1. Chapter 2

2. A. A shortage of resources used to satisfy the wants and needs B. Basic economic problem for any society is how to manage its resources. C. Need to develop new resources and technologies.

3.  Restaurants chose equipment over decor changes if the money is not available for both.  Cities might cut services to hire more police or firefighters.  When dealing with scarcity it is important to think about the best way to use the resource.

4. 1. There are 4 types of economic resources that go into making our products. 2. All of the components are necessary to produce a society’s goods and services.

5. 1. Natural resources (land)  materials used to form products.  The amount of resources available to a country has a direct effect on its economy  A countries economy is based on its natural resources Saudi Arabia depends on oil production, Latin America depends on coffee production…..

6.  Renewable resources: Can be reproduced.  Ex: Cattle, wheat  Nonrenewable resources: resources that are limited.  Ex: Coal, iron & oil  The amount of resources available to a country has a direct effect on its economy

7. 2. Human resources (labor)  The knowledge, efforts, and skills people bring to their work  Skilled or unskilled  Physical (blue collar) Intellectual (white collar)  Labor unions - workers belong to organization,  Collective bargaining - it negotiates for better pay, working conditions

8. 3. Capital resources  Things used to produce goods/services, like buildings, materials, and equipment.

9. CAPITAL goods are things used to create goods and services. What are the capital goods need to create and sell the entertainment service of football?

10. 4. Entrepreneurial resources  Meets the changing needs/wants of people  They improve on ways to use resources, or create and produce new ones.

11. 4. Entrepreneurial resources  Entrepreneurship - process of recognizing a business opportunity, testing the market and gathering the resources.  Entrepreneur is an individual who undertakes the creation, organization, and ownership of a business. Different from labor resources. Being entrepreneurial means acting and thinking like an entrepreneur

12.  The problem of scarcity forces societies to make choices.  Opportunity Cost –use it for one purpose means giving up the opportunity to use it for something else.

13.  3 Economic questions society needs to answer: 1. What should be Produced? 2. How should it be Produced? 3. Who should share in what is Produced?

14. It studies how society chooses to use resources to produce and distribute goods and services for people’s consumption. A economic system is needed so a nation uses it limited resources effectively. provide people with a minimum standard of living or quality of life.

15.  Economic decisions are made in the marketplace according to the laws of supply and demand  PRICE plays an important role.  If the price is too low and does not earn businesses a profit they will produce little or none of the product  If the price is high enough to earn a profit, they will produce the good and service

16.  Demand – the amount or quantity of goods and services that consumers are willing to buy at various prices.  Generally the higher the price the fewer consumers will buy an item….the lower the price the more consumers will buy.  Supply – the amount or quantity of goods and services that producers are willing provide at various prices.  Producers want to provide products that will cover their costs and provide a profit

17.  EQUILIBRIUM  Demand and Supply work together  When the quantity demanded and the quantity supplied meet

18.  The Private Enterprise System  Also called capitalism  Resources are privately owned  Consumers decide where to live, where to shop, and what to buy  Government control of the market is minimal  Primary role of the government is to support the marketplace….remove trade barriers

19.  Market Motivation  Competition – encourages businesses to provide better and cheaper products  Profit – the reward for taking a risk that encourages people to start businesses

20.  Advantages:  Freedom to choose from many different competing products  Freedom to start a business or choose a career  Disadvantages  Those who do not have the wanted job skills do not get an income  Sometimes only one or two businesses control the market, thus leading to higher prices and lower quality products

21.  Central authority makes the key economic decisions  Usually controlled by a government or state  Communism  Strong command economy the government makes all economic decisions  The state controls all resources  China, Cuba, Latin America, African countries  Socialism  Moderate command economy  Some form of private enterprise  State owns major resources  France and Sweden

22.  Advantages:  It guarantees everyone an equal standard of living  The State provides you with a job, a place to live, and health care.  Products are distributed evenly  The State takes care of utilities, transportation, and defense  Usually less crime and poverty –needs equally met  Disadvantage:  Little choice of what to buy  Non essentials are often unavailable  Prices, wages are fixed  No incentives for entrepreneurship

23.  Most Nations have a Mixed Economy a combination of market and command economy  State takes care of people’s needs  Marketplace takes care of people’s wants  USA  the government provides defense and education  Marketplace provides cars, computers, and fast food  There is some government regulation of business  In every country one type of economy is dominant, but find a mixed economy is the best way to manage their limited resources