1. What is an economy?

2. Need- Basic requirement for survival Want- Means of expressing a need
Needs vs. Wants
Need- Basic requirement for survival
Want- Means of expressing a need
Influenced by society
Influenced by culture
Change over time
Many only satisfy for short period of time
Depending on situation, can be labeled
reasonable or unreasonable
By examining this picture, what
needs or wants do these
people have? What would be
unreasonable wants?

3. The Fundamental Problem in Economics is
SCARCITY
Scarcity- Resources are always limited compared with the
number and variety of wants people have
Scarcity is not caused by a shortage of money.

4. What is scarce in each of these scenarios?
Brownouts in Los Angeles?
People carpooling to work everyday?
Turning off the faucet while you brush your teeth?
Mandatory newspaper recycling
Electricity
Gasoline
Water
Trees

5. Scarcity is caused by a lack of productive resources or a lack
in one of the four factors of production.
The Four Factors of Production: Resources people have for
producing goods and services to satisfy their wants
1. Land-Natural Resources used to make the
final product
2. Capital-Machines, tools, money used to make
the final product
3. Labor-Workers used to make the final product
4. Entrepreneur-Risk taker

6. Four Factors of Production
Brainstorm: What does it take to produce a pair of blue jeans?
Land
Cotton
Dyes
Copper/metal
Labor
Sewers
Capital
Sewing machine
Scissors
Entrepreneur
Levi
Wrangler

7. Is water scarce today? Will water be scarce in the future?
What are some factors that are
leading to this scarcity?
Population Growth
Climate
Food Production
Land Use
Dams

8. Production to Consumption
Production is followed by Distribution
Distribution- Process by which goods and
services are made available to the people
who want them
Distribution is followed by Consumption
Consumption- Act of buying or using goods or
services
Want-Satisfaction Chain

9. Place in order using the Want-Satisfaction Chain
__ Computer
__ George uses his computer
__ George wants a computer game
__ Computer shipped to store
__ Programmer, silicon, factory
__ George wants a computer
__ George buys a computer
__ Computer is assembled in factory

10. Making Choices Economy is all about making choices
You have to make choices because of scarcity
Which of your wants will you satisfy?
You must examine the trade-offs-
An exchange of one thing in return for
another, especially relinquishment of one
benefit or advantage for another regarded as
more desirable

11. For Example Future Costs Can Reuse Parents Approval
Concert Tickets New Computer IPOD
Future Costs
Can Reuse
Parents Approval
Very Little No
Maybe
Yes
Most Likely
Very Little
Yes
Most Likely

12. Making Choices Opportunity Cost- Highest valued benefit
given up when a choice is made
For example, if you chose the concert tickets
the opportunity cost would be the
2nd option that you would of chosen
Businesses must make similar decisions
everyday
For Example: Should Ford Motor Co spend
money on building a new car plant?

13. What tradeoffs did
you make?

14. What tradeoffs did you make in order to balance the budget?
What is the opportunity cost of your budget recommendation?
Summarize the likely future consequences of your budget recommendation.

15. 3 Basic Economic Decisions
There are 3 basic economic decisions:
Which goods and services should be produced and in what amounts?
How should these good and services be produced?
Who will get the goods and services that are produced?

16. 3 Basic Economic Decisions
Questions 1: Which goods and services should be produced and in what
amounts?
Factors which influence this decision
Factors of Production availability
Natural Resources
Capital
Labor
How much they (entrepreneurs) think they can sell

17. 3 Basic Economic Decisions
Question 2: How will land, labor, and capital be combined?
Primary goal: Least costly
Technology- Practical application of science to commerce or industry

18. 3 Basic Economic Decisions
Question 3: Who will get the goods and services that are available?
Should they be divided equally?
Should citizens determine who gets what
How much government intervention is there to answer this question
How much economic freedom is there?
A lot of government intervention equals no economic freedom
People would receive the same even some may work harder
People have no say in the economy
No government intervention equal a lot of economic freedom
People compete freely and some may get more than others
People have all the say in the economy

19. Types of Economies There are 4 different types of economies
Traditional Economy
Command Economy
Market Economy
Mixed Economy

20. Types of Economies Traditional Economy:
Basic economic decisions are made according to long established
patterns of behavior that are unlikely to change
Customs and traditions are passed from elders to youth
Family is the basic unit, however all members work together
to support society, not just family
Works better with a smaller society
Fewer resources are needed
Fewer goods and services needed to be produced
Very few left in today’s world
Central and South America, Asia, Africa

21. Types of Economies Traditional Economy: Answering the basic questions:
What and How much to produce?
Answered by tradition and custom
Very little freedom
No Technology
Very little change over a period of time
Who gets what is produced?
May be based on role in society
May be divided according to number is family
Who owns resources?
Usually own their own land, tools and labor

22. Types of Economies Command Economy:
Government or a central authority owns or controls the factor of production
and makes the basic economic decisions
Egyptians, Medieval lords, USSR, Cuba and North Korea
Answering the 3 basic questions:
What and how much is produced
Consumers have very little or no power in determining what or how
much gets produced
Who gets what is produced
Depends on the goals and values of central government
Greedy Dictator-keeps more for himself OR
Satisfy the citizens, regardless how much they produce
Who owns resources?
Central authority

23. Types of Economies
Market Economy: System in which private individuals own the factors of
production and are free to make their own choices about production,
distribution and consumption
Market Economy is also known as
Free Enterprise System- No government control
Capitalism- Capital is privately owned
Market- Place or situation in which buyers and sellers agree to exchange
goods and services. This can be the local farmers market, Walmart
or Ebay
No one person or group can run the market
Competition plays an important role in the market economy
Producers compete for the wants of people
Labor competes for jobs

24. Types of Economies Market Economy: Answering the 3 Basic Questions:
What and how much is produced?
Driven by two factors
Profit- Difference between the total cost of production
and the total revenues from buyers
Invest- To use your money to help a business get started
or grow, with hope that the business will earn a
profit in which you can share
Who gets what is produced?
Those who earn high wages, own land or capital will get more
Who owns the resources?
Private people and companies

25. Types of Economies Modern day economy:
Mixed Economy- Mixture of the 3 other systems
Example: China
Predominately a command economy but have introduced more
of a market economy as private industries are steadily growing
and competing for the wants of the Chinese population.

26. Types of Economies United States Economy:
NOT a 100% pure market economy
Aspects on non-market economy
Minimum wage
US Government controls education, mail, military
Several regulations on businesses

27. Economic Spectrum
Economic Spectrum- A way to compare economic systems, based
upon government involvement in a country’s economy
Command
Mixed
Market
United States
Canada
Mexico
China
North Korea

28. http://www. rainer-rilling

29. Developing Economies Developing Economy-
Any 3rd world nation that does not have
a self-sustaining economy or relies
on outside assistance from other nations
or organizations.
A developing economy will improve
their economy by:
1. Improving Infrastructure
A. Transportation
B. Communication
2. Improve Human Development
A. Education
B. Healthcare
3. Creating Jobs/Industries