Foundations of Citizenship Update

CHAPTER 13
WHAT IS AN ECONOMY?

8796/p206070049_22502.gif


Summary

All societies make choices about how to use limited resources to produce goods and services that will satisfy people's wants. This system is called an economy. Decision makers in an economy decide what goods and services to produce, how to produce them, and who will get what is produced. The different kinds of economic systems—traditional, command, and market—represent different ways of producing and distributing goods and services.

Chapter Outline

Section 1: Why Societies Have Economies

People's basic wants are for food, clothing, and shelter. People use resources—land, labor, and capital—to make products and services to satisfy these wants. Through a chain of activities, people constantly make choices about what they want and how to spend the money they have to satisfy their wants. Scarcity is a problem in societies, as wants are frequently greater than resources. Therefore, in every economy, businesses, governments, and individuals make choices about how to use limited resources to satisfy unlimited wants.

Section 2: Basic Economic Decisions

There are three basic decisions in an economic system—what to produce and how much; how to produce the goods and services; and who will get what is produced. The goals and values of a society have great influence on how that society makes all three basic economic decisions.

Section 3: Three Types of Economies

In human history, there have generally been three basic types of economic systems: traditional, command, and market. These systems are three different ways a society can organize production, distribution, and consumption to solve the economic problem of scarcity.

 

Summary