Basic Economics
STANDARDS: SS6CG5B, SS6E5 A, B, C,
SS6E6A, B, SS6E7A, B, C, D
EQ:
HOW DO YOU IDENTIFY THE THREE
ECONOMIC SYSTEMS?
LEARNING TARGET:
I CAN ANALYZE AND COMPARE
DIFFERENT ECONOMIC SYSTEMS.
What is Economics?
Economics is the study of how people manage their
resources.
The Three Questions
All economics revolves around three simple questions:
What to produce?
2. How to produce it?
3. Whom do I produce it for?
1.
Natural Resources
Natural resources are gifts of nature that are used to
make products.
They are limited!
Examples:
Plants, Mined Metals, Animals, Oil, Coal, Minerals,
etc.
Production
Production is:
1. How goods are made with resources
2. How services are performed
**Production of any sort requires a resource or a combination of
resources**
What to produce?
What is the product?
What is the service?
What is the product
you’re making?
 Cars
 Shoes
 Pens
 Paper
You’re still creating and
selling something…
 Landscaping
 Mechanics
 Dentists
How do I produce it?
How do I make the things or services I want to sell?
If I want to sell shoes I first need to figure out how to
make shoes!
As you watch the video, list as many things as you can
that went in to making the shoe.
Traditional Economy
What is produced?
1.
1.
What people need to survive
2. How are goods produced?
1.
Farming, hunting or gathering
3. How do people get products?
1.
People make their own products or they barter (trade) with
people.
****There is no money involved in a Traditional Economy****
Command Economy
What is produced?
1.
1.
The government decides
2. How are goods produced?
1.
The government decides
3. How do people get products?
1.
The government decides
****The government COMMANDS everything****
Market Economy
What is produced?
1.
1.
Whatever people are willing to buy and sell
2. How are goods produced?
1.
Supply and demand. Producers decide based on what
customers want
3. How do people get products?
1.
It is determined by how much a person wants to – or – is
able to pay
Mixed Economies
A mixed Economy might use elements of both market
and command economics. The U.S. has a “mixed”
economy because the government doesn’t decide what
and how goods are produced, but it does regulate
certain things, like medicine (FDA: Food and Drug
Administration).
Some examples are the U.K., Germany, Russia, the
U.S.
Mixed Economy
Market Economy
United
Kingdom
79%
Germany
Russia 71%
51%
Pure
Command
Pure
Market
Canada
81%
Cuba
28%
Pure
Command
Brazil
57%
Pure
Market
Australia
83%
Pure
Command
Pure
Market
Trade Barrier
Trade Barriers
Countries sometimes set up trade barriers to restrict
trade because they want to sell their own goods to their
own people. Trade barriers include:
Tariffs, Quotas, and Embargoes
They “hinder” (stop or slow down) global trade.
Trade Barrier
Tariffs
Tariffs are taxes placed on imported or exported
goods. Tariffs cause the consumer to pay a higher
price for an imported item, increasing the demand for
a lower-priced item produced domestically. (at home)
Quotas
Quotas are restrictions on the amount of a good
that can be imported into a country. Quotas can cause
shortages that cause prices to rise
Embargoes
Trade embargoes forbid trade with another country.
 In the past- U.S. & Russia
 Present (but not for long): U.S. & Cuba
Human Capital
Human capital
(aka-Labor) include the people with skills
necessary to produce a product or perform
a service.
Examples:
Lumberjacks, Doctors, Teachers, Lawyers, Factory
Workers, Truck Drivers, etc.
Capital Resources
Capital resources are the tools and machines
that humans need to turn natural resources
into final products.
Examples:
Chainsaws, Trucks, Factories, Computers, Drills,
Mining Rigs, etc.
Entrepreneurship
Entrepreneurs are those people who come up
with the idea for a product or service and
bring the necessary resources together to
make it happen.
Basically……..the people with the idea.
Entrepreneurs
Entrepreneurs have 2 characteristics that make them
different from the rest of the labor force:
1. innovative (have creative ideas)
2. risk taker (use limited resources in an innovative way in
hopes that people will buy the product)
It can be several things:
Starting your own business
Inventing something new
Changing the way something was previously done so that it
works better
GDP: Gross Domestic Product
GDP = the total amount of final goods and services
produced in one year within a country
GDP is a domestic measurement because it measures
only what has been produced within the country--this
doesn’t include products that are imported.
It is much better for the economy of a country to
produce its own goods and services (this increases the
country’s GDP).
Natural Resources in the Economy
Currency Exchange