined period of time.Higher productivity improves profitsGDP – output of goods and services produced by labor and property located withina country. Includes private investment, government spending, andpersonal spending, factor in trade surplus / deficit, factor in expanding /shrinking inventories.GNP – total dollar value of goods and services produced by a country, including goodsand services produced abroad by companies and citizens.Standard of Living – measurement of amount and quality of goods and services that anation’s people have. It reflects quality of life. Calculated by dividing GDP orGNP by populationInflation – refers to rising prices. Use CPI (Consumer Price Index) and PPI (ProducerPrice Index) as measures of inflation.Unemployment Rate – the number of people who are able to work but do notcurrently work
7 Class ProjectFind the Economic Measurements we just talked about for the US and CanadaLabor ProductivityGDPGNPInflation RateUnemployment Rate