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 Terms
economy
resources
factors of production
infrastructure
scarcity
traditional economy
market economy
command economy
Objectives
Define the concept of an economy
List the factors of production
Explain the concept of scarcity
Discuss how the three basic economic questions are answered by these economies:
Traditional
Mixed
Command
Market
Cite examples of various economic systems
Marketing 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 people
A country chooses how to use its resources to produce and distribute goods and services
Therefore, a country’s resources determine economic activities such as:
Manufacturing
Buying
Selling
Transporting
Investing
Marketing Essentials Chapter 3, Section 3.1

6. Resources
Resources X are all the things used in producing goods and services.
Four Categories of Resources:
Land (Natural Resources)
Labor (Human Resources)
Capital
Entrepreneurship
Which are tangible? Which are intangible?
Land Labor Capital Entrepreneurship

7. 1. Land Resources
Land includes all the “natural” resources in the earth or found in the seas, for example:
What are some examples of Natural resources?
Coal
Crude oil
Trees, plants and soil
Water and all living things in the lake
Climate and country’s geography used to attract tourists
Marketing Essentials Chapter 3, Section 3.1

8. These natural resources are used as:
Raw materials for the creation of goods and services
Attractions for tourism
Spain’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 Resources
Labor refers to all the people who work.
What are some examples of Labor resources?
Full- and part-time workers
Managers
Professionals in the public and private sectors
Businesses compete to have the best employees
Economies with well-trained labor have an advantage over other nations in attracting businesses

10. 3. Capitol Resources
Capital includes money to start and operate a business and goods used in the production process:
What are some examples of Capital Resources?
Cash/money
Factories and Office buildings
Computers and tools
Raw natural materials that have been processed into usable form (ex: lumber or steel that you own)

11. Capital Resources
Capital also includes infrastructure X, which is the physical development of a country
What are some examples of infrastructure?
Roads
Ports
Sanitation facilities
Utilities - especially Telecommunications

12. Capital Resources
Without capital, businesses would not have the funds or resources to develop, advertise, or transport goods
Marketing 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 services
Employers of a population
Marketing 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 force
Great deal of capital
Abundance of entrepreneurs
Large 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 total
Does every country have the same as we do?

16. Scarcity Different economies have different amounts of resources
May have resources but not the capital
May have capital but not the resources
Don’t have the labor force or education
Many 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 choices
Must decide how to use their limited resources
How 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 Whom
all 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:
Traditional
Market
Command
No 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 Economies
In 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 most
How: Businesses decide how to produce goods and services by being competitive and out-selling their competitors
For 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 Economies
A 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 decisions
Controls all employment opportunities and benefits
Extreme cases: tells people where they will work and how much they will get paid
For 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 mixed
What do you think the US Economy is?
Mixed economy leaning toward market economy
Business laws and regulations, labor laws, OSHA standards
Marketing Essentials Chapter 3, Section 3.1

23. Economies
Economic systems placed on a continuum to compare levels of government involvement
Economic freedom to the right encourages competition
Systems to the left are more regulated by their governments
Where 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 market
Three political philosophies that shaped economies:
Capitalism
Socialism
Communism

25. Capitalism
Capitalism - economic philosophy characterized by marketplace competition and private ownership of business
The political system most frequently associated with capitalism is democracy
Capitalist countries include:
The United States
Japan
Where 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 production
No financial incentive for people to increase their productivity as the government regulates and assigns:
Employment
Medical care
Education
Housing
Food
Where is Communism on the Continuum?

27. Examples of modern communist countries are: Cuba North Korea China
Communism
Examples of modern communist countries are:
Cuba
North Korea
China
Marketing Essentials Chapter 3, Section 3.1

28. Socialism
Socialism: supports private ownership yet controls the means of production and distribution–
Market is not completely controlled by the government
Increased amount of government involvement
More social services: education and medical care is free or low cost
Pensions and Elderly care
The state will control noncompetitive companies like:
Telecommunications
Natural resources (gas, water, and power)
Transportation
Banking

29. Socialism
Examples of Modern countries with socialism:
Canada
Germany
Sweden
Where is Socialism on the Continuum?

30. This transfer of control is called privatization
Socialism
Today, many socialist countries are selling some of their state-run businesses to help balance the increasing costs of:
National health care
Unemployment
Retirement programs
This transfer of control is called privatization
Marketing 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:
Education
Technology
Exports
Means of production (roads, ports, utilities)
Marketing Essentials Chapter 3, Section 3.1

32. Differences and Similarities Among Market and Command Economies
Section 3.1
What Is an Economy?
Differences and Similarities Among Market and Command Economies

33. CHAPTER 1 REVIEW
SECTION 3.1 REVIEW

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SECTION 3.1 REVIEW
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