Download Our Economy - Somerset Independent Schools

Chapters 3 and 4
 Resources
a country may have are land

Land – everything on earth in its natural state
(coal, crude oil, lake)

Capital – money used to start a business and
goods used in the production process
Labor – All people who work in an economy


Entrepreneurship – people willing to risk their
time and money to start a business

The difference between unlimited wants and
limited resources creates SCARCITY.
 Should a piece of land be used for an
amusement park or office building?
 Should more money be spent on our military
or for medical research?
 Should a company sell product A or Product
B?
 Should a consumer buy or lease?
 Consumer
– buys the product (economic good
or service)
 Producer
– makes the product
 Government
the product
– provides regulation regarding
 What
goods and services should be produced?
How should the goods and services be
produced?
 For whom should the goods and services be
produced?

 In
a free enterprise (market or capitalist)
economy the CONSUMER decides what gets
produced!!!!!!!
 Where
the government answers all of the
questions about their economy



Hitler
Communism
Businesses have little control
 Little
government involvement in economic
decisions
 Consumers answer what gets produced and
for whom based on who has the money to
buy.
 The producers decide how it will be
produced.
 Freedom
of ownership – can own personal
property, businesses, property rights
(patents)
 Freedom
to compete – the struggle between
two companies for customers
 Price
competition – focuses on who has the
best price
 Non-price
competition focuses on who has
the best quality, service, business location ,
and reputation.
 Risk


is the potential for loss or failure
Example: Opening a business that fails or losing
money in an investment like the stock market
1/3 businesses in U.S. fail after 1st year
 Profit
is the money earned from business
after all costs and expenses are paid – it is
the motivation for taking the risk to start a
business
 Political
power is in hands of the people
 There are more than one political party
 Lay
off employees
 The businesses lose money
 Investors sell their stock – leaving less
money for businesses to use for reinvestment
 Government does not get as much tax money
 Increases unemployment compensation and
social services
 Hire
more employees
 Pay better wages (more money goes back to
economy
 Investors are willing to invest more money
 Government makes more money in taxes
 Businesses can afford to donate to charities
 Military
 Police
 Fire
protection
 Free public education
 Roads, bridges
 Public libraries
 Social
welfare system: Medicare – elderly
Medicaid – poor
 Provides
disaster relief after a natural
disaster. Example: Hurricane Katrina
 Run the Small Business Administration (SBA) –
which provides counseling and educational
materials to both businesses and home
owners
http://www.sba.gov/
 To encourage global business activity by
establishing trade alliances with other
countries
 Example: Selling Nike shoes to
customers in Africa
 Political
power should be in the hands of the
people.
 There is more than one political party.
(democrats, republicans, etc.) The people
elect their political leaders.
 The government is concerned about its
people and cares for the people who cannot
care for themselves.
 Examples
are: United States and Japan
There is an increase in the government’s
involvement in people’s lives.
 The government tries to reduce the difference
between the rich and the poor.
 Key industries are run by the government.
Examples are: telecommunications, mining,
banking, and transportation
 There are a lot of social services such as:

Free medical care
 Free education through college
 Pension systems and elderly care

Taxes are much higher (pay for all of services)
 Examples: Canada, Germany, Great Britain,
Sweden, and Australia

 The
government runs everything.
 There is only one political party.
 Government decides your job, schooling, and
housing.
 Total lack of freedom in this economy.
Advantage is? Everyone is taken care of.
 Examples
of communist countries are: North
Korea and Cuba
 Macroeconomics
of an economy


– looking at the big picture
Looking at the unemployment rate for the whole
nation
Looking at the total cost for medical care across
the nation
 Microeconomics
– looking at the smaller
picture of an economy


Looking at the unemployment rate in Pulaski
County
Looking at a businesses’ medical cost for their
employees
 Direct
Competition (Price competition) –
competing based on similar product and
price
 Indirect
Competition (non-price competition)
– competing based on factors not related to
price such as quality, service, financing,
reputation, business location, etc.
 Exclusive
control over a product or the
means of producing it. They are not
allowed except for:
 Electric companies and gas companies
 Example
of a company fined for being
like a monopoly:
 Microsoft – Bill Gates
 U.S.
Post office competes with UPS and Fed
Ex
 Tennessee
Valley Authority (TVA) – electric
company
 Amtrak
– competes with other forms of
transportation like subways, busses, taxis
A
patent protects against someone stealing
an invention. patents

A copyright protects against someone
stealing someone’s music or booksHarry
Potter and the Half-Blood Prince Tickets

A
(50-100years or death)
trademark protects a symbol
 Equal
Employment Opportunity Commission –
protects against discrimination in hiring due
to age, gender, race, religion, disability,
national origin

Consumer Product Safety Commission –
protects against products that are harmful (
have to do recalls)Recent Recalls
 Environmental
Protection Agency (EPA) –
protects against damage to the environment
 Securities
Exchange Commission – regulates
the sale of stocks and bonds
 Consumer

and worker protection:
OSHA – protects against unsafe conditions
* Unhealthy chemicals
* Unsafe equipment


Food and Drug Administration(FDA): Protects
consumers against bad food and drugs