Download Economies - Marketing Education

Unit 2
Economics
Chapter 3 Political and
Economic Analysis
Chapter 4 Global Analysis
WhatChapter
Is an Economy?
3
Political and Economic Analysis
• Section 3.1 What Is an Economy?
• Section 3.2 Understanding the Economy
What Is an Economy?
Key Terms
economy
resources
factors of
production
infrastructure
scarcity
traditional
economy
market
economy
command
economy
Objectives
• Define the concept of an economy
• List the factors of production
• Explain the concept of scarcity
• Discuss how the three basic economic questions
are answered by these economies:
Traditional
Mixed
Command
Market
• Cite examples of various economic systems
Marketing Essentials Chapter 3, Section 3.1
What Is an Economy?
Study Organizer
Create a diagram like this one to record information about
market economies and command economies.
What Is an Economy?
An economy X is the organized way a nation
provides for the needs and wants of its people
A country chooses how to use its resources to
produce and distribute goods and services
Therefore, a country’s resources determine
economic activities such as:
• Manufacturing
• Buying
• Selling
• Transporting
• Investing
Marketing Essentials Chapter 3, Section 3.1
Resources
Resources X are all the things used in
producing goods and services.
Four Categories of Resources:
• Land (Natural Resources)
• Labor (Human Resources)
• Capital
• Entrepreneurship
Which are tangible? Which are intangible?
Land
Capital
Labor
Entrepreneurship
1. Land Resources
Land includes all the “natural” resources in the
earth or found in the seas, for example:
What are some examples of Natural resources?
•
•
•
•
•
Coal
Crude oil
Trees, plants and soil
Water and all living things in the lake
Climate and country’s geography used to
attract tourists
Marketing Essentials Chapter 3, Section 3.1
These natural resources are used as:
• Raw materials for the creation of
goods and services
• Attractions for tourism
Spain’s land—including its coasts,
historical cities, and national parks—is
an economic resource that makes the
country an attractive tourist
destination.
Marketing Essentials Chapter 3, Section 3.1
2. Labor Resources
Labor refers to all the people who work
What are some examples of Labor resources?
• Full- and part-time workers
• Managers
• Professionals in the public and private sectors
• Businesses compete to have the best
employees
Economies with well-trained labor have an
advantage over other nations in attracting
businesses
3. Capitol Resources
Capital includes money to start and operate a
business and goods used in the production
process:
What are some examples of Capital Resources?
• Cash/money
• Factories and Office buildings
• Computers and tools
• Raw natural materials that have been
processed into usable form (ex: lumber or
steel that you own)
Capital Resources
Capital also includes infrastructure
infrastructure: the physical development
of a country
What are some examples of infrastructure?
• Roads
• Ports
• Sanitation facilities
• Utilities - especially
Telecommunications
Capital Resources
Without capital, businesses would not
have the funds or resources to
develop, advertise, or transport goods
Marketing Essentials Chapter 3, Section 3.1
4. Entrepreneurship Resources
Entrepreneurship refers to the skills of people
who are willing to invest their time and money
to run a business.
Entrepreneurs:
• Organize factors of production to create goods
and services
• Employers of a population
Marketing Essentials Chapter 3, Section 3.1
United States Resources
• What are some examples of natural
Resources in the US?
• Student Contributions:
United States Resources
•
•
•
•
Educated Labor force
Great deal of capital
Abundance of entrepreneurs
Large amount of natural resources:
– coal, copper, lead, molybdenum, phosphates, uranium, bauxite,
gold, iron, mercury, nickel, potash, silver, tungsten, zinc,
petroleum, natural gas, timber; note: the US has the world's
largest coal reserves with 491 billion short tons accounting for
27% of the world's total
• Does every country have the same as we do?
Scarcity
• Different economies have different amounts of resources
• May have resources but not the capital
• May have capital but not the resources
• Don’t have the labor force or education
• Many can’t meet the needs and wants of all its citizens
(poverty a result)
• Scarcity = the difference between a country’s unlimited
wants and limited resources X.
• Scarcity forces nations to make economic choices
• Must decide how to use their limited resources
• How they use their resources defines their economic system
How Does an Economy Work?
Nations answer three basic questions when
deciding how to use their limited resources:
• What goods and services should be produced?
• How should the goods and services be produced?
• For whom should the goods and services be produced?
Like asking What, How, and Whom
all questions are based on the resources they have
access to
How Does an Economy Work?
There are three broad categories into which
economic systems are classified:
• Traditional
• Market
• Command
No economy is purely one type. It is always a
combination.
Marketing Essentials Chapter 3, Section 3.1
Traditional Economies
In a traditional economy X, traditions and rituals answer
the basic questions of what, how, and for whom.
• What: If people belong to a farming community, they farm
for generations. There is little choice as to what to produce.
Only product what they need to sustain – no surplus
• How: Again, this is bound by traditions. The practices of a
family’s ancestors carry on.
• For whom: Tradition regulates who buys and sells and
where and how the exchange takes place.
• Ex: - bartering of hunted prey used by the Inuit tribes in northern
Canada
- economy of the Sami reindeer herders in northern Scandinavia.
Market Economies
In a pure market economy X, there is no government
involvement in economic decisions. The market is free
to answer:
• What: Consumers decide what should be produced
in the market through which products they buy the
most
• How: Businesses decide how to produce goods and
services by being competitive and out-selling their
competitors
• For whom: The people who have more money are
able to buy goods and services.
• To make money, people are motivated to work and
invest their income
Command Economies
A command economy X system in which a country’s
government makes economic decisions and decides:
• What: One person (often a dictator) or a group of
government officials decides what products are needed.
• How: The government owns all means of production, so it
makes the decisions
• Controls all employment opportunities and benefits
• Extreme cases: tells people where they will work and how
much they will get paid
• For whom: Wealth is regulated by the government to
equalize everyone. Everything from housing to education is
subsidized by the government.
Mixed Economies
• No economy is purely traditional, market, or command
• All economies are considered somewhat mixed
• What do you think the US Economy is?
• Mixed economy leaning toward market economy
• Business laws and regulations, labor laws, OSHA standards
Marketing Essentials Chapter 3, Section 3.1
Economies
• Economic systems placed on a continuum to compare levels
of government involvement
• Systems to the left are more regulated by their
governments
• Economic freedom to the right encourages competition
• Where would a pure Market Economy be placed on the
continuum below?
• Where would a pure Command Economy be placed?
• What is in between?
Political Philosophies
A meaningful classification depends on how much a government
interferes with the free market
Three political philosophies that shaped economies:
1. Capitalism
2. Socialism
3. Communism
Capitalism
• Capitalism - economic philosophy characterized by
marketplace competition and private ownership of
business
• The political system most frequently associated with
capitalism is democracy
• Capitalist countries include:
• The United States
• Japan
Where is capitalism on the continuum below?
Marketing Essentials Chapter 3, Section 3.1
Communism
•
•
Communism = economic philosophy in which the
government controls the factors of production
No financial incentive for people to increase their
productivity as the government regulates and assigns:
• Employment
• Medical care
• Education
• Housing
• Food
Where is Communism on the Continuum?
Communism
Examples of modern communist countries are:
• Cuba
• North Korea
• China
Marketing Essentials Chapter 3, Section 3.1
Socialism
Socialism: supports private ownership yet controls the
means of production and distribution–
• Market is not completely controlled by the government
• Increased amount of government involvement
• More social services: education and medical care is
free or low cost
• Pensions and Elderly care
• The state will control noncompetitive companies like:
• Telecommunications
• Natural resources (gas, water, and power)
• Transportation
• Banking
Socialism
Examples of Modern countries with socialism:
• Canada
• Germany
• Sweden
Where is Socialism on the Continuum?
Socialism
Today, many socialist countries are selling some
of their state-run businesses to help balance the
increasing costs of:
• National health care
• Unemployment
• Retirement programs
This transfer of control is called privatization
Marketing Essentials Chapter 3, Section 3.1
Developing economies are mostly poor
countries with little industrialization that are
improving their infrastructure to become more
prosperous.
These countries need to improve:
• Education
• Technology
• Exports
• Means of production (roads, ports, utilities)
Marketing Essentials Chapter 3, Section 3.1
Section 3.1
What Is an Economy?
Differences and Similarities Among Market and
Command Economies
SECTION
CHAPTER3.1
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