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Scarcity & Making Scarcity & Making ChoicesChoices
Obj.: 1.01 Analyze the impact Obj.: 1.01 Analyze the impact scarcity has on various economic scarcity has on various economic
systems.systems.
Popcorn = One Dollar ($1.00)
Fruit Juice = One Dollar ($1.00)
Attending College vs. Not Attending CollegeLifetime earnings of a College Graduate
vs.High School Graduate
T001-01.01
DefinitionWhat you give up when you make one choice over
another
Example
OR
Something to Think About
Six Step Decision Making Process1. Define the problem.
2. Identify the alternatives.
3. List all the advantages and disadvantages.
4. Choose among alternatives.
5. Act on your choice.
6. Evaluate your decision.
What affects your decision What affects your decision making?making?
• Values
• Goals
Values are . . .Values are . . .
• The beliefs and principles you consider important, correct, and desirable
• The ideals in life that are important to you
• Principles by which a person lives
GoalsGoals
There are three types of goals:
• Short-term
• Intermediate
• Long-term
Short-term GoalsShort-term Goals
Short term goals are goals you expect to reach within a few days or a week.
Examples: pass a quiz, paint a room
Intermediate GoalsIntermediate Goals
Intermediate goals are goals you expect to reach in the next few months or few years.
Examples: high school graduation, summer internship, new shoes
Long-term GoalsLong-term Goals
Long-term goals are goals you expect to reach over a period of several years.
Examples: career, marriage, new car
Questions for you:Questions for you:
Since each decision made is affected by the values and goals an individual possesses:
• What are your values?
• What are your goals?
The Three Economic QuestionsThe Three Economic Questions
1. What goods and services are to be produced?
2. How should the goods and services be produced?
3. For whom should the goods and services be produced?
Natural ResourcesNatural Resources
Raw materials supplied by nature that come from the earth, the water, or the air and are used to produce goods.
Natural Resources Can Be Natural Resources Can Be Renewable or NonrenewableRenewable or Nonrenewable
Renewable resources are resources that can be replaced.
Nonrenewable resources are
resources that cannot be replaced.
HUMAN RESOURCESHUMAN RESOURCES
The people who contribute physical and mental energy to the production process.
CAPITAL RESOURCESCAPITAL RESOURCES
The tools, equipment, and buildings that are used to produce goods and services.
Entrepreneurial ResourcesEntrepreneurial Resources
The initiative to combine natural, human and capital resources to produce goods or services.
Types of EconomiesTypes of Economies
TraditionalismCommunismSocialismCapitalism
TRADITIONALISMTRADITIONALISM
An economy in which people do things the way they have always been done.
Resources are allocated by inheritance, and which has a strong social network and is based on primitive methods and tools.
TRADITIONALISMTRADITIONALISMAdvantages:
Everyone has a role in the economy.
Economic life is stable and community life continuous.
Fosters a sense of community, as it causes little friction among members and provides a sense of security and psychological comfort.
Relatively low unemployment rate and low crime rate. A traditional economy allows for a greater degree of autonomy and little or no money is used.
TRADITIONALISMTRADITIONALISMDisadvantages:
Discourages new ideas and ways of doing things.
Does not take advantage of technology and there is relatively little promotion of intellectual and scientific development.
Provides few incentives for entrepreneurs, thus limiting choices for consumers and lowering standards of living.
TRADITIONALISMTRADITIONALISM
Main Countries:
Societies living in rain forests of Latin America, parts of Africa, and the Middle East.
COMMUNISMCOMMUNISM
An economy in which the government makes ALL decisions concerning the three important economic questions.
COMMUNISMCOMMUNISM
Advantages:
Can make a dramatic change in a short time on production of goods.
Each person is provided with a job with certain medical and social services.
COMMUNISMCOMMUNISM
Disadvantages:
Consumer goods and services rank low on the list of priorities for that country. Few consumer wants are met.
A lack of incentive to work hard. (No competition among businesses.)
Limits an individual’s choice to make his or her own economic decisions.
COMMUNISMCOMMUNISM
Main Countries:
North Korea, China, and Cuba are some of the countries considered to be communistic.
SOCIALISMSOCIALISM
An economic system in which the government owns major industries (like railroad systems, steel, and iron), but allows for private ownership of other businesses.
SOCIALISMSOCIALISMAdvantages:Government and private business work together.
Ownership of resources is shared. Government representatives become members of management committees for private business. These committees decide what and how to produce. The government decides who should receive the goods and services.
Individuals are provided with medical services, lifelong welfare services, and social security benefits to everyone.
SOCIALISMSOCIALISM
Disadvantages:Workers are taxed at an extremely high
rate to pay for all that the government provides.
This high tax rate discourages private business.
The high tax rate also lessens consumers’ spendable income to make for fewer choices in the marketplace.
SOCIALISMSOCIALISM
Main Countries:
Sweden and France are both considered to be socialistic economy countries.
CAPITALISMCAPITALISM
An economic system where the basic economic decisions are based on the actions of individual people and businesses participating in many different markets. Also called Free Enterprise system.
CAPITALISMCAPITALISMAdvantages:This economic system produces goods and
services that people want or need and that will bring a profit to the sellers.
Freedom of choice.Those who get more income for their input in the
market can have more of the resources.Price plays an important role in the market
place. Competition ensures that prices stay low.Government does not dictate what, how or for
whom to produce.
CAPITALISMCAPITALISM
Disadvantages:
Citizens who are productive are the only ones who are rewarded.
The wealth of the economy is not evenly distributed.
CAPITALISMCAPITALISM
Main Countries:
The United States, Japan, Canada, and Great Britain are considered capitalistic.