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

1. Unit 1: Introduction to Economic Concepts ECI.3 Identify the basic economic questions. Essential Question: How does a society decide who gets what?

2. Entrepreneurship Goods or Services Resources: Anything used to produce an economic good or service FACTORS of PRODUCTION

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

4. Human Resources the personnel of a business or organization, especially when regarded as a significant asset.

5. the processed materials, equipment, and buildings used in production Capital Resources

6. The 3 Basic Questions for All Economic Systems Production What 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. • In other words, economies have to • prioritize production.

7. The 3 Basic Questions for All Economic Systems For Example… a computer company might decide to use its resources to produce more laptop computers and fewer desktop computers.

8. The 3 Basic Questions for All Economic Systems Production How 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?

9. The 3 Basic Questions for All Economic Systems For Example… a computer maker might decide to buy moremachines (capital resource) to assemble the computers and employ fewer workers (human resource).

10. The 3 Basic Questions for All Economic Systems Distribution For whom will it be produced? • How much should be produced? Consumption • 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?

11. Economic Goals • The 3 economic questions are answered differently by every economic system, depending on their views on each economic goal. Economic Efficiency Economic Freedom Full employment of all the factors of production The value a society places on making their own economic decisions without government interference. Economic Equity Fair and just distribution of a society’s wealth.

12. Economic Goals • The 3 economic questions are answered differently by every economic system, depending on their economic goals. Economic Growth Economic Security A society’s ability to provide basic needs for all members The improvement of a society’s standard of living through innovation Certainty—counting on goods and services to always be available Economic Stability

13. Factors of Production Review Natural Resources Human Resources Good or Service Entrepreneur Capital Resources

14. 3 Economic Questions Review For whom will it be Produced? How much? What will be Produced? How will it be Produced?

15. Free Market Economy 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 economy

16. Free Market Economy Characteristics 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?

17. Free Market Economy Characteristics of the basic economic systems: Economist Adam Smith said… “Every individual…neither intends to promote public interest, nor knows how much he is promoting it…He intends his own gain, and he is in this, as in many other cases, led by an invisible handthat promotes an end which was no part of his intention…By pursuing his own interests he frequently promotes that of society…” The Wealth of Nations, 1776

18. Free Market Economy Characteristics of the basic economic systems: The “Invisible Hand”

19. Command 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.

20. Command Economy Characteristics 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.

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

22. Traditional 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).

23. Mixed-Market Economy Most common type of economic system Government and individuals share the decision making process

24. Mixed-Market Economy Individuals and businesses make decisions for the private sector.

25. Mixed-Market Economy Individuals own the means of production.

26. Mixed-Market Economy Government makes plans for the public sector

27. Mixed-Market Economy Government guides and regulates production of goods and services offered

28. Mixed-Market Economy A 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 economies

29. THINK ABOUT IT… Think 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) Malawi Ivory Coast Traditional Economy: Country/Example Soviet Russia Cuba North Korea Command Economy: Country/Example USA Japan Germany Free Market Economy: Country/Example

30. AFTER 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.