Our Global Economy

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Our Global Economy

• 2-1 Economics and Decision Making
• 2-2 Basics of Economics
• 2-3 Economic Systems
• 2-4 Achieving Economic Development
• 2-5 Resources Satisfy Needs

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LESSON 2-1Economics and Decision Making

• GOALS

• Describe the basic economic problem.
• List the steps of the decision-making process.

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The Basic Economic Problem

• Scarcity refers to the limited resources
  available to satisfy the unlimited needs and
  wants of people.
• Economics is the study of how people choose to
  use limited resources to satisfy their unlimited
  needs and wants.

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Making Economic Decisions

• Coping with scarcity
• Making choices

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The Decision-Making Process
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LESSON 2-2Basics of Economics

• GOALS

• Describe how the market sets prices.
• Explain the causes of inflation.

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Price-Setting Activities

• Supply is the relationship between the amount of
  a good or service that businesses are willing and
  able to make available and the price.
• Demand is the relationship between the amount of
  a good or service that consumers are willing and
  able to purchase and the price.
• Market price is the point at which supply and
  demand cross.

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Market Price Is Set by Supply and Demand
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Changing Prices

• Inflation
• Demand-pull inflation
• Cost-push inflation

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LESSON 2-3Economic Systems

• GOALS

• Name the three main factors of production.
• Understand how different countries make economic
  decisions.

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Economic Resources Satisfy Needs

• Natural resources
• Human resources
• Capital resources

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Natural Resources

• Also known as land, these resources are the raw
  materials that come from the earth, from the
  water, and from the air. Iron ore, gold, silver,
  agricultural products, rivers, and oxygen are
  examples of natural resources.
• These items are used in the production of goods
  and services consumed by individuals, businesses,
  and governments.

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Human Resources

• Also known as labor, these resources are the
  people who work to create goods and services.
• While technology has changed or eliminated
  certain tasks previously performed by people, new
  types of work are continually being created.

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Capital Resources

• Also called capital, these resources include
  buildings, money, equipment, and factories used
  in the production process.
• These items are expensive and are used over
  several years by business organizations.

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Economic System

• The economic choices of a country relate to three
  basic questions

• 1. What goods and services are to be produced?
• 2. How should the goods and services be produced?
• 3. For whom should the goods and services be
  produced?

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Types of Economic Systems

• Command Economies
• Market Economies
• Private property
• Profit motive
• Free, competitive marketplace
• Mixed Economies

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LESSON 2-4Achieving Economic Development

• GOALS

• Describe the factors that affect economic
  development.
• Identify the different levels of economic
  development.

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Development Factors

• Literacy level
• Technology
• Agricultural dependency

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Types of Development

• Industrialized countries
• Less-developed countries
• Developing countries

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Levels of Economic Development
Less-Developed Country
Developing Country
Industrialized Country

• Low literacy
• Limited technology
• Agricultural or mining economy

• Improving literacy
• Improving technology
• Decreasing dependence on agriculture or mining

• High literacy
• Modern technology
• Industrial economy

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LESSON 2-5Resources Satisfy Needs

• GOALS

• Discuss economic principles that explain the need
  for international trade.
• Identify various measures of economic progress
  and development.

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The Economics of Foreign Trade

• Absolute advantage exists when a country can
  produce a good or service at a lower cost than
  other countries.
• Comparative advantage exists when a country can
  produce a good or service with more efficiency
  than other countries.

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Measuring Economic Progress

• Measure of Production
• Gross domestic product (GDP)
• Gross national product (GNP)
• International Trade Activity
• Balance of trade
• Foreign exchange rate
• Foreign debt
• Other Economic Measurements
• Consumer price index (CPI)
• Unemployment rate