1. Introduction to Business Introduction to Business Economic Resources and Systems

2. Making Economic Decisions Just as consumers have to deal with shortages of resources, so do societies ◦Resources are the items that go into making goods and services ◦Lack of resources is known as scarcity ◦Scarcity means there are limited resources for satisfying unlimited wants and needs

3. Factors of Production Definition ◦All the economic resources necessary to produce a society’s goods and services Four factors of production: ◦Natural resources ◦Labor resources ◦Capital resources ◦Entrepreneurial resources

4. Natural Resources What are natural resources? ◦Raw materials that are used to produce goods  Trees, water, grain, oil, coal Why are natural resources important? ◦Economy of many countries is primarily based on natural resources Renewable ◦Wheat and cattle Non-renewable ◦Coal, oil, iron

5. Labor and Capital Resources Labor resources are people who make the goods and services for which they are paid a salary. ◦Skilled or unskilled ◦Physical or intellectual Capital resources are things used to produce goods and services ◦Buildings, materials, equipment How are capital resources different from capital?

6. Entrepreneurial Resources Are used by people who recognize opportunities and start businesses Entrepreneurship is the process of recognizing a business opportunity, testing it in the market, and gathering the resources necessary to start and run a business Entrepreneurs are individuals who undertake the creation, organization, and ownership of a business ◦Accepts the risks and responsibilities of business ownership to gain profits and satisfaction

7. Economic Systems Basic questions??? ◦What is economics?  The study of how individuals and groups of individuals strive to satisfy their needs and wants by making choices  All societies have to make choices to deal with forms of scarcity. ◦ What should be produced? ◦ How should it be produced? ◦ Who should share in what is produced?

8. Different Types of Economies Economic Systems – ◦Methods societies use to distribute resources ◦Two basic types: 1) market 2) command

9. Market Economy Definition ◦An economic system in which economic systems are made in the marketplace ◦What is a marketplace?  Where buyers and sellers meet to exchange goods and services, usually for money  Also known as private enterprise system, free enterprise system, or capitalism  Resources are privately owned  Owners decide how businesses will be run, what to produce and sell, and what prices to charge  Consumers choose their occupations and decide here to live, where to shop, and what to buy

10. Command Economy Definition ◦An economic system in which a central authority makes the key economic decisions. The government dictates what will be produced and who will get the goods  Goods that are not considered necessities are often unavailable  Prices are controlled by the state (or government)

11. For Discussion How does a market economy decide what will be produced? What are some the freedoms you enjoy by living as a citizen in a market economy?

12. Homework – Due Friday, September 18, 2009 Web Research ◦Research a country that has moved from a command economy to a market economy and write a paper that includes the following:  The transitional process from command to market economy  The conditions that led to the move  The rights and responsibilities of businesses, consumers, and the government before and after the switch  List natural resources, labor resources, and capital resources that are found in the country