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Unit 1: Introduction to Economic ConceptsECI.3 Identify the basic economic questions.

Essential Question: How does a society decide who gets what?

1Factors of Production & Economic Questions, Systems, and GoalsFACTORS of PRODUCTIONResources: Anything used to produce an economic good or service

Entrepreneurship Goods or Servicesmaterials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain.Natural Resources

Human Resourcesthe personnel of a business or organization, especially when regarded as a significant asset.

Capital Resourcesthe processed materials, equipment, and buildings used in production

The 3 Basic Questions for All Economic SystemsWhat will be produced?Resources are limited.

An economy cannot produce everything it wants or needs.

If an economy produces more of one good or service, it must produce less of something else. Production

In other words, economies have to prioritize production.

a computer company might decide to use its resources to produce more laptop computers and fewer desktop computers.

For Example

The 3 Basic Questions for All Economic SystemsHow will it be produced?Goods and services can be produced in different ways..Economies have to ask how will factors of production be organized?

How many workers will be hired? What skills must they have? What production method will be used?The 3 Basic Questions for All Economic SystemsProduction

a computer maker might decide to buy more machines (capital resource) to assemble the computers and employ fewer workers (human resource).For Example

The 3 Basic Questions for All Economic SystemsFor whom will it be produced?The economic system determines how goods and services will be divided up among the people. Will the government decide? Or, will consumer choice and prices?How much should be produced?DistributionConsumptionThe 3 Basic Questions for All Economic SystemsThe 3 economic questions are answered differently by every economic system, depending on their views on each economic goal.Economic FreedomEconomic EfficiencyEconomic GoalsEconomic EquityThe value a society places on making their own economic decisions without government interference.Full employment of all the factors of production Fair and just distribution of a societys wealth.The 3 economic questions are answered differently by every economic system, depending on their economic goals.Economic GoalsEconomic GrowthEconomic SecurityEconomic StabilityThe improvement of a societys standard of living through innovationA societys ability to provide basic needs for all membersCertaintycounting on goods and services to always be availableFactors of Production ReviewNatural ResourcesHuman ResourcesCapital ResourcesEntrepreneurGood or Service3 Economic Questions ReviewWhat will be Produced?How will it be Produced?For whom will it be Produced? How much?Characteristics of the basic economic systems:Private ownership of property/resources

Profit and competition motivate production

Consumer sovereignty (the consumer determines preferences)

Individual choice

Minimal government involvement in the economyFree Market EconomyCharacteristics of the basic economic systems:In a free market economy, individual freedom promotes the economy.

THINK ABOUT IT What about a individual freedom is beneficial to an economic system? Free Market EconomyCharacteristics of the basic economic systems:Economist Adam Smith said

Every individualneither intends to promote public interest, nor knows how much he is promoting itHe intends his own gain, and he is in this, as in many other cases, led by an invisible hand that promotes an end which was no part of his intentionBy pursuing his own interests he frequently promotes that of society The Wealth of Nations, 1776Free Market Economy

Characteristics of the basic economic systems: The Invisible Hand Free Market Economy

Characteristics of the basic economic systems:Centrally planned economy.

No private ownership of property

Government owns or controls almost all of the resources, especially capital tools and production equipment, etc.

Government tells labor force what to produce and how much to produce.

Lack of consumer choice.Command EconomyCharacteristics of the basic economic systems:Karl Marx wrote The Communist Manifesto(1848) In reaction to the social impact on classes and abuses of capitalism from the first Industrial Revolution of the early 1800s.

Command Economy

Characteristics of the basic economic systems:He advocated an overthrow of capitalist society to replace it with socialism (property owned by all, for all), then communism (socialism with no class differences)

Command Economy

Characteristics of the basic economic systems:Economic system in which production is based on customs, traditions, and historical precedent economic roles passed down from one generation to the next.

People perform the same type of work as their parents/grandparents (father to son, mother to daughter).Traditional EconomyMixed-Market EconomyMost common type of economic system

Government and individuals share the decision making process

Mixed-Market EconomyIndividuals and businesses make decisions for the private sector.

Mixed-Market EconomyIndividuals own the means of production.

Mixed-Market EconomyGovernment makes plans for the public sector

Mixed-Market EconomyGovernment guides and regulates production of goods and services offered

Mixed-Market EconomyA greater government role than in a free market economy

Most effective economy for providing goods and services

U.S. and most Western European countries are mixed economiesTHINK ABOUT ITThink of countries or examples that can be associated with each of the economies.

List how they are the same and the major differences of each.India (within the caste system) MalawiIvory CoastSoviet RussiaCubaNorth KoreaUSAJapanGermanyTraditional Economy:Country/ExampleCommand Economy:Country/ExampleFree Market Economy:Country/ExampleAFTER NOTES

Read pg. 41-47 in the textbook.

DRAW AN X THROUGH the Connecting to Reading & Activity HO.

Turn it over and put your name at the top of this side. Use the text and your notes to complete the Comparison Chart on the back.

Turn in when you are finished.