Economics
Scarcity
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A word economists use to describe the
conflict between people’s desires and
limited resources.
The foundation for all economics.
Economic System?
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The way in which a nation uses its
resources to satisfy people’s needs and
wants.
Every economic system has to answer
three basic questions:
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What will be produced?
How will it be produced?
For whom will it be produced?
Economic Systems
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Market System – Citizens and businesses
make most economic decisions.
Government plays a limited role.
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Ex. U.S., Canada, Mexico, U.K.
Command System – Government decides
how many of which goods are produced
and sets the price.
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Ex. Communist governments (North Korea and
Cuba).
Economic Systems cont.
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Traditional System – social roles and culture
determine how goods and services are produced,
what prices and individual incomes are, and which
consumers are allowed to buy certain goods.
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Ex. Family’s status may determine whether they can own
a tractor.
Mixed System – Mixes elements of two systems.
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Ex. India has features of both market and traditional
economies.
Gross Domestic Product
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GDP – gross domestic product – tells the
total value of the goods and services that a
country produces each year. This is one
way to measure a country’s economy.
https://www.cia.gov/library/publications/theworld-factbook/rankorder/2004rank.html
Four Factors of Production
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Natural Resources – raw materials such as land,
water, forests, and minerals.
Human Capital – workers with skills and
experience to make goods or provide services.
Capital Resources – machines, factories, and
supplies
Entrepreneurs – People who bring natural
resources, labor resources, and capital resources
together to produce goods and services.
Factors of Production for a Music CD
Entrepreneur
(owner of recording
studio and factory)
Labor Resources
(musicians, sound technicians,
producer, factory manager,
factory workers)
Natural Resources
(materials to
manufacture CDs)
Music CD
Capital Resources
(recording equipment, studio,
factory and manufacturing
equipment)
Elements of a Market System
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Consumers – the people who use goods and
services in a market economy.
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Supply – number of items offered at each price.
Demand – number of items that people will buy at each
price.
Profit – money that remains after the costs of
producing a product are paid.
Competition – rivalry among businesses to sell
goods to consumers and make the greatest profit.
What happens if there is more demand
than supply??
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Too much demand without enough supply
does what to prices of goods?
Wii?
i-Phone?
What happens if there is more supply
than demand??