Answering the 3 Basic EconomicQuestionsChapter 2SystemsBecause
of scarcity- societies choose a systemEconomic system- method used
to produce and distribute goods/services3 basic questions must be
answered1. What goods/services should be produced2. How should
goods/services be produced3. Who consumes goods/services.WhatMust
meet need and wants.Guns vs Butter questions-
allocationDefenseEducationWelfareConsumer goodsUltimately-
opportunity costs
HowHow to use resources-Producing Energy- oil, solar,
nuclear?Teaching- 20 or 50 students to a classAgriculture- Large
corporate farms or small family farmsLAND/LABOR/CAPITAL all figured
into decisionFigure 2.1 illustrates- efficiency/best wayTechnology
impact?
WHOU.S. produces many, many goods and servicesRemember
quantities/resources are not unlimited.How are things divide up or
allocated?Usually by distribution of income in a society.FACTOR
PAYMENTS- income received by providing land, labor, capital or
entrepreneurship
WHOLandowners receive rentWorkers receive
wagesBanks/institutions lend $ collect interestEntrepreneurs profit
off their businessRent? Minimum wage? Distribution/allocation of
goods resources determined by each societyBased- social values and
goals to that societyEconomic Goals & Social ValuesDifferent
societies answer the 3 basic questions differentlyAll try to
achieve broad economic goals1. Efficiency-making most of
resources2. Economic Freedom- govt regulation- freedom of choice3.
Economic Security safety net4. Predictability knowledge that future
will be okay5. Economic Equity-fair distribution of wealth6.
Economic Growth growing workforce and employment 7. Innovation-
increase standard of living for people
