Back to Table of Contents

pp. 18-33

Chapter 2 Economic Resources and Systems

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 2 of 74

Factors of Production Factors of Production A shortage of resources is called scarcity.

A basic economic problem for any society is how to manage its resources.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 3 of 74

Factors of Production Factors of Production To meet the wants and needs of its people, a society must produce goods and services.

The means to produce them are called economic resources, or factors of production.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 4 of 74

Natural Resources Natural Resources The raw materials found in nature are called natural resources.

Natural resources become factors of production when we use them to produce goods.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 5 of 74

Natural Resources Natural Resources The economy of many countries is based on their natural resources.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 6 of 74

Natural Resources Natural Resources Some resources, like wheat and cattle, are renewable. They can be reproduced.

Other resources are limited, or nonrenewable, like coal, iron, and oil.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 7 of 74

Natural Resources Natural Resources The amount of natural resources available to a society has a direct effect on its economy.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 8 of 74

Human Resources Human Resources The knowledge, efforts, and skills people bring to their work are called human resources, or labor.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 9 of 74

Human Resources Human Resources Labor can be skilled or unskilled, physical or intellectual.

One of the biggest problems facing many nations today is not a shortage of labor but a shortage of skilled labor.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 10 of 74

Capital Resources Capital Resources Capital resources are the things used to produce goods and services, like buildings, materials, and equipment.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 11 of 74

Capital Resources Capital Resources As the wants and needs of people change, so do the needs for capital resources.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 12 of 74

Entrepreneurial Resources Entrepreneurial Resources Meeting the changing wants and needs of people requires entrepreneurial resources.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 13 of 74

Entrepreneurial Resources Entrepreneurial Resources Entrepreneurs improve on ways to use resources, or create and produce new ones.

A key to dealing with scarcity is to develop new resources and technologies.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 14 of 74

Making Decisions Making Decisions About Production About Production

No society has enough productive resources available to produce everything people want.

Every society must, therefore, make choices.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 15 of 74

Basic Economic Questions Basic Economic Questions Rules and regulations determine choices.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 16 of 74

Basic Economic Questions Basic Economic Questions A society makes economic choices by answering three economic questions:

• What should be produced?• How should it be produced?• Who should share in what is produced?

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 17 of 74

What Should Be Produced? What Should Be Produced? Deciding to use a resource for one purpose means giving up the opportunity to use it for something else.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 18 of 74

How Should It Be Produced? How Should It Be Produced? When a society decides what to produce, it must also address other types of questions, such as what methods will be used, how many people will work on the production, and what will be the quality of the items produced?

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 19 of 74

Who Should Share in Who Should Share in What Is Produced? What Is Produced?

This question focuses on the concept that people can’t get everything that they want because society doesn’t have enough resources.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 20 of 74

Who Should Share in Who Should Share in What Is Produced? What Is Produced?

In most societies, people can have as many goods and services as they can afford to buy based on the income they receive.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 21 of 74

Types of Economic Systems Types of Economic Systems Economics studies how society chooses to use resources to produce and distribute goods and services for people’s consumption.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 22 of 74

Types of Economic Systems Types of Economic Systems To use its limited resources effectively, every nation needs an economic system.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 23 of 74

Types of Economic Systems Types of Economic Systems The primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 24 of 74

Types of Economic Systems Types of Economic Systems The two basic and opposing economic systems that have been developed are:

• Market economy• Command economy

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 25 of 74

Market Economy Market Economy In a market economy economic decisions are made in the marketplace according to the laws of supply and demand.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 26 of 74

Price is the amount of money given or asked for when goods and services are bought or sold.

Market EconomyMarket EconomyThe Market and PricesThe Market and Prices

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 27 of 74

Demand is the amount or quantity of goods and services that consumers are willing to buy at various prices.

Market EconomyMarket EconomyThe Market and PricesThe Market and Prices

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 28 of 74

The higher the price, the fewer consumers will buy an item.

The lower the price, the more consumers will buy an item.

Market EconomyMarket EconomyThe Market and PricesThe Market and Prices

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 29 of 74

Supply is the amount of goods and services that producers will provide at various prices.

Market EconomyMarket EconomyThe Market and PricesThe Market and Prices

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 30 of 74

Demand and supply work together.

When the quantity demanded and the quantity supplied meet, the price is called the equilibrium price.

Market EconomyMarket EconomyThe Market and PricesThe Market and Prices

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 31 of 74

Figure2.2 VISUALIZING DEMAND AND SUPPLY

Remember these two points: (1) The demand curve always falls left to right on a graph, and (2) the supply curve always rises from left to right on the graph.

How many CDs will be demanded at $16 a piece?

How many CDs will be supplied at $18 a piece?

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 32 of 74

Capitalism, or private enterprise, is a market economy system.

In a capitalist system, resources are privately owned.

Market EconomyMarket EconomyThe Market and PricesThe Market and Prices

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 33 of 74

In a capitalist system, the primary role of government is to support the marketplace by removing obstacles such as trade barriers.

Market EconomyMarket EconomyThe Market and PricesThe Market and Prices

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 34 of 74

A market economy offers incentives, such as competition and the profit motive, to produce more.

Market EconomyMarket EconomyThe Market’s MotivationsThe Market’s Motivations

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 35 of 74

The profit motive is the reward for taking a risk that encourages people to start businesses.

Market EconomyMarket EconomyThe Market’s MotivationsThe Market’s Motivations

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 36 of 74

A market economy provides the individual with the freedom to choose from many different competing products, and the freedom to start a business or choose a career.

Market EconomyMarket EconomyThe Market’s MotivationsThe Market’s Motivations

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 37 of 74

The problem with a market economy is that those who do not have the wanted job skills do not get an income.

Market EconomyMarket EconomyThe Market’s MotivationsThe Market’s Motivations

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 38 of 74

Another problem in a market economy is that sometimes one or two businesses control the market, thus leading to higher prices and lower quality products.

Market EconomyMarket EconomyThe Market’s MotivationsThe Market’s Motivations

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 39 of 74

Command Economy Command Economy In a command economy a central authority makes the key economic decisions.

A command economy is also called a planned or managed economy.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 40 of 74

Command Economy Command Economy There are two types of command economies.

In a strong command economy, such as communism, the state makes all the economic decisions.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 41 of 74

Command Economy Command Economy In a moderate command economy, also called socialism, there is some form of private enterprise.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 42 of 74

Command Economy Command Economy The primary advantage of a command economy is that it guarantees everyone an equal standard of living.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 43 of 74

Command Economy Command Economy There are some disadvantages to a command economy.

Since the state provides all goods and services in a strong command economy, there is little choice of what to buy.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 44 of 74

Command Economy Command Economy Another disadvantage to the command economy is that there is no incentive for entrepreneurship when you can’t run your own business.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 45 of 74

Mixed Economy Mixed Economy Most nations have a mixed economy, a combination of a market and command economy.

The state takes care of people’s needs while the marketplace takes care of people’s wants.

ChapteChapterr

22

Introduction to Business, Economic Resources and Systems Slide 46 of 74

Graphic Organizer

What shouldbe produced?What should

be produced?

Basic Economic QuestionsBasic Economic Questions

Graphic OrganizerGraphic Organizer

MARKET ECONOMYMARKET ECONOMYEconomic decisions are made in the marketplace

according to the laws of supply and demand.

How should itbe produced?How should itbe produced?

Who should share inwhat is

produced?

Who should share inwhat is

produced?

COMMAND ECONOMYCOMMAND ECONOMYGovernment makes all key economic decisions.

MIXEDMIXED ECONOMYECONOMYCombination market and command economy.