Civics: Government and Economics in Action Chapter 13: What is an Economy Civics: Government and Economics in Action

Chapter Links Section 1 “Why Societies Have Economies” Section 2 “Basic Economic Decisions” Section 3 “Three Types of Economies” Civics: Government and Economics in Action

“Why Societies Have Economies” Section 1 “Why Societies Have Economies” Section Outline: People’s Many Wants Using Resources III. Production to Consumption IV. Making Choices V. Scarcity Main Idea: In an economic system, scarce resources are used to produce and distribute goods and services that satisfy people’s needs and wants. Key Terms: Factors of Production Capital Consumption Opportunity Cost Scarcity Civics: Government and Economics in Action

Civics: Government and Economics in Action People’s Many Wants Basic Wants Food, clothing, shelter More Wants People are usually not satisfied with having their basic needs/wants met. People have seemingly endless wants outside of the basic necessities of life. Civics: Government and Economics in Action

Civics: Government and Economics in Action Using Resources Factors of Production Are the resources people have for producing goods and services to satisfy their wants Land Labor Capital Anything produced in an economy that is used to produce other goods and services. Civics: Government and Economics in Action

Production to Consumption FIRST: A Consumer has Wants SECOND: A Producer Produces Using Land, Labor, and Capital THIRD: A Product is Distributed LASTLY: A Consumer Consumes The act of buying or using people’s goods or services. Civics: Government and Economics in Action

Civics: Government and Economics in Action Making Choices Benefits What will a particular economic decision result in? Costs Opportunity Cost The highest valued benefit given up when a choice is made. Civics: Government and Economics in Action

Civics: Government and Economics in Action Scarcity Scarcity The term which signifies how resources are limited compared with the number and variety of wants people have. The idea of scarcity is not just based on the total amount of resources in a society; it is based on the relationship between wants and the resources available to satisfy them. Civics: Government and Economics in Action

“Basic Economic Decisions” Section 2 “Basic Economic Decisions” Section Outline: What and How Much? How to Produce Goods and Services Who Gets What? Main Idea: Basic economic decisions include what and how much to produce, how to produce it, and who will have the opportunity to consume it. Key Terms: Quantity Technology Civics: Government and Economics in Action

Civics: Government and Economics in Action What and How Much? The first major economic question that must be answered is, “What will I produce, and how much will I produce?” An owner of resources decides what to produce An owner of resources decides the quantity or amount to produce. Civics: Government and Economics in Action

How to Produce Goods and Services The second major economic question that must be answered is, “How will I produce these good and/or services?” Choices to Make Uses of Land, Labor, and Capital The Role of Technology The practical application of science to commerce or industry. Civics: Government and Economics in Action

Civics: Government and Economics in Action Who Gets What? The third major economic question that must be answered is, “Who will get the goods and/or services that I’ve produced?” A society must decide how goods are services are divided among the population. Civics: Government and Economics in Action

“Three Types of Economies” Section 3 “Three Types of Economies” Section Outline: Traditional Economies Command Economies Market Economies Modern Day Economies Main Idea: Various types of economic systems include traditional economies, command economies, and market economies. Key Terms: Traditional Economy Command Economy Market Economy Profit Invest Capitalism Mixed economy Civics: Government and Economics in Action

Traditional Economies Economy where the basic economic decisions are made according to long-established patterns of behavior that are unlikely to change. Economic customs, rituals, roles, or values In this form of economy, tradition dictates what to produce, how to produce it, who gets what is produced, and who owns the resources. Civics: Government and Economics in Action

Civics: Government and Economics in Action Command Economies Command Economies An economic system in which the government or a central authority figure owns or controls the factors of production and makes the basic economic decisions. Government Decision Making A central planning group makes the decisions of what is produces, how to produce it, and how gets the products. Civics: Government and Economics in Action

Civics: Government and Economics in Action Market Economies Market Economy A system in which individuals own the factors of production and are free to make their own choices about production, distribution, and consumption. The United States economy is based on the market system. Decision making done by individuals There is competition Civics: Government and Economics in Action

Market Economies (cont.) The Incentive of Profit Seeking Profit: the difference between the total cost of production and the total revenues Investment: the use of money to help a business get started, with the hope that the business will earn a profit in which you can share Civics: Government and Economics in Action

Market Economies (cont.) Free Enterprise The system in which individuals in a market economy are free to undertake economic activities with little or no control by the government. Capitalism A system in which people make their own decisions about how to save resources as capital and how to use their capital to produce goods and provide services. Civics: Government and Economics in Action

Civics: Government and Economics in Action Modern Day Economies Mixed Economy An economy that is a mixture of the three basic systems China Command economy, with elements of free enterprise. The Economy of the United States Market or “free enterprise” economy Small elements of government control Civics: Government and Economics in Action