Economic Overview

Economic Systems

• Economics– The study of how people manage their

resources• Produce and exchange goods and services.

Key Terms• Producers

– Owners & workers

• Consumers– People who buy and use the goods and services

• Goods– Products being made or grown

• Pencils, paper, books, clothes, houses, bikes, iPods, gas

• Services – Jobs people do to help other people

• Doctor, teacher, mechanic, waitress

Summarizing Activity• Goods vs. Services

– Copy the chart below– Mark if the worker provides a good or service

Worker Goods Services

Jewelry Maker

Mayor

Baker

Teacher

Firefighter

Farmer

• Human Resources– Skills people have to produce goods or services

• The people that do the work.

• Capital Resources– Things people make (machines or equipment) to produce goods and

services

• Natural Resources– Nature = forests, water, fertile soil– People can’t make these resources

• Renewable Resources – able to replenish – trees

• Non-renewable Resources – not able to be replenished - oil

Types of Resources

Summarizing Activity

• Write each resource on your paper.

• Label which type of resource it is. – N = natural resource.– H = human resource. – C = capital resource.

1. Ocean

2. Hardware store

3. Dentist

4. Coal

5. Steel mill

6. River

7. Bus

8. Bus driver

3 Basic Economic Questions

1. What will be produced?

2. How will it be produced?

3. For whom will it be produced?

• Based on how a country answers these questions will determine what type of economy they will have.

Key Terms• Currency

– Money that is accepted as a medium of exchange• USA = dollar, England = pound, Russia = ruble, Greece = euro

• Exchange Rate– Amount of one currency that can be purchased for another currency

• Supply and Demand– Price of a good rises or falls depending on how many people want it or

amount available

• Scarcity– Not enough goods or services are available– Conflict of what people want and what is available to them

• Entrepreneur– Person who owns a company and assumes the risk for its success

International Trade

• Many things we want or need come from other parts of the world.

• International trade is the movement of goods and services between countries.

Export vs. Import

• Exports– Goods or services that are

produced in one country.

– Shipped to consumers in other countries to be used.

Countries must have a “Balance of Trade” between Imports and Exports.

• Imports – Goods or services that are

produced in another country.

– Shipped into this country to be sold to consumers.

Trade Barriers• Some countries limit the amount of imports into a country by

using trade barriers.– Tariffs

• A fee or tax charged for goods brought into a country from another country

• Used to protect products made within a country.

– Embargo• Government placed restrictions on the import and

export of certain goods.• Usually a political action backed by the military.

Summarizing Activity – Think, Pair, Share

• What do you think?– Pretend the USA could not import good from

other countries. • How would your daily life be different?

– Share with your partner how your life would be different.

Types of Economic Systems

• Market Economy– Businesses are privately owned (Capitalism)

• Workers produce goods and services• Workers paid from profits as determined by owners

– No government control of business

• Examples: No “true” market economy

• Command Economy– Government owns ALL industry (Communism,

Socialism)• Government provides all goods and services the people

need• Government determines what is produced, price and wages

• Example: Cuba, China, North Korea

Summarizing Activity – Think, Pair, Share

• What is the difference between a Market Economy and a Command Economy?

• Traditional Economy– Based on customs and traditions (Agrarian

societies)– Usually based on agriculture and hunting

– Typically, non-industrialized countries

– Example: Aborigines in Australia

• Mixed Economy– Features of both Market and Command Economies

• Businesses are owned by both individuals and the government

• Government controls select businesses– Ie. Post office, healthcare, banks

• Example: USA, Great Britain

ReviewTYPES OF ECONOMIC SYSTEMS

Definition Associated Terms Examples in Practice

1) Market economy An economic system in which individuals own and operate the factors of production.

Free enterpriseCapitalism

2) Command economy An economic system in which the government owns and operates the factors of production.

SocialismCommunism

CubaChina

3) Traditional economy An economic system based upon customs and traditions. Economy is based upon agriculture and hunting.

Non-IndustrializedAgrarian societies

Aborigines

4) Mixed economy An economic system that has features of both market and command economies.

Free enterpriseCapitalism

United StatesGreat Britain

Japan

Personal Money Management• Savings

– Money that has been set aside for future use

• Budget– Financial plans that allow a person to manage money– Helps prevent debt

• Loan/Credit– A way to borrow money to buy something now and pay for it

later.

• Interest– A fee that is added to the amount of money borrowed.