Presentation on theme: "Chapter 3 – Political and Economic Analysis"— Presentation transcript:
1 Chapter 3 – Political and Economic Analysis Unit 2 - Economics
2 3.1 What is an economy?The organized way a nation provides for the needs and wants of its people.A nation chooses how to use its resources to provide and distribute good and servicesA country’s resources determine economic activities such as manufacturing, buying, selling, transporting, and investing.
3 ResourcesResourcesAll the things used in producing goods and servicesEconomists use the term Factors of Production when they talk about resourcesThe factors of production comprise 4 categories:Land, Labor, Capital, and Entrepreneurship
4 LandLand includes everything contained in the earth or found in the seas.Ex. Coal and Crude Oil are natural resourcesNatural resources are used as raw material for making goods and creating services that are marketed to customers.Climate and geography can also be an example
5 Labor Labor refers to all the people who work. It includes:Full/part timeManagersProfessionals in both private and public sectorsEconomies with well trained, well educated labor have an advantage over other nations in attracting business
6 Capital Includes money to start and operate a business. Also includes the goods in the production process
7 Infrastructure Capital includes infrastructure Which is the physical development of a countryIncludes roads, ports, sanitation, facilities, and utilities, especially telecommunications
8 EntrepreneurshipRefers to the skills of people who are willing to invest their time and money to run a businessThey organize factors of production to create the goods and services that are part of an economy
9 Economics and the Shopping Mall The local shopping mall is a good place to observe economic principals.Labor is represented by salespeopleCapital is the money that was invested in manufacturing products and selling themWhat are examples of the other 2 factors of production (land and entrepreneurship)?The location of the mall for land, business owners for entre.
10 ScarcityThe difference between wants and needs and available resources
11 How does an Economy Work? Nations must answer three basic questions when deciding how to use their limited resources.Which goods and services should be produced?How should the goods and services be produced?For whom should the goods and services be produced?Dubai ExampleLocation60 Minutes VideoPictures
12 Traditional Economies Traditions and rituals answer the basic questions of what, how, and for whom.Answers are also based on:CulturalReligious practicesideals (passed from one generation to the next)
13 Market EconomiesThere is no government involvement in economic decisionsThe government lets the market answer the three basic economic questionsWhatHowFor Whom
14 Command EconomyA country’s government makes economic decisions and decides what, when, and how much will be produced and distributed.The government controls the factors of productions and makes all decisions about their use.
15 Capitalism Marketplace competition and private ownership of business Government is concerned aboutPeopleCares for those that cannot care for themselvesUnited States and Japan are examples
16 Communism Government controls the factors of production No private ownership of property or capitalThe theoryGoods owned in common are available to all as neededVery few leftCuba, North Korea, and China are examples
17 SocialismOriginally referred to a system that was on its way to turning communist.The main goal is to meet basic needs for all and to provide employment for manyCanada, Germany, and Sweden
18 3.2 Understanding the Economy The Economy and MarketingIf you are a marketer and you want to perform a useful SWOT analysis you need to consider the economic factors that will influence your marketing plan.
19 When is an economy successful? A healthy economy has three goals:Increase productivityDecrease unemploymentMaintain stable pricesAll nations analyze their economies to keep track of how well they are doingHow is the US economy now?
20 Producers and Consumers A nation's economy is the production and consumption of goods (food, clothes, cars) and services (repairs, lawn-mowing, haircuts) in that nationAnybody producing or consuming things in a country plays some role in the economy.Production and consumption are intertwined.
21 Supply and DemandThe ultimate goal of producers is to make moneyConsumers may want to satisfy their wants and needs by buying productsProducers are the ones who actually set prices, but they do so based on the behavior of consumers.
22 Supply and Demand Cont.If nobody buys a product at a particular price, the producer knows the price is too high.If some consumers buy it, but not enough to buy everything produced, producers must either decrease the price or decrease the supply.
23 Supply and Demand Cont.The willingness of consumers to pay for products is known as demand.Even if there is constant high demand for a product (toilet paper, for example), individual producers need to keep the price down or consumers will just buy it from a competitor.
24 Business Cycle The recurring changes in economic activity Expansion When the economy is flourishing, sometimes referred to as a period of prosperityRecessionA period of economic slowdown that lasts for at 6 monthsDepressionA period of prolonged recession
25 RecessionA recession is a prolonged period of time when a nation's economy is slowing down, or contracting. Such a slow-down is characterized by a number of different trends, including:People buying less stuffDecrease in factory productionGrowing unemploymentSlump in personal incomeAn unhealthy stock marketBy the conventional definition, this slow-down has to continue for at least six months to be considered a recession.