Intro To Business

1. Chapter 2 Economic Resources and Systems Intro To Business

2. Economic Resources Making Economic Decisions • Scarcity – The inability to satisfy all of everybody’s wants . • Individuals, businesses, and countries face a lack of resources • Principle of Scarcity – there are limited resources for satisfying unlimited wants and needs. • Factors of Production • All economic resources necessary to produce a society’s goods and services 2-1

3. Economic Resources • Factors of Production • Natural Resources • Raw Materials from nature that are used to produce goods • Trees, water, grains, cattle, coal • Renewable Resources- can be reproduced • Wheat and cattle • Non Renewable Resources- Limited • Ex. Coal, iron, oil • Labor Resources • People who make the goods and services for which they are paid. • Labor can be skilled or unskilled, physical or intellectual.

4. Economic Resources • Capital Resources • Things used to produce goods and services (Capital Goods) • Tractor, Delivery Truck, Computers, Medical Supplies • Entrepreneurial Resources • Individuals who start and direct businesses to produce goods and services to satisfy needs and wants • Used by people who recognize opportunities and start businesses • Entrepreneur – An individual who undertakes the creation, organization, and ownership of a business • Entrepreneurship- The process of recognizing a business opportunity, testing the market and gathering the resources necessary to start and run a business.

5. Questions • Why do all nations face the problem of scarcity? • Identify one similarity and one difference between labor and entrepreneurial resources? • Describe the four factors of production

6. Economic Systems • Economics – The study of how individuals and groups of people strive to satisfy their needs and wants by making choices • Basic Economic Questions • What should be produced? • Deciding to use a resource for one purpose means giving up the opportunity to use it for something else. • This is the opportunity cost. • How should it be produced? • Methods and labor used as well as the quality of the items produced. • Who should share in what is produced? • In most societies people can have as many goods and services as they can afford to buy • The amount of income they receive determines how many goods and services they can have. 2-2

7. Different Types of Economies • Economic System • The methods societies use to distribute resources. • Command Economy • Economic system in which a central authority makes the key economic decisions • The government dictates what will be produced, how it will be produced, and who will get the goods. • Higher skilled workers earn the same as low-skilled workers • Socialism – Moderate Command Economy • The state owns the major Resources • Mixed Economy • An economy that contains both private and public enterprises • Combines elements of both capitalism and socialism.

8. Different Types of Economies • Market Economy • Economic system where economic decisions are made in the marketplace. • Marketplace – Where buyers and sellers meet to exchange goods and services . • Also called Private enterprise system, free enterprise system, or capitalism.

9. Different Types of Economies • Market Economy continued: • Relationship between Price, Supply and Demand • Price – Amount of money given or asked for when goods and services are bought and sold • Supply – Amount of goods and services that producers provide at a various price • Demand – Amount or quantity of goods and services that consumers are willing to buy at various prices • The higher the price, the less consumers will buy. The lower the price, the more the consumers will buy. • Equilibrium Price – Is the point at which the quantity demanded and the quantity supplied meet. At any other price you would either have a surplus or shortage

10. Typical Demand/Supply Curve

11. Demand and the Price Effect Price Elasticity of Demand- is a measurement of the impact of the price effect. It indicates a buyer’s eagerness to buy a good or service. • Elastic vs. Inelastic Demand Price D1 D2 Quantity

12. Demand and the Price Effect Factors that Affect the Elasticity of Demand:- Availability of Substitutes - Percentage of Budget - Time

13. Questions • How does a market system decide what will be produced? • In a market system, what determines how many goods and services an individual can buy? • Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true?