World

Economies

Economy

• Economy - A system for producing, distributing, and consuming goods and services.

Components of Economy

• Goods – products that are made to be sold– Cars, baskets, computers, paper, clothes

• Services – work done or duties performed for other people.– The work of a doctor or of a television repair

person.

Goods and Services T-Chart

Goods Services

Components of Economy

• Producer – a person who makes products that are used by other people. – Owners and workers

• Consumer – a person who buys goods and services. – Everyone who buys things

There are many dif f erent kinds

, of economies around the world

most of t hem f all int o the

f ollowing three basic

.cat egories 1 . Tr a d it io n a lE c o n o m y

2. Command Ec onomy

3. Market Economy

Tr a d it io n a lE c o n o m y

Traditional Economy - is a system in which the allocation of resources and other economic activities are affected by ritual, custom, or habit.

Example: The Tuareg of the Sahara in northern Africa are nomadic herders who travel about the region in search of food and water for their animals. They produce most of the things they need and trade with others for what they need and cannot produce.

The Tuareg

A Tuareg jewelry stall market, near Mandara Lake, Awbari Sea, Fezzan, Libya.

Tools of the Tuareg Blacksmith

Tuareg nomad boy returns home at dusk with sheep he herded all day

Command Ec onomyCommand Economy - is a system

organized around a central authority which makes most of the major economic decisions.

• The government decides what products are made, how much is produced, and what the goods cost.

Example: Cuba’s economy

Cuba’s Command Economy• Most of the means of production

are owned and run by the government and most of the labor force is employed by the state.

• In the year 2000, the public sector employment was 76% and the private sector at 23%.

• The Cuban government sets most prices and rations goods to citizens.

Market Economy• Market Economy – individuals depend on supply,

demand, and prices to determine the answers to the four economic questions of "what to produce," "how to produce," "how much to produce," and "for whom to produce.”

• In a market economy, most businesses are privately owned.

• When a company sells its products, it earnsa profit. Owners decide how to use profits and how much to pay workers.

Why would consumers be important to a market economy?

Closest Example: The U.S.A.’s Free Enterprise System

Example• The U.S.A.’s free enterprise

system is an example of a Market Economy

Mixed Economy

• Is it a market economy?• Is it a command economy?

• Answer: It’s a mixture of both economies

Why are we not a Market?

• We have government involvement:

• Taxes (ex. Income tax, Sales tax)• Regulations (ex. Fireworks, Environmental

Laws, Driver’s License)

Supply and Demand-The market will determine the price of goods and services

2. If demand is low and there is a large supply what happens to price?

7. If demand is high and supply is low what happens to price?

Finish your Cornell Notes

• At least 5 questions

• At least 3 sentences in your summary.

• Economy - A system for producing, distributing, and consuming goods and services.

• Goods – products that are made to be sold• Services – work done or duties performed for other people. • Producer – a person who makes products that are used by

other people. • Consumer – a person who buys goods and services. • Traditional Economy - is a system in which the allocation of

resources and other economic activities are affected by ritual, custom, or habit

• Command Economy - is a system organized around a central authority which makes most of the major economic decisions.

• Market Economy – is a system where individuals depend on supply, demand, and prices to determine the answers to the four economic questions of "what to produce," "how to produce," "how much to produce," and "for whom to produce.”

Create A Foldable

Rum Tum Tum

• Story time

The Kingdom of RumTumTum• How do you think the knights should decide which of

them should get the drumsticks?• If Flam Flam doesn’t come back, how will the people of

RumTumTum get the things they want?• What are some of the things they might want to

produce?• In order to get these three things, what decisions have

to be made?• After these items have been produced, what decision

has to be made?• When there isn't enough of something for everyone to

have all he or she wants, what’s that condition called?• Have any of you ever experienced scarcity?

What is Scarcity?Scarcity is the condition of not being able to have all of the goods and services one wants because resources are limited and our wants are not.

Oh nooo…there is only one snickers and two of us!

You’re right but I am the one getting it!!

• In the classroom-

• At home-

• In our society-

1. Have you ever wanted something but did not have the resources available to get that something or there was no supply of that something left?

2. Think about the following places and give examples of scarcity that could occur there:

• Scarcity is the condition of not being able to have all of the goods and services one wants.

• Resources do not exist in sufficient quantities to satisfy all desires to use them. – Land, goods, and labor (machinery, people to do the work,etc.)

• Individuals, governments, and businesses experience economic scarcity and therefore must make choices or trade-offs which have both present and future consequences.

• Opportunity Cost - The cost of an alternative, or the trade-off, that is given up in order to pursue a certain action. Put in another way, the benefits you could have received by taking an alternative action.

– Example: To feel better you stay home from school. The opportunity cost is the learning and work that you missed. What you get for that cost is rest in order to feel better.

Scarcity• Rarely can one region or nation satisfy all demands. This

forces regions and nations to trade goods and services.Trade - exchanging goods and services with people for other goods and services or for money. When people trade voluntarily, they expect to be better off as a result.

Scarcity• Some under-developed nations are not able to

develop their own resources because they lack the finances to support industries and lack the technology and expertise to process the raw materials into goods.

• Other nations often invest in industries, creating international companies to process and export the goods. In this instance, the country owning the resources does not profit as much as the country which invests in and processes the resources.

Industry

• Make a new page of your notes

Factors of Production

• Factors of production are resources needed to create products. They include land, capital or investments (money), labor, and entrepreneurship.

• What problems and issues may arise when one or more of the factors of production is in relatively short supply?

Nations profit when they possess rich natural resources and can process them and ship finished goods to other nations. The more demand there is for a resource the more a nation can profit from its own production.

Types of IndustryIndustries differ in their involvement in the processing of natural resources, the production and marketing of goods, and the development of products and ideas. The types of industries are listed below:

• Primary• Secondary• Tertiary• Quaternary

Primary• Takes natural resources or raw materials

from the earth.– Some examples of primary industries include fishing,

farming, lumbering, and oil drilling.

Fishing

Secondary• A secondary industry processes raw

materials into finished products. These include steel plants or processing plants which turn agricultural products into canned or frozen goods.

Canning plant processes the tuna

Tertiary• A tertiary industry exchanges and markets

the products of the primary and secondary industries.

• A tertiary industry provides a service such as restaurants, supermarkets, hospitals, education, and emergency services.

Supermarket sells the tuna

Quaternary• Quaternary industries are those parts of the

economy concerned with research, the gathering and dissemination of information, and administration.

• The quaternary sector is sometimes included with the tertiary sector, as they are both service sectors.

• Examples include medical research and consultancy (offering advice to businesses)

Bar codes tell the market when to reorder the fish

Economic Development• Economists look for patterns in human behavior which

indicate how much money people will spend at what times in their lives and for what products.

• These patterns are called economic indicators. The ability to purchase, or purchasing power, changes as consumers age or move from hourly wage jobs to salaried positions. As their spendable income increases so does their ability to purchase goods and services. What they purchase changes depending on their age and stage in the life cycle.

• Young married couples are more likely to purchase a house while parents of high school students are trying to save for college.

• Life expectancy -- the average number of years remaining in the life span of a person at a given age -- also influences purchasing decisions, as does literacy -- the ability to read and write.

Scarcity Game

• You have been divided into different countries and given a package (resources).

• Each country will have a finite amount of resources (paper, scissors, markers, etc.) to use in order to produce a list of products.

• You may trade with other countries for resources, however those countries may not want to trade with you if your country does not have anything they need.

• If that happens you may have to find an alternative.• Each item is worth a certain amount of points. The

country who produces all the products first or earns the most points wins the game.

Activity Questionsa. Was everyone able to complete the tasks? b. What tasks were you unable to complete? Why?c. How did you choose which tasks to complete? d. If your country didn’t finish the tasks, how did you feel? e. Did anything happen that made the tasks more difficult

to complete? f. Did anyone experience scarcity? g. Where there any countries unwilling to trade or let you

in on their resources?g. Is there anything that can be done to help each country

complete all the tasks? h. What activity would make all the countries happy?