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

2. 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

3. “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

4. 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

5. 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

6. 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

7. 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

8. 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

9. “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

10. 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

11. 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

12. 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

13. “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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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