Chapter 2

Economic Resources and Systems

pp. 18-33

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Chapter

Why Its Important

Understanding economic resources
and economic systems is essential to
lessening economic problems.

Introduction to Business, Economic Resources and Systems

Chapter

Key Words
scarcity
factors of production
natural resources
human resources
capital resources
entrepreneurial resources
economics
market economy
demand
supply
equilibrium price
command economy
mixed economy
Introduction to Business, Economic Resources and Systems

Chapter

Factors of Production
A shortage of resources is called scarcity.

The means to produce goods and services

are called economic resources, or factors
of production.
Introduction to Business, Economic Resources and Systems

Chapter
Figure
2.1

YOUR ECONOMIC REALITY AT A GLANCE

The average American spends $7 a day on food. People spend less than half of
that money on home-cooked meals. Recreate the table below. Insert a check
mark in the appropriate square based on your eating experience in one week.

How do your choices

influence your
economic situation?

Introduction to Business, Economic Resources and Systems

Chapter

Natural Resources
The raw materials found in nature are
called natural resources.
The amount of natural resources available
to a society (or country) has a direct effect
on its economy.
Introduction to Business, Economic Resources and Systems

Chapter

Natural Resources
Some resources, like wheat and cattle, are
renewable. They can be reproduced.
Other resources are limited, or
nonrenewable, like coal, iron, and oil.
Introduction to Business, Economic Resources and Systems

Chapter

Human Resources
The knowledge, efforts, and skills people
bring to their work are called human
resources, or labor.

Introduction to Business, Economic Resources and Systems

Chapter

Capital Resources
Capital resources are the things used to
produce goods and services, like buildings,
materials, and equipment.

Introduction to Business, Economic Resources and Systems

Chapter

Entrepreneurial Resources
Meeting the changing wants and needs of
people requires entrepreneurial
resources.
A key to dealing with scarcity is to
develop new resources and technologies.
Introduction to Business, Economic Resources and Systems

Chapter

Fast Review

1. What is scarcity?
2. What are the four factors of production?
3. What are some examples of capital
resources?

continued

Introduction to Business, Economic Resources and Systems

Chapter

Basic Economic Questions

A society makes economic choices by

answering three economic questions:
What should be produced?
How should it be produced?
Who should share in what is
produced?
Introduction to Business, Economic Resources and Systems

Chapter

What Should Be Produced?

Deciding to use a resource for one purpose
means giving up the opportunity to use it
for something else.

Introduction to Business, Economic Resources and Systems

Chapter

How Should It Be Produced?

When a society decides what to produce, it
must also address other types of questions,
such as what methods will be used, how
many people will work on the production,
and what will be the quality of the items
produced?
Introduction to Business, Economic Resources and Systems

Chapter

Who Should Share in

What Is Produced?

This question focuses on the concept that

people cant get everything that they want
because society doesnt have enough resources.
In most societies, people can have as many
goods and services as they can afford to buy
based on the income they receive.
Introduction to Business, Economic Resources and Systems

Graphic
Organizer
Chapter
Graphic
Organizer
Basic
Economic
Questions
MARKET ECONOMY

Economic decisions are made in the marketplace

according to the laws of supply and demand.

MIXED
ECONOMY
Combination
market and
command
economy.

What should
be produced?

How should it
be produced?

Who should
share in
what is
produced?

COMMAND ECONOMY

Government makes all key economic decisions.

Introduction to Business, Economic Resources and Systems

Chapter

Types of Economic Systems

Economics studies how society chooses to
use resources to produce and distribute
goods and services for peoples
consumption.

Introduction to Business, Economic Resources and Systems

Chapter

Market Economy
In a market economy economic decisions
are made in the marketplace according to
the laws of supply and demand.

Introduction to Business, Economic Resources and Systems

Chapter

Market Economy

The Market and Prices

Price is the amount of money given or
asked for when goods and services are
bought or sold.

Introduction to Business, Economic Resources and Systems

Chapter

Market Economy

The Market and Prices

Demand is the amount or quantity of
goods and services that consumers are
willing to buy at various prices.
Supply is the amount of goods and
services that producers will provide at
various prices.
Introduction to Business, Economic Resources and Systems

Chapter

Market Economy

The Market and Prices

Demand and supply work together.
When the quantity demanded and the
quantity supplied meet, the price is called
the equilibrium price.
Introduction to Business, Economic Resources and Systems

Chapter
Figure
2.2

VISUALIZING DEMAND AND SUPPLY

Remember these two
points: (1) The demand
curve always falls left
to right on a graph,
and (2) the supply
curve always rises
from left to right on
the graph.

How many CDs will be

demanded at $16 a piece?

How many CDs will be

supplied at $18 a piece?

Introduction to Business, Economic Resources and Systems

Chapter

Market Economy
Capitalism, or private enterprise, is a
market economy system.
In a capitalist system, resources are
privately owned.
Introduction to Business, Economic Resources and Systems

Chapter

Market Economy

The Markets Motivations

A market economy provides the individual
with the freedom to choose from many
different competing products, and the
freedom to start a business (profit motive)
or choose a career.
Introduction to Business, Economic Resources and Systems

Chapter

Market Economy

The Markets Problems

1. Those who do not have the wanted job skills do not
get an income.
2. Sometimes one or two businesses control the market,
thus leading to higher prices and lower quality
products.

Introduction to Business, Economic Resources and Systems

Chapter

Command Economy
In a command economy a central
authority makes the key economic
decisions.
A command economy is also called a
planned or managed economy.
Introduction to Business, Economic Resources and Systems

Chapter

Command Economy
There are two types of command
economies:
1. communism, the state makes all the economic
decisions
2. socialism, there is some form of private enterprise
Introduction to Business, Economic Resources and Systems

Chapter

Command Economy
Advantage: equal standard of living
Disadvantages: there is little choice of what to buy and
no incentive for entrepreneurship

Introduction to Business, Economic Resources and Systems

Chapter

Mixed Economy
Most nations have a mixed economy, a
combination of a market and command
economy.
The state takes care of peoples needs
while the marketplace takes care of
peoples wants.
Introduction to Business, Economic Resources and Systems

Chapter

Fast Review

1. Summarize how economic decisions in

the market economy are made.
2. Compare the types of economic
systems.
continued
Introduction to Business, Economic Resources and Systems

Graphic
Organizer
Chapter
Graphic
Organizer
Basic
Economic
Questions
MARKET ECONOMY

Economic decisions are made in the marketplace

according to the laws of supply and demand.

MIXED
ECONOMY
Combination
market and
command
economy.

What should
be produced?

How should it
be produced?

Who should
share in
what is
produced?

COMMAND ECONOMY

Government makes all key economic decisions.

Introduction to Business, Economic Resources and Systems