Economics: What is an Economy?

Brenda H., Niloufar K., Thomas B., Akash M.

Economics: the branch of knowledge concerned with the production, consumption, and transfer of wealth.

Resources: Four Types

                                                                 Niloufar K.

Land Resources

Land resources include everything contained in the earth or found in the seas.

  • Natural resources are used as the raw material for making goods and creating services that are marketed to customers
  • Some places have a climate and geography that attracts tourists, which generates money and impacts their economy positively  (ex. skiing lodges in Vermont)
  • Trees, coal, crude, lakes, living things, soil, are all natural resources


Labor resources require human physical and mental effort to create goods and services.

  • If you have ever been paid for a job, you have contributed labor resources
  • A waiter bringing your order to your table, an engineer that designed your car, factory workers that package sushi, are all examples of labor resources
  • The money earned by labor resources is called wages; the largest source of income for most people to this day are wages


Capital resources are already-produced goods that are used in production of new goods or services.

  • Common examples of capital include boards, hammers, conveyer belts, computers, and delivery vans
  • The type of capital resource differs based on the type of work being done
  • For example, a teacher would need a white board to conduct the service of teaching, while a doctor would much rather need a stethoscope to examine the patient
  • The income earned by those who use capital resources is called interest


An entrepreneur is a person who combines the factors of production – land, labor, and capital – to earn a profit.

  • Entrepreneurs are innovators who find new ways produce goods and services and bring them to the market
  • Famous entrepreneurs are: Henry Ford, who developed the assembly line and the idea of mass production; Bill Gates, who built the world's largest software business, Microsoft; Philemon Pormort, the man who upheld the public education system
  • Entrepreneurs are a vital engine of economic growth because their ideas/inventions lead to more jobs being created
  • An entrepreneur's pay is called a profit.

The four factors of production – land, labor, capital, and entrepreneurship – are scarce resources that form the building blocks of the economy.


                                                                      Brenda H.

           Scarcity is the lack of supply that forces economic choices.

- Many countries have the resources but they don't have capital or labor to develop them.(3rd world countries)

- Unlimited needs and wants for growth and development but limited resources to meet them.  

-  The difference between wants and needs and available resources is called scarcity.

There will always to be scarcity because of lack from:

-LABOR            -RAW MATERIALS           -CAPITAL

-These three questions define their economic system.

1. Which goods and services should be produced?

2. How should the goods and services be produced?

3. For whom should the goods and services be produced?

(Traditional, market, and command economies)

Types of Economies

Akash M.

Market Economy: A market economy features the government having no involvement in economic decisions. The consumers own the means of production and answer the three basic economic questions.

Command Economy: A command economy features the government having involvement in all economic decisions. Thus, in a command economy the government owns the means of production and answers the three basic economic questions.

Mixed Economy: A mixed economy is a mix of a market and command economy. Some economic decisions are made by the government, and some by the consumers. Mixed economies can lean either toward a market or command economy - the more decisions made by consumers, the closer the economy leans to a market economy and vise versa.

Traditional Economy: A traditional economy features the economic decisions being decided by tradition. The three basic economic questions are answered by culture, tradition, ancestors, and rituals.

Political Economies

                                                                     Thomas B

Capitalism: Capitalism is a political and economic philosophy characterized by competition in the market place and privately owned businesses.

-Capitalism is usually associated with democratic governments

-Democracy's usually are capitalist because they believe the power should be in the hands of the people

-Governments in capitalist society's are concerned about the people and care for those who cannot care for themselves

-The United States and Japan are two examples of countries that are capitalist and democratic

Communism: Communism is a social, political, and economic philosophy in which the government that is usually authoritarian controls the factors of production.

-In communist country's everything is available to the whole country

-In a communist country everyone able to work  is assigned a job

-The idea is that there is no unemployment but even if you don't go to work you get paid still

-The government tells people almost everything they do in their lives including where to live

-Very few countries are still communist and most have collapsed in recent years

Socialism: Socialism is in between Capitalism and Communism on the amount of government control and the main goal is to meet basic needs for all and to provide employment for many.

-Socialist countries are usually associated with being democratic country's

-The government is more involved in socialist countries than in capitalist countries but less involvement than communist countries

-They usually tend to have more social services to ensure specific standards of living

-Individuals and businesses pay much higher taxes than capitalist countries but it goes to financing government services  

-The Government controls key industries and make economic decisions while state controlled noncompetitive companies run smaller industries

-Canada, Sweden, and Germany are usually characterized as socialist countries

Economies in Transition

                                                            Brenda H.

         The breakup of the soviet union is one of the best examples of societies making the difficult change from command to market economies. Also many Eastern European that were once communist have moved toward global market economies. This means state-owned industries have been privatized in many nations.


A Move Toward Privatization :

       Today many socialist countries are selling state operated businesses to help balance their budgets as the cost for programs such as health care, unemployment, and retirement increase.

Example: Great Britain privatized British Airways and since 1987 the nation has made sales of almost $63 billion .

Developing Economies :

     Developing economies are most likely poor countries with little industrialization. Much success can be traced back to the high education levels of the labor force and on directing and using foreign investment efficiently.

Example: Chad was a mainly agricultural and farming economy. However, with an oil field and pipeline project paid for by foreign investors Chad's economy has extremely improved.   


  1. Farese, Lois Shneider, Grady Kimbrell, and Carl A. Woloszyk. Marketing Essentials. United States of America: Glencoe, 2006. Print.
  2. Entrepreneur Video:
  3. "The Four Economic Resources." Petrarcanomics. N.p., 25 June 2008. Web. 15 Dec. 2014.
  4. Scarcity Video:

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