LESSON

2-1

GOALS ECONOMICS AND DECISION MAKING

 Describe the basic economic problem.

 List the steps of the decision-making process. © SOUTH-WESTERN EDUCATIONAL PUBLISHING

The Basic Economic Problem



Scarcity

refers to the limited resources available to satisfy the unlimited needs and wants of people.



Economics

is the study of how people choose to use limited resources to satisfy their unlimited needs and wants. © SOUTH-WESTERN EDUCATIONAL PUBLISHING

Making Economic Decisions

Review

6

Define

1

Take

5

Identify

2 © SOUTH-WESTERN EDUCATIONAL PUBLISHING

LESSON

2-2

BASICS OF ECONOMICS GOALS

 Describe how the market sets prices.

 Explain the causes of inflation.

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Price-Setting Activities



Supply

is the relationship between the amount of a good or service that businesses are willing and able to make available and the price.



Demand

is the relationship between the amount of a good or service that consumers are willing and able to purchase and the price.



Market price

is the point at which supply and demand cross.

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Supply and Demand

$12 $10 $8 $6 $4 $2 $0 0 10 Demand Supply Market Price 20 30 40 Number of Tapes 50 60 70

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LESSON

2-3

ECONOMIC SYSTEMS GOALS

 Name the three main factors of production.

 Understand how different countries make economic decisions.

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Economic Resources Satisfy Needs

 Natural resources  also known as land  Human resources  also known as labor  Capital resources  also known as capital © SOUTH-WESTERN EDUCATIONAL PUBLISHING

Types of Economic Systems

 Command Economies  Market Economies  Private property  Profit motive  Free, competitive marketplace  Mixed Economies © SOUTH-WESTERN EDUCATIONAL PUBLISHING

LESSON

2-4

GOALS ACHIEVING ECONOMIC DEVELOPMENT

 Describe the factors that affect economic development.

 Identify the different levels of economic development.

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Development Factors

 Literacy level  Technology  Agricultural dependency © SOUTH-WESTERN EDUCATIONAL PUBLISHING

Types of Development

 Industrialized countries  Less-developed countries  Developing countries © SOUTH-WESTERN EDUCATIONAL PUBLISHING

Levels of Economic Development

Less-Developed Country

 Low literacy  Limited technology  Agricultural or mining economy

Developing Country

 Improving literacy  Improving technology  Decreasing dependence on agriculture or mining economy

Industrialized Country

  High literacy Modern technology  Industrial economy © SOUTH-WESTERN EDUCATIONAL PUBLISHING

LESSON

2-5

RESOURCES SATISFY NEEDS GOALS

 Discuss economic principles that explain the need for international trade.

 Identify various measures of economic progress and development.

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Economics of Foreign Trade



Absolute advantage

exists when a country can produce a good or service at a lower cost than other countries.



Comparative advantage

exists when a country can produce a good or service with more efficiency than other countries.

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Measuring Economic Progress

 Measure of Production  Gross domestic product (GDP)  Gross national product (GNP)  International Trade Activity  Balance of trade  Foreign exchange rate  Foreign debt  Other Economic Measurements  Consumer price index (CPI)  Unemployment © SOUTH-WESTERN EDUCATIONAL PUBLISHING