What is an economy
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WHAT IS AN ECONOMY?. Journal Topic. What is an economy? Save as: 1_lastname_firstname_U2J1. Georgia Performance Standard. MKT-MP-2: Integrate social studies skills into marketing, sales and service to obtain an understanding of customers and the economic environment in they function.

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Journal Topic

  • What is an economy?

  • Save as: 1_lastname_firstname_U2J1

Georgia Performance Standard

MKT-MP-2: Integrate social studies skills into marketing, sales and service to obtain an understanding of customers and the economic environment in they function.

Economy or Economic System

The way a nation makes choices. These choices involve how the nation will use its resources to produce and distribute goods and services.


  • All things used in producing goods and services

  • Factors of Production – the technical term economists use for resources

Resource 1 – Land

  • Everything on the earth in its natural state / the earth’s natural resources

  • Resources Include:

    • Everything contained in the earth or found in the sea

    • Coal and crude oil are examples

    • A lake and all the living

      things in the lake are

      also examples

Resource 2 – Labor

  • All the people who work in the economy

  • Labor includes:

    • Full and Part-time Workers

    • Both the Public and the Private sector

Resource 3 - Capital

  • The money needed to start and operate a business

  • The goods used in the production process

  • Examples are:

    • Factories

    • Office Buildings

    • Computers

    • Raw materials that are processed

      into a more useful form (lumber, steel)

Resource 4 - Entrepreneurship

  • The skills of the people willing to risk their time and money to run a business

  • Entrepreneurs organize the other factors of production to create the goods and services desired in an economy


  • The physical development of a country

  • Things necessary for production and distribution of goods and services

  • Parts of the infrastructure include

    • Roads

    • Ports

    • Sanitation Facilities

    • Utilities


The difference between wants and needs and the resources available to meet these needs is called Scarcity.

Nations have unlimited wants and needs but limited resources – Scarcity forces the nations to make economic choices.

The Basic Economic Questions

  • Nations must answer 3 basic economic questions when deciding to use their limited resources

  • The way nations answer these questions define their economic system

    • What goods and services should be produced?

    • How should the goods and services be produced?

    • For whom should the goods and services be produced?

What Should Be Produced?

  • Consumers decide what is to be produced through purchases made in the market place.

  • Items that satisfy the customer’s needs and wants are purchased making the products successful

  • Items that do not satisfy the needs and wants of the consumer are not purchased and are not successful

How Should Goods and Services Be Produced?

  • How products will be produced is left up to the business

  • Businesses must be competitive

  • Businesses must produce quality products at lower prices than their competitors

  • Businesses must find the best way to produce goods and services

  • Businesses must also find the best way to encourage customers to purchase their products

For Whom Should Goods and Services Be Produced?

  • Those individuals with the most money are able to purchase more goods and services

  • To obtain money individuals work and invest

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