Economics

What is Economics?

Economics: the branch of social science that deals with the production and distribution and consumption of goods and services and their management

What questions do economist ask?

What to produce? How to produce? For whom to produce?

Scarcity

Scarcity: condition where human wants are greater than the available supply.

Time Goods Labor Capital Resources

Land & oil

Price

What happens to price when items are scarce?

Price

What happens to price when items are scarce?

Production

the making of goods available for use – Resources are turned into goods & services

• Resources– Natural resources– Labor– capital

distribution

the act or process of distributing the marketing of goods How does the consumer get the goods or

services?– Movement– Who decides?

consumption

the act or process of consuming the amount consumed Satisfying our needs and wants by choosing

goods & services– consumer

4 Types of Markets

Economic Markets Traditional Command Mixed Free (market economy)

Traditional Economy

• Economic System that answers economic questions the way they have always been answered

– Primitive tribe– Ainu in Japan– Native Brazilians (rain forest)– Amish

Traditional Economy

• Strengths• Minimizes problems

within society

• Weaknesses– Restricts

individuals– Lacks

advancements– Lacks new

technology– Lacks economic

growth

Market Economy

• Economic is a system based on private ownership, free trade, competition

– Price is determined by supply & demand– Also known as

• Free Market• Capitalism

• Example: United States

Market Economy

• Strengths– Freedom

• Buy & sell• Entrepreneurship• Advancements

– technology

Command Economy

• Is a system in which the central government makes all economic decisions.

– Government answers these questions• What good to produce?• How much goods to produce?• What price will be charged?

– Examples:• North Korea & Cuba

Command Economy

• Owns & controls most businesses• People do not have a say• Regulate the market

– Control• Production & Distribution of goods & services

Mixed Market

• An economy that uses elements of both the command & market economic systems

– Example is China

• Includes – Government purchases– Employment– Taxation– Redistribution– regulation

Market Economhy