Presentation on theme: "Unit 2 Economics Chapter 3 Political and Economic Analysis"— Presentation transcript:
1 Unit 2 Economics Chapter 3 Political and Economic Analysis Chapter 4 Global Analysis
2 Chapter 3 Political and Economic Analysis What Is an Economy?Section 3.1 What Is an Economy?Section 3.2 Understanding the Economy
3 What Is an Economy? Objectives Define the concept of an economy Key Termseconomyresourcesfactors of productioninfrastructurescarcitytraditional economymarket economycommand economyObjectivesDefine the concept of an economyList the factors of productionExplain the concept of scarcityDiscuss how the three basic economic questions are answered by these economies:TraditionalMixedCommandMarketCite examples of various economic systemsMarketing Essentials Chapter 3, Section 3.1
4 What Is an Economy? Study Organizer Create a diagram like this one to record information about market economies and command economies.
5 What Is an Economy?An economy X is the organized way a nation provides for the needs and wants of its peopleA country chooses how to use its resources to produce and distribute goods and servicesTherefore, a country’s resources determine economic activities such as:ManufacturingBuyingSellingTransportingInvestingMarketing Essentials Chapter 3, Section 3.1
6 ResourcesResources X are all the things used in producing goods and services.Four Categories of Resources:Land (Natural Resources)Labor (Human Resources)CapitalEntrepreneurshipWhich are tangible? Which are intangible?Land Labor Capital Entrepreneurship
7 1. Land ResourcesLand includes all the “natural” resources in the earth or found in the seas, for example:What are some examples of Natural resources?CoalCrude oilTrees, plants and soilWater and all living things in the lakeClimate and country’s geography used to attract touristsMarketing Essentials Chapter 3, Section 3.1
8 These natural resources are used as: Raw materials for the creation of goods and servicesAttractions for tourismSpain’s land—including its coasts, historical cities, and national parks—is an economic resource that makes the country an attractive tourist destination.Marketing Essentials Chapter 3, Section 3.1
9 2. Labor ResourcesLabor refers to all the people who work.What are some examples of Labor resources?Full- and part-time workersManagersProfessionals in the public and private sectorsBusinesses compete to have the best employeesEconomies with well-trained labor have an advantage over other nations in attracting businesses
10 3. Capitol ResourcesCapital includes money to start and operate a business and goods used in the production process:What are some examples of Capital Resources?Cash/moneyFactories and Office buildingsComputers and toolsRaw natural materials that have been processed into usable form (ex: lumber or steel that you own)
11 Capital ResourcesCapital also includes infrastructure X, which is the physical development of a countryWhat are some examples of infrastructure?RoadsPortsSanitation facilitiesUtilities - especially Telecommunications
12 Capital ResourcesWithout capital, businesses would not have the funds or resources to develop, advertise, or transport goodsMarketing Essentials Chapter 3, Section 3.1
13 4. Entrepreneurship Resources Entrepreneurship refers to the skills of people who are willing to invest their time and money to run a business.Entrepreneurs:Organize factors of production to create goods and servicesEmployers of a populationMarketing Essentials Chapter 3, Section 3.1
14 United States Resources What are some examples of natural Resources in the US?Student Contributions:
15 United States Resources Educated Labor forceGreat deal of capitalAbundance of entrepreneursLarge amount of natural resources:coal, copper, lead, molybdenum, phosphates, uranium, bauxite, gold, iron, mercury, nickel, potash, silver, tungsten, zinc, petroleum, natural gas, timber; note: the US has the world's largest coal reserves with 491 billion short tons accounting for 27% of the world's totalDoes every country have the same as we do?
16 Scarcity Different economies have different amounts of resources May have resources but not the capitalMay have capital but not the resourcesDon’t have the labor force or educationMany can’t meet the needs and wants of all its citizens (poverty a result)Scarcity = the difference between a country’s unlimited wants and limited resources X.Scarcity forces nations to make economic choicesMust decide how to use their limited resourcesHow they use their resources defines their economic system
17 How Does an Economy Work? Nations answer three basic questions when deciding how to use their limited resources:What goods and services should be produced?How should the goods and services be produced?For whom should the goods and services be produced?Like asking What, How, and Whomall questions are based on the resources they have access to
18 How Does an Economy Work? There are three broad categories into which economic systems are classified:TraditionalMarketCommandNo economy is purely one type. It is always a combination.Marketing Essentials Chapter 3, Section 3.1
19 Traditional Economies In a traditional economy X, traditions and rituals answer the basic questions of what, how, and for whom.What: If people belong to a farming community, they farm for generations. There is little choice as to what to produce.How: Again, this is bound by traditions. The practices of a family’s ancestors carry on.For whom: Tradition regulates who buys and sells and where and how the exchange takes place.
20 Market EconomiesIn a pure market economy X, there is no government involvement in economic decisions. The market is free to answer:What: Consumers decide what should be produced in the market through which products they buy the mostHow: Businesses decide how to produce goods and services by being competitive and out-selling their competitorsFor whom: The people who have more money are able to buy goods and services.To make money, people are motivated to work and invest their income
21 Command EconomiesA command economy X system in which a country’s government makes economic decisions and decides:What: One person (often a dictator) or a group of government officials decides what products are needed.How: The government owns all means of production, so it makes the decisionsControls all employment opportunities and benefitsExtreme cases: tells people where they will work and how much they will get paidFor whom: Wealth is regulated by the government to equalize everyone. Everything from housing to education is subsidized by the government.
22 Mixed Economies No economy is purely traditional, market, or command All economies are considered somewhat mixedWhat do you think the US Economy is?Mixed economy leaning toward market economyBusiness laws and regulations, labor laws, OSHA standardsMarketing Essentials Chapter 3, Section 3.1
23 EconomiesEconomic systems placed on a continuum to compare levels of government involvementEconomic freedom to the right encourages competitionSystems to the left are more regulated by their governmentsWhere would a pure Market Economy be placed on the continuum below?Where would a pure Command Economy be placed?What is in between?
24 Political Philosophies A meaningful classification depends on how much a government interferes with the free marketThree political philosophies that shaped economies:CapitalismSocialismCommunism
25 CapitalismCapitalism - economic philosophy characterized by marketplace competition and private ownership of businessThe political system most frequently associated with capitalism is democracyCapitalist countries include:The United StatesJapanWhere is capitalism on the continuum below?Marketing Essentials Chapter 3, Section 3.1
26 Where is Communism on the Continuum? Communism = economic philosophy in which the government controls the factors of productionNo financial incentive for people to increase their productivity as the government regulates and assigns:EmploymentMedical careEducationHousingFoodWhere is Communism on the Continuum?
27 Examples of modern communist countries are: Cuba North Korea China CommunismExamples of modern communist countries are:CubaNorth KoreaChinaMarketing Essentials Chapter 3, Section 3.1
28 SocialismSocialism: supports private ownership yet controls the means of production and distribution–Market is not completely controlled by the governmentIncreased amount of government involvementMore social services: education and medical care is free or low costPensions and Elderly careThe state will control noncompetitive companies like:TelecommunicationsNatural resources (gas, water, and power)TransportationBanking
29 SocialismExamples of Modern countries with socialism:CanadaGermanySwedenWhere is Socialism on the Continuum?
30 This transfer of control is called privatization SocialismToday, many socialist countries are selling some of their state-run businesses to help balance the increasing costs of:National health careUnemploymentRetirement programsThis transfer of control is called privatizationMarketing Essentials Chapter 3, Section 3.1
31 These countries need to improve: Education Technology Exports Developing economies are mostly poor countries with little industrialization that are improving their infrastructure to become more prosperous.These countries need to improve:EducationTechnologyExportsMeans of production (roads, ports, utilities)Marketing Essentials Chapter 3, Section 3.1
32 Differences and Similarities Among Market and Command Economies Section 3.1What Is an Economy?Differences and Similarities Among Market and Command Economies