ECONOMICS
ECONOMIC SYSTEMS
The way people produce and exchange goods and services is called an economic system.
Four types of economic systems: traditional, command, market and mixed.
TRADITIONAL ECONOMY
Goods and Services are traded withoutexchanging money. Also called “barter”.
MARKET ECONOMY
Production of goods and services isdetermined by the demand from
consumers.Also called a Free Market Economy.
COMMAND ECONOMY
Production of goods and services isdetermined by a central government,
whichusually owns the means of production.
MIXED ECONOMY
A combination of command and marketeconomies provides goods and services
sothat all people will benefit.
ECONOMIC SYSTEMS:SATISFY OUR WANTS AND NEEDS
Goods – Things we can touch or see that satisfy our wants or needs.
Services – Actions people undertake in order to satisfy their wants and needs.
TYPES OF RESOURCES: PRODUCTION RESOURCES
Businesses use three types of productionresources to produce goods and services.
Natural HumanCapital
NATURAL RESOURCES
Resources that are present without human interference
“gifts of nature” Examples are land, timber and mineral
deposits
HUMAN RESOURCES
Any human effort used to produce goods and services
Examples include workers and their skills, training and education
CAPITAL RESOURCES
Tools of production Goods used to produce other goods or
services Examples include tools, machinery and
buildings. Money used to purchase these
resources is called capital.
IDENTIFYING RESOURCES: WRITE EACH RESOURCE LISTED BELOW IN THE CORRECT CATEGORY ON YOUR PAPER.
cotton tractor marketing degree table saw computers
water driver’s license crude oil employees
factory building aluminum electrician’s license land
NATURAL
HUMAN CAPITAL
LEVELS OF ECONOMIC ACTIVITY
Primary – First level Secondary – Second
level Tertiary – Third level
PRIMARY ACTIVITIES
Businesses involved in gathering raw materials.
Examples include mining and timber companies.
SECONDARY ACTIVITIES
Businesses that add value to materials by changing their form.
Examples include automobile manufacturers and textile factories.
TERTIARY ACTIVITIES
Companies that provide business or professional services.
Examples include salespeople, teachers and doctors.
IDENTIFYING LEVELS OF ACTIVITY
_____ Hershey Chocolate _____ Pilot Gas
Station
_____ Luck Stone Corp. _____ NTelos
_____ Law Well Drilling Inc. _____ Fry Appraisal Co.
_____Oak Lawn Cemetery _____ Walmart
_____Augusta Medical Center _____ Hollister
IMPORTANT NOTE:
The more developed an economy is, thegreater the number and variety of
activitiesyou will find.
WORLD TRADE: WHY DO COUNTRIES TRADE WITH EACH OTHER?
Trade maintains and improves relations between countries.
Trade allows countries to acquire goods and services, often natural resources or raw materials, that it does not have available to them.
Trade allows countries to obtain products that other countries may produce more efficiently and therefore are less costly.
INTERNATIONAL TRADE SOME BASIC TERMS:
Imports – goods or services that a nation buys from other nations
Q: What type of goods does the U.S. import the most?A: crude oil, refined petroleum, automobiles, food and
beverages, raw materials, and consumer goods
Exports – the goods or services that a nation produces and then sells to another nation
Q: What type of goods does the U.S. export the most?A: capital goods, industrial supplies, raw materials,
agriculture products, and automobiles
…MORE TERMS
Specialization – the idea of countries only making those products that they produce the most efficiently
Absolute Advantage – a country’s ability to produce more of a given product than can another country
Comparative Advantage – a country’s ability to produce a given product relatively more efficiently than another country – or – production at a lower opportunity cost
SPECIALIZATION
The key to international trade is specialization. Even though one country may have an absolute advantage over another country in producing all concerned products it can still be beneficial for both countries to specialize and trade.
Take some time to complete the Enrichment Activity and you will see for yourself.