Chapter 13 What is an Economy? Why do societies have economies? Basic wants Food Water Shelter.
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Transcript of Chapter 13 What is an Economy? Why do societies have economies? Basic wants Food Water Shelter.
Chapter 13
What is an Economy?
Why do societies have economies?
• Basic wants• Food• Water• Shelter
Wants• Wants are influenced
by our society– Live: house or
apartment
• Our wants change– Little to now to older
Factors of Production• The resources people
have for producing goods and services to satisfy their wants
• Three basic factors of production:
• LAND
• LABOR
• CAPITAL
LAND• The natural
resources that are needed to help produce goods and services
• Water
• Air
• Wildlife
LABOR• Time and energy
used• The mental and
physical efforts applied to the production of goods and services.
• Labor will include the knowledge and skills used in job
• The human resource• Payments for labor services
are called wages
CAPITAL • Anything produced in an economy that is used to produce other goods and services
• Tools, machinery, buildings used to create goods
• Goods used as capital are CAPTIAL GOODS
The Wants and Satisfaction Chain
#1. WANTS
• You want to eat spaghetti for dinner.
#2. PRODUCTIONUSE OF LLC
• The people who combine the resources of LLC
• Farmers use soil, water, seeds farm machinery
• Labor used to produce the wheat
#2. PRODUCTION
• Making the pasta• Wheat processed
into flour• Rolled into the
pasta you want to eat
# 3. DISTRIBUTION• Now the pasta is
made how do you get it?
• It is sold to the grocery store
• You go to the store and purchase it
#4. CONSUMPTION
• Now you can buy it, cook it and eat it.
#5. SATISFACTION
• You want to eat it for dinner next week too.
Making Choices
• One part of making economic decisions IS what BENEFITS will you receive from your choice?
COSTS
• What is the cost of your choice?
• Opportunity cost • is the highest valued
benefit given up when a choice is made
• Is the benefit greater than the cost?
Scarcity • Resources are always limited compared with the number and variety of wants people have
Chapter 13.3
The Three Types of Economies
Traditional Economy• Basic economic
decisions are made according to long-established patterns of behavior that are unlikely to change
• Customs passed from elders to youth
• Few remain in the world
• Tribal societies in Central and South America, Africa
A Kavango vendor selling both conventional and traditional vegetables. This indicates the important role traditional food still plays in the nourishment of the people of the Kavango. Despite conventional vegetables being grown and sold widely, traditional bush vegetables arre still found in every market.
Command Economy• The government or central authority owns or controls the factors of production and make that basic economic decisions
• Farms and stores own by government
• Gt can set wages and decide who will work which jobs
• Communist Soviet Union or Egyptian Pharaohs
Market Economies• A system in which private individuals own the factors of production and are free to make their own choices about production, distribution and consumption
• No one person or groups runs a market economy
• Everyone takes part, not one person runs a market economy
• Local farmers market, New York Stock Exchange
Vocabulary• Profit
– The difference between the total cost of production and the total revenues received from buyers.
• Invest– To use your money to help
a business get started or grow
• Free enterprise– People in a market
economy are free to undertake economic activities with little to no control from gt
• Capitalism– How people use capital to
produce goods and provide services
Mixed Economy• Mixture of the
three basic systems