WHAT IS AN ECONOMY?

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WHAT IS AN ECONOMY?
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What is Economics

• The study of how people choose to use their
  resources.
• How nations will use its resources to produce and
  distribute goods and services.

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The Basic Economic Problem

• The Concept of Economics Exercise

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The Basic Economic Problem

• Peoples wants and needs are unlimited
• We rarely feel that our wants and needs are
  satisfied.
• Resources used to fulfill these needs are
  limited.
• There is never enough resources to fulfill all
  peoples wants and needs.

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Scarcity

• The difference between wants and needs and the
  resources available to meet these needs is called
  Scarcity.
• Nations have unlimited wants and needs but
  limited resources Scarcity forces the nations
  to make economic choices.

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Even in The US

• With all of our resources we still have people
  living below the poverty line and businesses go
  bankrupt all the time.

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So what do we do?

• Because of Scarcity. NATIONS MUST MAKE DECISIONS
  ON HOW TO USE ITS RESOURCES and WHAT PRODUCTS TO
  PRODUCE.

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Economy or Economic System

• The way a nation makes choices. These choices
  involve how the nation will use its resources to
  produce and distribute goods and services.

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Resources

• All things used in producing goods and services
• Factors of Production the technical term
  economists use for resources

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Resource 1 Land

• Everything on the earth in its natural state /
  the earths natural resources
• Resources Include
• Everything contained in the earth or found in the
  sea
• Coal and crude oil are examples
• A lake and all the living
• things in the lake are
• also examples

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Resource 2 Labor

• All the people who work in the economy
• Labor includes
• Full and Part-time Workers
• Both the Public and the Private sector

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Resource 3 - Capital

• The money needed to start and operate a business
• The goods used in the production process
• Infastructure
• Examples are
• Factories
• Office Buildings
• Computers
• Raw materials that are processed
• into a more useful form (lumber, steel)

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Infrastructure

• The physical development of a country
• Things necessary for production and distribution
  of goods and services
• Parts of the infrastructure include
• Roads
• Ports
• Sanitation Facilities
• Utilities

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Resource 4 - Entrepreneurship

• The skills of the people willing to risk their
  time and money to run a business
• Entrepreneurs organize the other factors of
  production to create the goods and services
  desired in an economy

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The Basic Economic Questions

• Nations must answer 3 basic economic questions
  when deciding to use their limited resources
• The way nations answer these questions define
  their economic system
• What goods and services should be produced?
• How should the goods and services be produced?
• For whom should the goods and services be
  produced?

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What Should Be Produced?

• Consumers decide what is to be produced through
  purchases made in the market place.
• Items that satisfy the customers needs and wants
  are purchased making the products successful
• Items that do not satisfy the needs and wants of
  the consumer are not purchased and are not
  successful

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How Should Goods and Services Be Produced?

• How products will be produced is left up to the
  business
• Businesses must be competitive
• Businesses must produce quality products at lower
  prices than their competitors
• Businesses must find the best way to produce
  goods and services
• Businesses must also find the best way to
  encourage customers to purchase their products

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For Whom Should Goods and Services Be Produced?

• Those individuals with the most money are able to
  purchase more goods and services
• To obtain money individuals work and invest