_ survival needs include food, clothing, and shelter. _people also have endless wants Such wants may include things that make life more comfortable, more entertaining, or more satisfying in some way. ● Three Fundamental Economic Questions: What to Produce, How, and for Who _ If a nation’s resources were unlimited, it might be possible to meet all of these wants and needs _ a nation’s limited resources should be used mainly to provide public goods, such as clean air and water, or to produce private goods. _ Economic systems differ from one country to another because each society answers these questions in its own way _Includes things such as farming and how money is spent ● The Four Factors of production: Land, Labor, Capitol, Entrepreneurship . _ Land . By land, economists mean the natural resources of a nation. These raw materials include fertile soil, water, plants, and minerals _ Labor . Labor refers to the effort—both mental and physical—that people put into
producing goods and services _ Capital . The term capital has multiple meanings. It can mean the money needed to start a business. It can mean the machinery, buildings, tools, and equipment used to produce goods and services. It can also mean human capital—the knowledge and skills that workers bring to their jobs _ Entrepreneurship . This last factor is the human effort that goes into organizing land, labor, and capital to produce and sell goods and services. Entrepreneurs risk their money and time to turn an idea into something that people will want or need _ Three basic types of economic systems exist in the world today:traditional, market, and command ● Traditional Economies: Decision making by customers _ People in traditional economies provide for themselves. Some are hunters and gatherers, as they have been for thousands of years. _ Most people in a traditional economy live at a subsistence level, producing just enough goods to feed, clothe, and house their families _ In a traditional society, the production and distribution of food, clothing, and shelter is woven into the fabric of society _ Tradition and community values serve to keep the economy running smoothly _ Many of the Inuit of Alaska and northern Canada still maintain a traditional economy based on hunting and fishing ● Market System: Decision making by individuals _ In a pure free-market economy, the government plays little or no role in economic affairs _ Producers are free to decide what goods and services to produce and how much to charge for them _ Consumers are free to decide what to buy. _ Prices are determined by the market . In economic terms, a market is any place or situation in which people buy and sell goods and services. ● Advantages _ One advantage of a market system is its efficiency at meeting peoples’ needs.
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