political and economic analysis. what creates an economy what is an economy? organized way a...
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Political and Economic Analysis
What Creates an Economy
What is an Economy?
Organized way a nation provides for the needs and wants of its people
Factors of Production (Resources)Tangible
Land and CapitalIntangible
Labor and Entrepreneurship
What Creates an Economy
LandEverything on the Earth
Natural Resources: Land, Animals, Plants, Minerals
LaborAll Employees
Education and Training = Advantages!
What Creates an Economy
CapitalMoney used by the business and goods used in
productionFactories, Buildings, Computers, Tools, Etc.
Includes Infrastructure Roads, Ports, Utilities (Water/Electric), Sanitation
What Creates an Economy
EntrepreneurshipSkills of people who invest time and money into a business
Organize the factors of production to create goods or services
TechnologyAdvancements in technology can provide new opportunities
for business or cause products/services to become obsolete
What Creates an Economy
ScarcityThe difference between wants/needs and
available resources
Shortages – Can be replenished
Scarcity – Resources are limited
Types of Economic Systems
3 questions nations must answer about limited economic resources1. What?
2. How?
3. For whom?How countries answer these questions determine their
type of economic system
Types of Economic Systems
TraditionalHabits/traditions/rituals
Culture/religious practices/passed down ideals
1. What – Little choice – What’s needed to survive
2. How – Underdeveloped – Techniques learned from ancestors
3. For whom – Community – Excess is traded among residents
Types of Economic Systems
MarketNo government involvement/Businesses compete for
consumers
1. What – Consumers decide through their purchases
2. How – Efficiency– Must produce quality / lower prices
3. For whom – People with more money can buy more – Motivated to work and invest their money
Types of Economic Systems
CommandGovernment makes all decisions
1. What – One person or group – What they believe is important
2. How – Government owns means of production – Owns businesses
3. For whom – In principal…shared equally among the people
Types of Economic Systems
MixedIn reality all economies are mixed…The mix
depends on the amount of government involvement
What two economic systems does the US Mix?
Market and Command
Political and Economic Philosophies
CapitalismCharacteristics – Govt. laws and policies that affect the market / Social
services for citizens
Political Foundations – Democracy
CommunismCharacteristics – Govt. makes decisions for you…little economic freedom
No True Communist Countries…Cuba and North Kore are close. China has communist political party in power
Political and Economic Philosophies
SocialismCharacteristics – Increased levels of social services /
Businesses and citizens pay higher taxes than Capitalist countries / Govt. owned and run industries (Telecommunications, transportation, natural resources, and banking)
Examples – Canada, Germany, and SwedenGovernment official are still elected
The Economy and Marketing
Goals of a Healthy Economy1. Increase Productivity
• Efficiency / Training and Education /Increased Duties
2. Decrease Unemployment
• More people working = more production….and taxes!
3. Maintain Stable Prices
• Keep Inflation in check
The Economy and Marketing
Economic MeasurementsGross Domestic Product (GDP)
Output of goods and services produced by labor and property located within a country
Gross National Product (GNP)Total goods and services produced by a nation
Includes goods and services produced abroad by citizens and companies
The Economy and Marketing
Economic MeasurementsStandard of Living
Amount of GDP or GNP per person (Divide GDP or GNP by the population)
High levels or production typically equal higher standards of living
Inflation Rate Rising Prices
Consumer Price Index (CPI) – Measures the change in price of 400 specific retail and service goods
Producer Price Index (PPI) – Measures Wholesale price levels in the economy
Unemployment Rate
The Business Cycle
Expansion vs RecessionExpansion = Growth and low unemployment…good
time for business to start or expand
Recession = Slowdown for at least 2 quarters of a year…companies reduce workforce and plans for new products or expansions are put on hold
The Business Cycle
Depression vs RecoveryDepression = prolonged recession…high
unemployment and businesses shut down.
Recovery = Renewed growth following a depression…Production increases and more jobs are created
Political and Economic Analysis Project and PowerPoint Presentation
Working with a Partner:
1. Identify the following for the US and another country of your choosing – No teams can have the same 2nd country!!
a. Unemployment Rate, Inflation Rate, Consumer Price Index, and GDP/GNP.
b. Government actions that may affect the economy in the near future
c. What does the information tell you about the economy?
d. How will this information dictate your marketing decisions?
Political and Economic Analysis Project and PowerPoint Presentation
Working with a Partner:
2. Chose how you will invest in your country (Not US)
a. Select two companies to invest in based upon your previous research? – Provide rationale behind all decisions
b. Conduct a SWOT analysis for each company you select for investment
c. Explain your Target Market for each company invested in
Ch. 3 Quiz
1. List the 4 Factors of Production – Bonus Point for 5th
2. List the 3 Questions Nations Must Answer about Limited Resources
3. List the 4 Types of Economic Systems
4. List the 3 Goals of a Healthy Economy
5. List the 4 Phases of the Business Cycle
6. Explain the Difference Between GDP and GNP