Chapter 7-9 Ips 8 Smt I-II What is an Economy

7/28/2019 Chapter 7-9 Ips 8 Smt I-II What is an Economy

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What is an Economy


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What is an Economy?

What is meant by the term economy The factors of production The concept of scarcity The difference between a traditional, a market, a

command, and a mixed economy

What youll learn . . .


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Economy

The way in whicha nation makeseconomic

choices.

Also called anEconomicSystem


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Resources = Factors of Production

Resources are all the things used in producing goods andservices. The technical term for it is factors of production .


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Land -- everything on the earth that is inits natural state, or the Earths naturalresources.


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Labor -- all the

people who work inthe economy


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Capital --includes moneyneeded to start andoperate a business.It also includes the

goods used in theproduction process.Factories, officebuildings,computers, andtools are all capitalresources.


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Entrepreneurship -

- the skills of peoplewho are willing torisk their time andmoney to run abusiness.


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Economic Systems are needed because:

Scarcity -- no one country has enough resources to

supply everything that is needed or wanted whichcreates scarcity. Scarcity forces nations to make economic choices.


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Three Economic Questions

Nations must answer three basic questions when

deciding how to use their limited resources. What goods and services will be produced? How should goods and services be produced? For whom should the goods and services be

produced?


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Types of Economic Systems

Traditional Economy Traditions and rituals answer

the basic questions. Answers are often based oncultural or religious practices and ideals that have beenpassed down for generations.

Market Economy In a pure market economy there isno government involvement in economic decisions.

Command Economy A system in which the

government controls the factors of production andmakes all decisions about their use.

Mixed Economies All economies in the world today(including the Free Enterprise System in the U.S.) aremixed with varying degrees of government regulation


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Types of Mixed Economies

Capitalism -- Characterized by private ownership of

businesses and marketplace competition.


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Political Foundations of Capitalism

The political system most frequently associated withcapitalism is democracy.


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Socialism there is

increased governmentinvolvement in peoples livesand the economy.

Tend to have more socialservices to ensure acertain standard of living

for everyone Government runs key

industries and makes

economic decisions


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Communism Countries

have a totalitarian form of government, which means thatthe government runs

everything . All who are able to work areassigned jobs

Housing and schooling aredecided by the government


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Economies in Transition the breakup of the former

Soviet Union probably provides the best examples of societies making the difficult change from command tomarket economies.
http://flagspot.net/images/s/su.gif


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Command Economy

Socialism

Market Economy

Communism Capitalism

If you place economic systems on a continuum,they would look something like this.

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Chapter 7-9 Ips 8 Smt I-II What is an Economy