WHAT IS AN ECONOMY?

1. WHAT IS AN ECONOMY?

2. Journal Topic • What is an economy? • Save as: 1_lastname_firstname_U2J1

3. Georgia Performance Standard MKT-MP-2: Integrate social studies skills into marketing, sales and service to obtain an understanding of customers and the economic environment in they function.

4. Economy or Economic System The way a nation makes choices. These choices involve how the nation will use its resources to produce and distribute goods and services.

5. Resources • All things used in producing goods and services • Factors of Production – the technical term economists use for resources

6. Resource 1 – Land • Everything on the earth in its natural state / the earth’s natural resources • Resources Include: • Everything contained in the earth or found in the sea • Coal and crude oil are examples • A lake and all the living things in the lake are also examples

7. Resource 2 – Labor • All the people who work in the economy • Labor includes: • Full and Part-time Workers • Both the Public and the Private sector

8. Resource 3 - Capital • The money needed to start and operate a business • The goods used in the production process • Examples are: • Factories • Office Buildings • Computers • Raw materials that are processed into a more useful form (lumber, steel)

9. Resource 4 - Entrepreneurship • The skills of the people willing to risk their time and money to run a business • Entrepreneurs organize the other factors of production to create the goods and services desired in an economy

10. Infrastructure • The physical development of a country • Things necessary for production and distribution of goods and services • Parts of the infrastructure include • Roads • Ports • Sanitation Facilities • Utilities

11. Scarcity The difference between wants and needs and the resources available to meet these needs is called Scarcity. Nations have unlimited wants and needs but limited resources – Scarcity forces the nations to make economic choices.

12. The Basic Economic Questions • Nations must answer 3 basic economic questions when deciding to use their limited resources • The way nations answer these questions define their economic system • What goods and services should be produced? • How should the goods and services be produced? • For whom should the goods and services be produced?

13. What Should Be Produced? • Consumers decide what is to be produced through purchases made in the market place. • Items that satisfy the customer’s needs and wants are purchased making the products successful • Items that do not satisfy the needs and wants of the consumer are not purchased and are not successful

14. How Should Goods and Services Be Produced? • How products will be produced is left up to the business • Businesses must be competitive • Businesses must produce quality products at lower prices than their competitors • Businesses must find the best way to produce goods and services • Businesses must also find the best way to encourage customers to purchase their products

15. For Whom Should Goods and Services Be Produced? • Those individuals with the most money are able to purchase more goods and services • To obtain money individuals work and invest