Introduction to
Business
Economic Resources and Systems

Just as consumers have to deal with
shortages of resources, so do societies
◦ Resources are the items that go into making
goods and services
◦ Lack of resources is known as scarcity
◦ Scarcity means there are limited resources for
satisfying unlimited wants and needs
Making Economic Decisions

Definition
◦ All the economic resources necessary to
produce a society’s goods and services

Four factors of production:
◦
◦
◦
◦
Natural resources
Labor resources
Capital resources
Entrepreneurial resources
Factors of Production

What are natural resources?
◦ Raw materials that are used to produce goods
 Trees, water, grain, oil, coal

Why are natural resources important?

Renewable

Non-renewable
◦ Economy of many countries is primarily based on
natural resources
◦ Wheat and cattle
◦ Coal, oil, iron
Natural Resources

Labor resources are people who make the
goods and services for which they are paid a
salary.
◦ Skilled or unskilled
◦ Physical or intellectual

Capital resources are things used to produce
goods and services
◦ Buildings, materials, equipment

How are capital resources different from
capital?
Labor and Capital Resources

Are used by people who recognize opportunities
and start businesses

Entrepreneurship is the process of recognizing a
business opportunity, testing it in the market,
and gathering the resources necessary to start
and run a business

Entrepreneurs are individuals who undertake the
creation, organization, and ownership of a
business
◦ Accepts the risks and responsibilities of business
ownership to gain profits and satisfaction
Entrepreneurial Resources

Basic questions???
◦ What is economics?
 The study of how individuals and groups of
individuals strive to satisfy their needs and wants
by making choices
 All societies have to make choices to deal with
forms of scarcity.
◦ What should be produced?
◦ How should it be produced?
◦ Who should share in what is produced?
Economic Systems

Economic Systems –
◦ Methods societies use to distribute resources
◦ Two basic types:
1) market
2) command
Different Types of Economies

Definition
◦ An economic system in which economic systems are made
in the marketplace
◦ What is a marketplace?
 Where buyers and sellers meet to exchange goods and services,
usually for money
 Also known as private enterprise system, free enterprise system,
or capitalism
 Resources are privately owned
 Owners decide how businesses will be run, what to produce and
sell, and what prices to charge
 Consumers choose their occupations and decide here to live,
where to shop, and what to buy
Market Economy

Definition
◦ An economic system in which a central
authority makes the key economic decisions.
The government dictates what will be produced
and who will get the goods
 Goods that are not considered necessities are
often unavailable
 Prices are controlled by the state (or government)
Command Economy

How does a market economy decide what
will be produced?

What are some the freedoms you enjoy
by living as a citizen in a market
economy?
For Discussion

Web Research
◦ Research a country that has moved from a
command economy to a market economy and
write a paper that includes the following:
 The transitional process from command to market
economy
 The conditions that led to the move
 The rights and responsibilities of businesses,
consumers, and the government before and after
the switch
 List natural resources, labor resources, and
capital resources that are found in the country
Homework – Due Friday,
September 18, 2009