CHAPTER 2 SECTION 1
“3 ECONOMIC QUESTIONS”
Economics Ms. Love
Key Terms

1.
2.
3.
Define 3 Key Terms from page 23!
Warm up

Define Capitalism or Free Market? Or provide
examples of what you might find in a free market
or capitalist Economic system.
Agenda

What we will cover…
 What
key economic questions must every society
answer?
 What basic economic goals do societies have?
 What types of economic systems exist today?
Background

We studied the economic concept of SCARCITY
 Scarcity
means that we cannot have ALL that we want
or need.



Scarcity FORCES different nations or societies to
answer some HARD economic questions.
An Economic System is the method used to by a
society to distribute goods and services.
The choice of the economic system reflects the
society’s GOALs and VALUES
3 Economic Questions

1.
2.
3.
Because economic resources are limited or SCARCE,
every society must answer three economic questions.
WHAT goods and services should be PRODUCED?
HOW should these goods and services be
produced?
WHO consumes or gets these goods and services?
Question One - What should be made

How is the society going to satisfy its needs and wants?
Is it hard to determine the difference between a want and a
need?
 Do societies get this right?
 What about Defense? Education? Health Care? Consumer
Goods?
 Guns-and-Butter Trade Off


Does Russia decide how it will satisfy the needs and
wants of its people differently than the U.S.? Mexico?
Question Two – How to produce

Societies need to decide how they are going to use
their Limited Resources to produce goods and
services.
 Should
we use Nuclear Energy to get off Oil?
 What will be grown on Farms?
 Should environmentally dangerous methods be used for
the production of goods and services?

Remember there are many ways to combine LAND,
LABOR, and CAPITAL – Each society needs to
determine how it will do it.
Question Three – Who gets them?




Pop-Corn read pages 24 to 25
Start with Who Consumes Goods and Services
Question
If Led Zeppelin was to tour the world in 2011, do
you think that the same method for the distribution
of tickets would be used for a concert in Los
Angeles and another in Beijing China?
Economic Goals and Societal Values
Societies answer the three economic questions based on their values and they become the
goals for the society.
Efficiency
Freedom
Security &
Predictability
• Making the
most of
resources
• Distributing the
goods and
services
• Government
involvement in
the production
and
distribution of
goods
• Patriotism
• Goods and
services are
available
• They are paid
for on time
• Safety Net for
People
Growth & Innovation
• Innovation leads to Growth
• Growth leads to better Standard of
Living
Equity/Fairness
• Fair
distribution of
Wealth
• How are jobs
viewed?
Other Goals
• Military Dominance
• Environmental Protection
4 Main Economic Systems

These are examples of the 4 main systems that have
been developed to address the three economic
questions.
 Traditional economies rely on habit, custom, or
ritual to decide what to produce, how to produce it,
and to whom to distribute it. THINK OLD STYLE…
SMALL AND CLOSE VILLAGES
 In a market economy economic decisions are made
by individuals and are based on exchange, or
trade. THINK FREE MARKET or CAPITALISM
4 Main Economic Systems

The other two economic systems…
 In
a centrally planned economy the central
government makes all decisions about the production
and consumption of goods and services. THINK
COMMAND OR CENTRALLY PLANNED.
 Mixed
economies are systems that combine
tradition and the free market with limited
government intervention.
 What is an example of a nation with a Mixed
Economy?
Assessment
1. Each society determines who will consume what is produced based on
(a) its unique combination of social values and goals.
(b) the amount of factor payments.
(c) its needs and wants.
(d) economic equity.
2. To improve its standard of living, a nation’s economy must
(a) remain stable.
(b) grow through innovation.
(c) reach economic equity.
(d) allow the central government to make economic decisions.
Answers
1. Each society determines who will consume what is produced based on
(a) its unique combination of social values and goals.
(b) the amount of factor payments.
(c) its needs and wants.
(d) economic equity.
2. To improve its standard of living, a nation’s economy must
(a) remain stable.
(b) grow through innovation.
(c) reach economic equity.
(d) allow the central government to make economic decisions.
Assessment Continued….
Section 1 Assessment Key Terms and Main Ideas
# 1.
# 2.
# 3.
# 4.
# 5.

Applying Economic Concepts
#6