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Module 1 - Lesson 3

The document discusses the fundamentals of economics, including the concepts of goods, services, needs, wants, supply and demand, scarcity, and incentives. It outlines the four types of economic systems: traditional, command, market, and mixed economies, each with distinct characteristics. Additionally, it emphasizes the importance of studying economics for making informed decisions and understanding historical and future economic impacts.

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10 views9 pages

Module 1 - Lesson 3

The document discusses the fundamentals of economics, including the concepts of goods, services, needs, wants, supply and demand, scarcity, and incentives. It outlines the four types of economic systems: traditional, command, market, and mixed economies, each with distinct characteristics. Additionally, it emphasizes the importance of studying economics for making informed decisions and understanding historical and future economic impacts.

Uploaded by

6fss9thr6y
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Module 1: Uncovering the Past

Topic 3: Studying Economics


How are you able to buy what you want or need?
Economic Fundamentals

Every day, people need to purchase goods and services from


others.

Goods are products that people can consume or use, such as food
or tools.
Services are things that people do. For example, a tutor provides a
service by helping someone learn a subject.

Economic systems help people buy the goods and


services they need.
An economy is a system of producing, selling, and buying
goods and services.
The study of economies is called economics.
Needs and Wants

All around the world, people need certain things to survive. People cannot live without food
and water, shelter, and clothing.

These basic materials that people cannot live without are called needs.

In addition to their needs, there are many items that people want in order to make their
lives more comfortable.
People’s wants are not necessary for survival, but they can have great value to people.

Different people have different wants.


In addition, a person’s wants can change over time.

People satisfy their needs and wants by obtaining goods


and services.
Supply and Demand

The price of a good or service is usually determined by the law of supply and demand.

Supply is the amount of a good or service that businesses are willing and able to produce.
Demand is the desire that a person has to buy a good or service and the ability to pay for it.
Scarcity and Choice

The work of economists, or people who study economics,


shows that we all face one main economic problem.

This problem is scarcity. Scarcity is when there are not enough


resources to meet people’s wants.

People’s wants are unlimited, but the resources available


to satisfy wants are limited. When a resource becomes
scarce, it is harder for producers to get.
Products made with that resource also become more
difficult to get.
As a result, the prices for these items usually rise.
Incentives (or Benefits)

An incentive is something (especially money) that motivates or encourages


a person to do something.

Economic activity is influenced by incentives, or benefits. For individuals and


businesses, profit is a major incentive.

Profit is the money an individual or business has left after paying expenses.

The profit motive, or the desire to make a profit, is essential in many economies.
If people do not want profit, they will not start businesses and people will have no
way to get goods and services.

Saving money is also an incentive.


Types of Economies
A country’s economic system determines how resources, goods, and services are distributed.

The four basic economic systems that the countries use are as follows;
traditional, command, market, and mixed economies.

- In a traditional economy, economic decisions are based on how economic activity has been carried
out in the past. People may grow their own food and make everything they need to survive, or they
might trade with others to get things that they cannot make themselves.
Most of ancient civilizations were based on traditional economy.

- In a command economy, the government makes all economic decisions and owns or controls all the
factors of production. The government tells people what they can produce, how much of it to produce,
and how much they can charge for it.
Only a few countries in the world, such as North Korea and Cuba, have command economies.
- The third type of economy is called a market economy. A market economy is one in which
economic decisions are made by people looking out for their own best interests.

A market economy is based on freedom. People are free to own or control factors of production.
They can own a property, start companies, or buy and sell products as they choose. Companies also
need to be free to compete with one another.
Japan is an example of a market economy.

- The fourth type of economy is called a mixed economy.


A mixed economy is one with features of market and
command economic systems. In these mixed economies,
businesses are largely free to operate as they please.
However, they must obey laws and rules set up by the
government.
The United States is an example of a mixed economy.
The Importance of Economics

There are different reasons why people study economics.

One reason is that an understanding of economics can help us make everyday decisions about money.

Another reason is that it helps explain world history. Events have affected economics, and economics
have affected events. Understanding economic history can help us explain the past.

It can also help us explain the present and predict future consequences of economic decisions.

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