Transcript Document

Chapter
2
Economic Resources
and Systems
pp. 18-33
Chapter
2
Learning Objectives
After completing this chapter, you’ll be
able to:
1. Define scarcity.
2. List the four factors of production.
continued
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Chapter
2
Learning Objectives
After completing this chapter, you’ll be
able to:
3. Identify the differences between market
and command economies.
4. Explain why most countries prefer a
mixed economy.
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Chapter
2
Why It’s Important
Understanding economic
resources and economic systems
is essential to lessening
economic problems.
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Chapter
2
Key Words
scarcity
factors of production
natural resources
human resources
capital resources
entrepreneurial resources
economics
Introduction to Business, Economic Resources and Systems
continued
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Chapter
2
Key Words
market economy
demand
supply
equilibrium price
command economy
mixed economy
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Chapter
2
Factors of Production
A shortage of resources is called
scarcity.
A basic economic problem for any
society is how to manage its
resources.
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2
Factors of Production
To meet the wants and needs of its
people, a society must produce goods
and services.
The means to produce them are called
economic resources, or factors of
production.
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Chapter
Figure
2.1
2
YOUR ECONOMIC REALITY AT A GLANCE
The average American spends $7 a day on food. People spend less
than half of that money on home-cooked meals. Recreate the table
below. Insert a check mark in the appropriate square based on your
eating experience in one week.
How do your
choices influence
your economic
situation?
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2
Natural Resources
The raw materials found in nature are
called natural resources.
Natural resources become factors of
production when we use them to
produce goods.
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2
Natural Resources
The economy of many countries is
based on their natural resources.
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2
Natural Resources
Some resources, like wheat and cattle,
are renewable. They can be
reproduced.
Other resources are limited, or
nonrenewable, like coal, iron, and oil.
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Natural Resources
The amount of natural resources
available to a society has a direct
effect on its economy.
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2
Human Resources
The knowledge, efforts, and skills
people bring to their work are called
human resources, or labor.
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2
Human Resources
Labor can be skilled or unskilled,
physical or intellectual.
One of the biggest problems facing
many nations today is not a shortage
of labor but a shortage of skilled labor.
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Capital Resources
Capital resources are the things used
to produce goods and services, like
buildings, materials, and equipment.
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2
Capital Resources
As the wants and needs of people
change, so do the needs for capital
resources.
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Entrepreneurial Resources
Meeting the changing wants and
needs of people requires
entrepreneurial resources.
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Entrepreneurial Resources
Entrepreneurs improve on ways to use
resources, or create and produce new
ones.
A key to dealing with scarcity is to
develop new resources and
technologies.
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Chapter
2
Fast Review
1. What is scarcity?
2. What are the four factors of
production?
continued
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Chapter
2
Fast Review
3. What are some examples of
capital resources?
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Chapter
2
Making Decisions
About Production
No society has enough productive
resources available to produce
everything people want.
Every society must, therefore, make
choices.
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Basic Economic Questions
Rules and regulations determine
choices.
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2
Basic Economic Questions
A society makes economic choices by
answering three economic questions:
• What should be produced?
• How should it be produced?
• Who should share in what is
produced?
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What Should Be Produced?
Deciding to use a resource for one
purpose means giving up the
opportunity to use it for something
else.
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2
How Should It Be Produced?
When a society decides what to
produce, it must also address other
types of questions, such as what
methods will be used, how many
people will work on the production,
and what will be the quality of the
items produced?
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How Should It Be Produced?
The answers to these questions
depend on two factors.
One factor depends on how goods are
to be produced.
Another important factor is the quantity
of available resources.
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Who Should Share in
What Is Produced?
This question focuses on the concept
that people can’t get everything that
they want because society doesn’t
have enough resources.
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Who Should Share in
What Is Produced?
In most societies, people can have as
many goods and services as they can
afford to buy.
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2
Who Should Share in
What Is Produced?
The question arises as to how a
society determines the income earned
by each individual in that society?
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2
Blood Is Thicker Than Oil
Occidental Petroleum Corp. is exploring for oil
in Columbia. However, the U’wa people oppose
oil exploration on the land they have lived on
for thousands of years. For them, oil is the
“blood of Mother Earth.”
continued
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Chapter
2
Blood Is Thicker Than Oil
The problem is more complex because the
Columbian government supports the oil
production, which will bring development to
the country.
continued
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Chapter
2
Analyze
Who has the right to the land—the U’wa
people, or the Columbian government?
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Chapter
2
Fast Review
1. When a society chooses to use a
resource for one purpose and gives
up the opportunity to use it for some
other purpose, what cost is
involved?
continued
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Chapter
2
Fast Review
2. What happens to production
methods when a country discovers
new ways to combine economic
resources?
continued
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Chapter
2
Fast Review
3. In most countries, what determines
how many goods and services a
person can buy?
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2
Types of Economic Systems
Economics studies how society
chooses to use resources to produce
and distribute goods and services for
people’s consumption.
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2
Types of Economic Systems
To use its limited resources effectively,
every nation needs an economic
system.
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2
Types of Economic Systems
The primary goal of an economic
system is to provide people with a
minimum standard of living, or quality
of life.
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2
Types of Economic Systems
The two basic and opposing economic
systems that have been developed
are:
• Market economy
• Command economy
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2
Market Economy
In a market economy economic
decisions are made in the marketplace
according to the laws of supply and
demand.
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2
Market Economy
The Market and Prices
Price is the amount of money given or
asked for when goods and services
are bought or sold.
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2
Market Economy
The Market and Prices
Demand is the amount or quantity of
goods and services that consumers
are willing to buy at various prices.
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2
Market Economy
The Market and Prices
The higher the price, the fewer
consumers will buy an item.
The lower the price, the more
consumers will buy an item.
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2
Market Economy
The Market and Prices
Supply is the amount of goods and
services that producers will provide at
various prices.
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2
Market Economy
The Market and Prices
Demand and supply work together.
When the quantity demanded and the
quantity supplied meet, the price is
called the equilibrium price.
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Chapter
Figure
2.2
2
VISUALIZING DEMAND AND SUPPLY
Remember these
two points: (1) The
demand curve
always falls left to
right on a graph, and
(2) the supply curve
always rises from
left to right on the
graph.
How many CDs will be
demanded at $16 a piece?
How many CDs will be
supplied at $18 a piece?
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2
Market Economy
The Market and Prices
A market economy is also called
capitalism, or private enterprise.
In a capitalist system, resources are
privately owned.
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Market Economy
The Market and Prices
In a capitalist system, the primary role
of government is to support the
marketplace by removing obstacles
such as trade barriers.
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2
Market Economy
The Market’s Motivations
A market economy offers incentives,
such as competition and the profit
motive, to produce more.
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2
Market Economy
The Market’s Motivations
The constant demand for new goods
and services encourages
entrepreneurship.
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2
Market Economy
The Market’s Motivations
The problem with a market economy is
that owners and producers reap the
most rewards.
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2
Market Economy
The Market’s Motivations
Another problem with a market
economy is that unskilled workers and
older adults are often unable to afford
basic needs such as health care.
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2
Market Economy
The Market’s Motivations
Another problem with a market
economy is that a small number of
large companies can join forces to
control the supply of products and
manipulate prices.
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2
Market Economy
The Market’s Motivations
The profit motive can become an end
in itself rather than a means to
improve the good for all.
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2
Command Economy
In a command economy a central
authority makes the key economic
decisions.
A command economy is also called a
planned or managed economy.
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2
Command Economy
There are two types of command
economies.
In a strong command economy, such
as communism, the state makes all
the economic decisions.
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2
Command Economy
In a moderate command economy,
also called socialism, there is some
form of private enterprise.
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2
Command Economy
The primary advantage of a command
economy is that it guarantees
everyone an equal standard of living.
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2
Command Economy
There are some disadvantages to a
command economy.
Since the state provides all goods and
services in a strong command
economy, there is little choice of what
to buy.
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2
Command Economy
Another disadvantage to the command
economy is that there is no incentive
for entrepreneurship when you can’t
run your own business.
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2
Mixed Economy
Most nations have a mixed economy,
a combination of a market and
command economy.
The state takes care of people’s needs
while the marketplace takes care of
people’s wants.
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2
Graphic Organizer
Chapter
Graphic
Organizer
Basic
Economic
Questions
MARKET ECONOMY
Economic decisions are made in the marketplace
according to the laws of supply and demand.
MIXED
ECONOMY
Combination
market and
command
economy.
What should
be produced?
How should it
be produced?
Who should
share in
what is
produced?
COMMAND ECONOMY
Government makes all key economic decisions.
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Chapter
2
Fast Review
1. What is an economic system?
2. What is the difference between a
market economy and a command
economy?
continued
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Chapter
2
Fast Review
3. What are the advantages and
disadvantages of a command
economy and a market economy?
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2
What are some examples of
renewable and nonrenewable
resources?
continued
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2
Some stoves use corn as a heating
fuel. Based upon the cost savings,
do you think the price of corn is high
or low?
continued
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2
Why do you think other countries
are interested in buying cornburning appliances?
continued
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2
In a command economy, how might
a limit on the availability of corn
affect the people?
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2
Business Building Blocks
Interpreting Line Graphs
Graphs are a quick and useful way to
visually communicate information.
Line graphs often show change over a
period of time.
continued
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2
Business Building Blocks
Interpreting Line Graphs
The left side of a graph is the vertical
axis.
The bottom of the graph is the horizontal
axis.
continued
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2
Business Building Blocks
Interpreting Line Graphs
Both axes display numbers and a label
indicating what the numbers represent.
Dots on the graph show numerical
information.
continued
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2
Business Building Blocks
Interpreting Line Graphs
When the dots on the graph are
connected, they form a line whose
location and direction reveals information
about change through time.
continued
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2
Business Building Blocks
How to Interpret a Line Graph
• Read the title of the graph
• Read the label on each axis
• Understand the numbers on each axis,
including the interval used
continued
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2
Business Building Blocks
How to Interpret a Line Graph
• Examine where the dots are located on
the graph
• Determine what the line(s) or curve(s)
symbolize
continued
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Chapter
2
Business Building Blocks
How to Interpret a Line Graph
• Compare the line(s) on the graph to
both axes to determine the graph’s
meaning
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End of Chapter
2
Economic Resources and Systems