Chapter 2
A.
A shortage of resources used to satisfy the
wants and needs
B.
Basic economic problem for any society is how
to manage its resources.
C.
Need to develop new resources and
technologies.
 Restaurants
chose equipment over decor
changes if the money is not available for
both.
 Cities
might cut services to hire more police
or firefighters.
 When
dealing with scarcity it is important
to think about the best way to use the
resource.
1.
There are 4 types of economic resources
that go into making our products.
2.
All of the components are necessary to
produce a society’s goods and services.
Natural resources (land)
1.



materials used to form products.
The amount of resources available to a country
has a direct effect on its economy
A countries economy is based on its natural
resources Saudi Arabia depends on oil production,
Latin America depends on coffee production…..
 Renewable resources:
 Ex: Cattle, wheat
 Nonrenewable
Can be reproduced.
resources: resources that are
limited.

Ex: Coal, iron & oil
The amount of resources available to a country
has a direct effect on its economy
2. Human resources (labor)





The knowledge, efforts, and skills people bring to
their work
Skilled or unskilled
Physical (blue collar) Intellectual (white collar)
Labor unions - workers belong to organization,
Collective bargaining - it negotiates for better pay,
working conditions
3. Capital resources

Things used to produce goods/services, like
buildings, materials, and equipment.
CAPITAL goods are things used to create goods
and services. What are the capital goods
need to create and sell the entertainment
service of football?
4. Entrepreneurial resources


Meets the changing needs/wants of people
They improve on ways to use resources, or create
and produce new ones.
4. Entrepreneurial resources
Entrepreneurship - process of recognizing a business
opportunity, testing the market and gathering the
resources.
Entrepreneur is an individual who undertakes the
creation, organization, and ownership of a business.
Different from labor resources.
Being entrepreneurial means
acting and thinking like an
entrepreneur
 The
problem of scarcity forces societies to
make choices.
 Opportunity
Cost –use it for one purpose
means giving up the opportunity to use it for
something else.

3 Economic questions society needs to answer:
1.
2.
3.
What should be Produced?
How should it be Produced?
Who should share in what is Produced?
It studies how society chooses to use resources to
produce and distribute goods and services for
people’s consumption.
A economic system is needed so a nation uses it
limited resources effectively.
provide people with a minimum standard of living or
quality of life.
 Economic
decisions are made in the
marketplace according to the laws of supply
and demand
 PRICE plays an important role.


If the price is too low and does not earn businesses
a profit they will produce little or none of the
product
If the price is high enough to earn a profit, they
will produce the good and service
 Demand
– the amount or quantity of goods and
services that consumers are willing to buy at
various prices.

Generally the higher the price the fewer
consumers will buy an item….the lower the price the
more consumers will buy.
 Supply
– the amount or quantity of goods and
services that producers are willing provide at
various prices.

Producers want to provide products that will cover
their costs and provide a profit
 EQUILIBRIUM

Demand and Supply work together

When the quantity demanded and the quantity
supplied meet
 The





Private Enterprise System
Also called capitalism
Resources are privately owned
Consumers decide where to live, where to shop,
and what to buy
Government control of the market is minimal
Primary role of the government is to support the
marketplace….remove trade barriers
 Market
Motivation

Competition – encourages businesses to provide
better and cheaper products

Profit – the reward for taking a risk that
encourages people to start businesses
 Advantages:


Freedom to choose from many different
competing products
Freedom to start a business or choose a career
 Disadvantages


Those who do not have the wanted job skills do
not get an income
Sometimes only one or two businesses control
the market, thus leading to higher prices and
lower quality products
 Central
authority makes the key economic
decisions

Usually controlled by a government or state
 Communism



Strong command economy the government makes all
economic decisions
The state controls all resources
China, Cuba, Latin America, African countries
 Socialism




Moderate command economy
Some form of private enterprise
State owns major resources
France and Sweden
 Advantages:





It guarantees everyone an equal standard of living
The State provides you with a job, a place to live,
and health care.
Products are distributed evenly
The State takes care of utilities, transportation, and
defense
Usually less crime and poverty –needs equally met
 Disadvantage:




Little choice of what to buy
Non essentials are often unavailable
Prices, wages are fixed
No incentives for entrepreneurship
 Most
Nations have a Mixed Economy a
combination of market and command economy


State takes care of people’s needs
Marketplace takes care of people’s wants
 USA



the government provides defense and education
Marketplace provides cars, computers, and fast food
There is some government regulation of business
 In
every country one type of economy is
dominant, but find a mixed economy is the best
way to manage their limited resources