Scarcity & Making Choices Obj.: 1.01 Analyze the impact scarcity has on various economic systems.

Popcorn = One Dollar ($1.00) Fruit Juice = One Dollar ($1.00) Attending College vs. Not Attending College Lifetime earnings of a College Graduate vs. High School Graduate T Definition What you give up when you make one choice over another Example OR Something to Think About

Six Step Decision Making Process 1.Define the problem. 2.Identify the alternatives. 3. List all the advantages and disadvantages. 4. Choose among alternatives. 5.Act on your choice. 6. Evaluate your decision.

What affects your decision making? Values Goals

Values are... The beliefs and principles you consider important, correct, and desirable The ideals in life that are important to you Principles by which a person lives

Goals There are three types of goals: Short-term Intermediate Long-term

Short-term Goals Short term goals are goals you expect to reach within a few days or a week. Examples: pass a quiz, paint a room

Intermediate Goals Intermediate goals are goals you expect to reach in the next few months or few years. Examples: high school graduation, summer internship, new shoes

Long-term Goals Long-term goals are goals you expect to reach over a period of several years. Examples: career, marriage, new car

Questions for you: Since each decision made is affected by the values and goals an individual possesses: What are your values? What are your goals?

The Three Economic Questions 1.What goods and services are to be produced? 2. How should the goods and services be produced? 3. For whom should the goods and services be produced?

Natural Resources Raw materials supplied by nature that come from the earth, the water, or the air and are used to produce goods.

Natural Resources Can Be Renewable or Nonrenewable Renewable resources are resources that can be replaced. Nonrenewable resources are resources that cannot be replaced.

HUMAN RESOURCES The people who contribute physical and mental energy to the production process.

CAPITAL RESOURCES The tools, equipment, and buildings that are used to produce goods and services.

Entrepreneurial Resources The initiative to combine natural, human and capital resources to produce goods or services.

Types of Economies  Traditionalism  Communism  Socialism  Capitalism

TRADITIONALISM An economy in which people do things the way they have always been done. Resources are allocated by inheritance, and which has a strong social network and is based on primitive methods and tools.

TRADITIONALISM Advantages: Everyone has a role in the economy. Economic life is stable and community life continuous. Fosters a sense of community, as it causes little friction among members and provides a sense of security and psychological comfort. Relatively low unemployment rate and low crime rate. A traditional economy allows for a greater degree of autonomy and little or no money is used.crime rate

TRADITIONALISM Disadvantages: Discourages new ideas and ways of doing things. Does not take advantage of technology and there is relatively little promotion of intellectual and scientific development. Provides few incentives for entrepreneurs, thus limiting choices for consumers and lowering standards of living.entrepreneurs

TRADITIONALISM Main Countries: Societies living in rain forests of Latin America, parts of Africa, and the Middle East.

COMMUNISM An economy in which the government makes ALL decisions concerning the three important economic questions.

COMMUNISM Advantages: Can make a dramatic change in a short time on production of goods. Each person is provided with a job with certain medical and social services.

COMMUNISM Disadvantages: Consumer goods and services rank low on the list of priorities for that country. Few consumer wants are met. A lack of incentive to work hard. (No competition among businesses.) Limits an individual’s choice to make his or her own economic decisions.

COMMUNISM Main Countries: North Korea, China, and Cuba are some of the countries considered to be communistic.

SOCIALISM An economic system in which the government owns major industries (like railroad systems, steel, and iron), but allows for private ownership of other businesses.

SOCIALISM Advantages: Government and private business work together. Ownership of resources is shared. Government representatives become members of management committees for private business. These committees decide what and how to produce. The government decides who should receive the goods and services. Individuals are provided with medical services, lifelong welfare services, and social security benefits to everyone.

SOCIALISM Disadvantages: Workers are taxed at an extremely high rate to pay for all that the government provides. This high tax rate discourages private business. The high tax rate also lessens consumers’ spendable income to make for fewer choices in the marketplace.

SOCIALISM Main Countries: Sweden and France are both considered to be socialistic economy countries.

CAPITALISM An economic system where the basic economic decisions are based on the actions of individual people and businesses participating in many different markets. Also called Free Enterprise system.

CAPITALISM Advantages: This economic system produces goods and services that people want or need and that will bring a profit to the sellers. Freedom of choice. Those who get more income for their input in the market can have more of the resources. Price plays an important role in the market place. Competition ensures that prices stay low. Government does not dictate what, how or for whom to produce.

CAPITALISM Disadvantages: Citizens who are productive are the only ones who are rewarded. The wealth of the economy is not evenly distributed.

CAPITALISM Main Countries: The United States, Japan, Canada, and Great Britain are considered capitalistic.