ECONOMICS

ECONOMICS: The PRODUCTION, DISTRIBUTION, and CONSUMPTION of goods and services

1. PRODUCTION: The making of products

Example: factories

2. DISTRIBUTION: The movement of goods or products

Example: cargo ships and planes

3. CONSUMPTION: People who buy goods and services

Example: you and I buy products from stores

Make the Product Move the Product Buy the Product

FACTORS of PRODUCTION

How Products are MADE. “What does it take to make a product?”

1. LAND: The natural resources that Earth provides

Example: Water, Soil, Minerals, Crops

2. LABOR: Physical or Mental effort used to create goods and service

Example: Work! Digging a ditch, plowing a field, teaching a class

3. CAPITAL: Wealth in the form of money or property, used to create more wealth

Example: Things you can use to make money! Farmland, a Chicken, a boat for catching

fish

NAME_____________________________

DISTRIBUTION

How Products are MOVED. “How do we get products to the people who want them?”

1. IMPORT: Products coming into your country from another country

Example: Products from China, India, or Mexico

2. EXPORT: Products that move out of your country to another

Example: Products we make in America and ship to other countries. Ford Trucks and

Computers

CONSUMPTION

People who buy products and services like you and me. “How and why do I buy goods?”

1. WANT: Something one desires but is not necessary to live.

Example: Xbox one, a new IPod, a fancy Sports car

2. NEED: Something that is necessary to live. A person will die without these.

Example: Food, Water, Shelter, Clothing

1. SHORTAGE: Not enough supply of a product or service for all the people that want it.

Example: Wal-Mart doesn’t have enough IPods for everyone who wants one

2. SURPLUS: When a production or supply is greater than the demand

Example: Wal-Mart has more IPods than it can sell

LET’S START A BUSINESS!

1. Congratulations! The moment you start a business you have become an ENTREPENEUR!

ENTREPENEUR: A person who starts, runs and owns a business.

2. Starting a business isn’t free! I know that I will have many Expenses when I start my

business.

EXPENSES: The cost required for something; the money spent on something

Examples: paying rent, buying materials for my products, paying my employees

3. How do I pay my employees?? We agree on how much money they make. Called…

WAGES or SALARY: A fixed or regular payment made by an employer to an

employee.

4. Ok, now I have my business all set and ready to open. How do I get customers

interested in my products?? I need to give them an…

INCENTIVE: A reason to do something; motivations

Examples: Buy one, get one free!!, 50% off!!

5. Hey! There are other businesses in Holmen that are selling the same product as me!

That’s ok, those guys are called….

COMPETITION: Individuals or companies striving to sell more products or services

than the others

Examples: Microsoft vs. Apple, Coke vs. Pepsi

6. If my business is doing well and is making more money than its spending, I’m making a…

PROFIT: Money gained in a business venture; making more money than spent.

7. Oh no! I can’t afford to keep my business going; I need to borrow money from the bank.

I owe them a…

DEBT: Money or something of value owed to someone else

HOW DOES THE ECONOMY WORK?

1. There are TWO types of businesses in an economy:

BASIC BUSINESSES: Businesses that are necessary for a nation to function. Think

NEEDS!

Examples: electricity, roads, running water

NON BASIC BUSINESSES: Business that are nice… but not necessary for a nation

to function. Think WANTS!

Examples: Music, Sports and Designer Clothing

2. What are some things I see every day that are necessary for our country to function??

INFRASTRUCTURE: The basic physical and organizational structures and facilities

needed for the operation of society.

Examples: Roads, Telephone wire and Power lines, Sewer systems

TYPES OF ECONOMIC SYSTEMS

There are many kinds of governments throughout the world and they all operate their

economies a little differently. Governments own certain businesses in an economy.

1. CAPITALISM or “Free Market Economy”

An economic system where both basic and non-basic businesses are privately owned

2. SOCIALISM or “Mixed Economy”

An economic system where government owns the basic businesses and the non-basic

businesses are privately owned

3. COMMUNISM or “Command Economy”

An economic system where both the basic and non-basic businesses are owned by the

government