Chapter 2 Objectives
✏  Define
scarcity
✏  List the four factors of production.
✏  Identify the differences between
market and command economies
✏  Explain why most countries prefer a
mixed economy.
Chapter 2
Economic Resources and
Systems
What is Economics?
Chapter 2.1
Critical Thinking & Discussion
✏  Did
a store ever run out of an item
you wanted to buy?
✏  Did a store ever discontinue an item
you liked?
✏ What
did you do?
✏ Why was the store out of the item?
✏  Scarcity
✏ A
shortage of resources.
✏ Example:
A community not having enough
oil, doctors, or technology to satisfy
wants and needs.
Factors of Production
Factors of Production
✏  Everything
that is necessary to
produce a society’s goods and
services.
4 Factors of Production
1.
Natural Resources
2.
Labor Resources
3.
Capital Resources
4.
Entrepreneurial Resources
1. Natural Resources
✏  Raw
materials found in nature.
✏  Used
to produce goods.
✏  Examples:
Trees -> Paper
Fish -> harvested for food
Natural Resources (continued)
✏  Elements
that can be combined to
create goods.
✏  Countries
depend on their natural
resources.
2 Types of Natural Resources
✏  Renewable
✏ Can
be reproduced
✏ Ex: wheat, cattle
✏  Nonrenewable
✏ Limited
✏ Ex:
coal, iron, oil
2. Labor Resources
✏  Knowledge,
efforts, and skills people
bring to their work.
✏  Examples:
teachers, coal miners,
managers, farmers
Labor Resources (continued)
✏  Skilled
or unskilled
✏  Physical
✏  Labor
or intellectual
Unions
3. Capital Resources
✏  Things
used to produce goods and
services.
✏ Examples:
Buildings, materials,
equipment, delivery trucks,
supermarkets, cash registers, etc.
4. Entrepreneurial Resources
✏  Meets
the changing wants and needs
of people.
✏  Entrepreneurs
recognize the need for
new goods and services.
✏ Improve
resources
Chapter 2.2
TYPES OF ECONOMIC SYSTEMS
Three Basic Economic
Questions
✏  What
goods or services should be
produced?
✏  How goods or services should be
produced?
✏  For whom goods or services should be
produced?
Economics
✏  How
society chooses to use
resources:
produce and distribute goods and
services.
✏
Business Contribution
✏  Inventing
resources
products that use available
Economic System
✏  ‘monitors’
resources
✏  Goal:
provide people with a minimum
standard of living or quality of life
✏  2
types of economic systems:
✏ Market
Economy
✏ Command Economy
Create a large ven diagram in
your notes – half of a page in
size. Label one side ‘Market
Economy’, one side ‘Command
Economy’, and Both in the
middle.
Market Economy
✏  Economic
decisions are made in the
marketplace
Market Economic System
✏  Capitalism
✏ Resources
✏ Own
are privately owned
your house, land, business, etc.
✏ Government
control is minimal
✏ In reference to the US, what does the
government control? Record in notes
Market Economy (continued)
✏  The
Profit Motive
✏ Desire
to make more money
✏ Businesses constantly competing
✏ Owners and producers reap most rewards
✏  Fact:
CEOs make 500 times avg workers
Price, Supply and Demand
✏
✏
✏
Price-the amount of money given or asked for
when goods or services are bought or sold
Supply-is the amount of goods and services that
producers will provide at various prices
Demand-is the amount or quantity of goods and
services that consumers are willing to buy at
various prices.
Supply and Demand
✏  Refer
to p.30
✏  Choose a product refer back to p. 29
“real world” and using your ipad find
out the supply and demand correlation
for that particular product over the
last 10-15 years. Create a supply and
demand chart in your notes.
Command Economy
✏  Central
authority makes key economic
decisions.
Command Economy
✏  Government
✏ Airlines
owns major resources
and steel
✏ Makes key economic decisions
✏ Individuals may own some businesses
Mixed Economy
✏  Combination
economies
✏  The
of market and command
government takes care of peoples
needs, the marketplace takes care of
peoples wants.