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  • 1. What is an Economy?
    Chapter 3.1
  • 2. Economic Systems
    Economy: the organized way a nation provides for the needs and wants of its people
    A countys resources determine economic activities such as
    Manufacturing
    Buying
    Selling
    Transporting
    Investing
  • 3. Resources
    Are all the things used in producing goods and services
    Economists call these Factors of Production
    4 categories
    Land (tangible)
    Capital (tangible)
    Labor (intangible)
    Entrepreneurship (intangible)
  • 4. Land
    Everything contained in the earth or found in the seas
    Coal, crude oil, lakes, trees, plants, soil etc.
  • 5. Capital
    Money to start and operate a business
    Also goods used in production
    Factories
    Office buildings
    Computers
    Tools
    Lumber (processed raw materials
    Steel
    Includes infrastructure
    Physical development of countries
    Roads
    Ports
    Sanitation facilities
    Telecommunications
  • 6. Labor
    All the people who work (full & part-time)
    Economies with well-educated and well-trained labor have an advantage
  • 7. Entrepreneurship
    Skills of people who invest their time and money to run a business
    Organize factors of production to create goods and services
    Employers of a population
  • 8. Scarcity
    Different economies have different amounts of resources
    Limited resources
    Unlimited wants and needs
    Scarcity forces nations to make economic choices
  • 9. How Does an Economy Work?
    Three Basic Questions nations must ask:
    Which goods and services should be produced?
    How should goods and services be produced?
    For whom should the goods and services be produced?
    Answers define their economic system
  • 10. Economic Systems: 3 Categories
    Traditional Economy
    Market Economy
    Command Economy
  • 11. Traditional Economy
    Traditions & rituals answer economic ?s
    Based on cultural or religious practices
    Passed from one generation to next
    Activities assigned through tradition rather than choice
  • 12. Market Economy
    In pure market economy there is no government involvement in economic decisions
    Consumers decide what should be produced
    Businesses decided how to produce goods and services
  • 13. Command Economy
    Govtdecides what, when and how much will be produced and distributed
    Govt controls factors of production
  • 14. So what type of economy do we have?
    Traditional?
    Market?
    Command?
  • 15. Mixed Economies
    No economy is purely traditional, market, or command
    US = mixed economy leaning toward market economy (we have govt involvement)
    3 political philosophies have shaped world economies:
    Capitalism
    Socialism
    Communism
  • 16. Capitalism
    Political & economic philosophy characterized by marketplace competition and private ownership of businesses
    Same as free enterprise
    Political foundation is usually Democracy
    power in the hands of the people
    Multiple political parties
    Ex. US, Japan
  • 17. Communism
    Is a social, political, and economic philosophy
    Govt is authoritarian- controls factors of production
    No private ownership of property or capital
    goods owned in common theory where govt is representing the community as a whole
    Little or no economic freedom
    Ex. Cuba, North Korea
  • 18. Socialism
    Originally referred to a system on its way to communist ideal of classless society
    Today most socialist countries are democracies
    More govt involvement than Capitalist nations runs key industries, makes decisions
    Have more social services
    Businesses & individuals pay higher taxes
    Ex. Canada, Germany