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Unit 2 - Economics

Chapter 3 – Political and Economic Analysis. Unit 2 - Economics. The organized way a nation provides for the needs and wants of its people. A nation chooses how to use its resources to provide and distribute good and services

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Unit 2 - Economics

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  1. Chapter 3 – Political and Economic Analysis Unit 2 - Economics

  2. The organized way a nation provides for the needs and wants of its people. A nation chooses how to use its resources to provide and distribute good and services A country’s resources determine economic activities such as manufacturing, buying, selling, transporting, and investing. 3.1 What is an economy?

  3. Resources • All the things used in producing goods and services • Economists use the term Factors of Production when they talk about resources • The factors of production comprise 4 categories: • Land, Labor, Capital, and Entrepreneurship Resources

  4. Land includes everything contained in the earth or found in the seas. • Ex. Coal and Crude Oil are natural resources • Natural resources are used as raw material for making goods and creating services that are marketed to customers. • Climate and geography can also be an example Land

  5. Labor refers to all the people who work. • It includes: • Full/part time • Managers • Professionals in both private and public sectors • Economies with well trained, well educated labor have an advantage over other nations in attracting business Labor

  6. Includes money to start and operate a business. Also includes the goods in the production process Capital

  7. Capital includes infrastructure • Which is the physical development of a country • Includes roads, ports, sanitation, facilities, and utilities, especially telecommunications Infrastructure

  8. Refers to the skills of people who are willing to invest their time and money to run a business They organize factors of production to create the goods and services that are part of an economy Entrepreneurship

  9. The local shopping mall is a good place to observe economic principals. • Labor is represented by salespeople • Capital is the money that was invested in manufacturing products and selling them • What are examples of the other 2 factors of production (land and entrepreneurship)? Economics and the Shopping Mall

  10. The difference between wants and needs and available resources Scarcity

  11. Nations must answer three basic questions when deciding how to use their limited resources. • Which goods and services should be produced? • How should the goods and services be produced? • For whom should the goods and services be produced? • Dubai Example • Location • 60 Minutes Video • Pictures How does an Economy Work?

  12. Traditions and rituals answer the basic questions of what, how, and for whom. • Answers are also based on: • Cultural • Religious practices • ideals (passed from one generation to the next) Traditional Economies

  13. There is no government involvement in economic decisions • The government lets the market answer the three basic economic questions • What • How • For Whom Market Economies

  14. A country’s government makes economic decisions and decides what, when, and how much will be produced and distributed. The government controls the factors of productions and makes all decisions about their use. Command Economy

  15. Marketplace competition and private ownership of business • Government is concerned about • People • Cares for those that cannot care for themselves • United States and Japan are examples Capitalism

  16. Government controls the factors of production • No private ownership of property or capital • The theory • Goods owned in common are available to all as needed • Very few left • Cuba, North Korea, and China are examples Communism

  17. Originally referred to a system that was on its way to turning communist. The main goal is to meet basic needs for all and to provide employment for many Canada, Germany, and Sweden Socialism

  18. The Economy and Marketing • If you are a marketer and you want to perform a useful SWOT analysis you need to consider the economic factors that will influence your marketing plan. 3.2 Understanding the Economy

  19. A healthy economy has three goals: • Increase productivity • Decrease unemployment • Maintain stable prices • All nations analyze their economies to keep track of how well they are doing • How is the US economy now? When is an economy successful?

  20. A nation's economy is the production and consumption of goods (food, clothes, cars) and services (repairs, lawn-mowing, haircuts) in that nation Anybody producing or consuming things in a country plays some role in the economy. ­Production and consumption are intertwined. Producers and Consumers

  21. The ultimate goal of producers is to make money Consumers may want to satisfy their wants and needs by buying products Producers are the ones who actually set prices, but they do so based on the behavior of consumers. Supply and Demand

  22. If nobody buys a product at a particular price, the producer knows the price is too high. If some consumers buy it, but not enough to buy everything produced, producers must either decrease the price or decrease the supply. Supply and Demand Cont.

  23. The willingness of consumers to pay for products is known as demand. Even if there is constant high demand for a product (toilet paper, for example), individual producers need to keep the price down or consumers will just buy it from a competitor. Supply and Demand Cont.

  24. The recurring changes in economic activity • Expansion • When the economy is flourishing, sometimes referred to as a period of prosperity • Recession • A period of economic slowdown that lasts for at 6 months • Depression • A period of prolonged recession Business Cycle

  25. A recession is a prolonged period of time when a nation's economy is slowing down, or contracting. Such a slow-down is characterized by a number of different trends, including: • People buying less stuff • Decrease in factory production • Growing unemployment • Slump in personal income • An unhealthy stock market • By the conventional definition, this slow-down has to continue for at least six months to be considered a recession. Recession

  26. Page 69 • #21-25 • Page 70 • #29-30 Assignment

  27. Video - American History: America's Economy: Sorrow and Hope • Questions: • What were some causes of the great depression? • What happened to the residents of the dust bowl? The Great Depression

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