CHAPTER 2 SECTION 1“3 ECONOMIC QUESTIONS”

Economics Ms. Love

Key Terms

Define 3 Key Terms from page 23!1.2.3.

Warm up

Define Capitalism or Free Market? Or provide examples of what you might find in a free market or capitalist Economic system.

Agenda

What we will cover… What key economic questions must every

society answer? What basic economic goals do societies

have? What types of economic systems exist

today?

Background

We studied the economic concept of SCARCITY Scarcity means that we cannot have ALL

that we want or need. Scarcity FORCES different nations or

societies to answer some HARD economic questions.

An Economic System is the method used to by a society to distribute goods and services.

The choice of the economic system reflects the society’s GOALs and VALUES

3 Economic Questions

Because economic resources are limited or SCARCE, every society must answer three economic questions.

1. WHAT goods and services should be PRODUCED?

2. HOW should these goods and services be produced?

3. WHO consumes or gets these goods and services?

Question One - What should be made

How is the society going to satisfy its needs and wants? Is it hard to determine the difference between

a want and a need? Do societies get this right? What about Defense? Education? Health Care?

Consumer Goods? Guns-and-Butter Trade Off

Does Russia decide how it will satisfy the needs and wants of its people differently than the U.S.? Mexico?

Question Two – How to produce Societies need to decide how they are

going to use their Limited Resources to produce goods and services. Should we use Nuclear Energy to get off

Oil? What will be grown on Farms? Should environmentally dangerous

methods be used for the production of goods and services?

Remember there are many ways to combine LAND, LABOR, and CAPITAL – Each society needs to determine how it will do it.

Question Three – Who gets them? Pop-Corn read pages 24 to 25 Start with Who Consumes Goods and

Services Question If Led Zeppelin was to tour the world in

2011, do you think that the same method for the distribution of tickets would be used for a concert in Los Angeles and another in Beijing China?

Economic Goals and Societal Values

Efficiency

•Making the most of resources•Distributing the goods and services

Freedom•Government involvement in the production and distribution of goods•Patriotism

Security & Predictability •Goods and services are available•They are paid for on time•Safety Net for People

Equity/Fairness

•Fair distribution of Wealth•How are jobs viewed?

Growth & Innovation

•Innovation leads to Growth •Growth leads to better Standard of Living

Other Goals •Military Dominance•Environmental Protection

Societies answer the three economic questions based on their values and they become the goals for the society.

4 Main Economic Systems

These are examples of the 4 main systems that have been developed to address the three economic questions. Traditional economies rely on habit, custom,

or ritual to decide what to produce, how to produce it, and to whom to distribute it. THINK OLD STYLE… SMALL AND CLOSE VILLAGES

In a market economy economic decisions are made by individuals and are based on exchange, or trade. THINK FREE MARKET or CAPITALISM

4 Main Economic Systems

The other two economic systems… In a centrally planned economy the

central government makes all decisions about the production and consumption of goods and services. THINK COMMAND OR CENTRALLY PLANNED.

Mixed economies are systems that combine tradition and the free market with limited government intervention.

What is an example of a nation with a Mixed Economy?

Assessment

1. Each society determines who will consume what is produced based on

(a) its unique combination of social values and goals.

(b) the amount of factor payments.

(c) its needs and wants.

(d) economic equity.

2. To improve its standard of living, a nation’s economy must

(a) remain stable.

(b) grow through innovation.

(c) reach economic equity.

(d) allow the central government to make economic decisions.

Answers

1. Each society determines who will consume what is produced based on

(a) its unique combination of social values and goals.

(b) the amount of factor payments.

(c) its needs and wants.

(d) economic equity.

2. To improve its standard of living, a nation’s economy must

(a) remain stable.

(b) grow through innovation.

(c) reach economic equity.

(d) allow the central government to make economic decisions.

Assessment Continued….

Section 1 Assessment Key Terms and Main Ideas

# 1.# 2.# 3.# 4.# 5.

Applying Economic Concepts# 6