Impact of Human, Impact of Human, Capital, Productive, and Capital, Productive, and Natural Resources on Natural Resources on

Investment (7.05)Investment (7.05)

J. WorleyJ. Worley

CivicsCivics

Resources for InvestmentResources for Investment► 4 Major Resources For Investment4 Major Resources For Investment►Human CapitalHuman Capital

The money made by individuals and put back into the The money made by individuals and put back into the market in hopes of making moremarket in hopes of making more

► CapitalCapital The investment in the productivity of a business or firmThe investment in the productivity of a business or firm

►Natural ResourcesNatural Resources The investment in resources to help boost their cause The investment in resources to help boost their cause

or make it easier to accessor make it easier to access

► ProductiveProductive The investment in the numbers of products made or The investment in the numbers of products made or

soldsold

Resources for Investment Resources for Investment (cont.) (cont.)

►Capital GoodsCapital Goods Products used to make other goods or Products used to make other goods or

provide servicesprovide services EX- Bolts used in car engines, Vans used EX- Bolts used in car engines, Vans used

by delivery servicesby delivery services

►Consumer GoodsConsumer Goods Items produced for final use by individualsItems produced for final use by individuals EX- Bottle of Cola, Toaster, Pair of SkisEX- Bottle of Cola, Toaster, Pair of Skis

Resources for Investment Resources for Investment (cont.)(cont.)

►Producer Price Index (PPI)Producer Price Index (PPI) Used to estimate the costs of goods that Used to estimate the costs of goods that

producers might purchase or sellproducers might purchase or sell Measures the average change in prices of Measures the average change in prices of

different goodsdifferent goods As it pertains to investment, it not only looks As it pertains to investment, it not only looks

at the amount of money a producer spends at the amount of money a producer spends on capital goods but also the opportunity on capital goods but also the opportunity costs of not using that money to produce costs of not using that money to produce more goods to be soldmore goods to be sold

ProductivityProductivity

►Output vs. InputOutput vs. Input Input is all of the factors of production that Input is all of the factors of production that

go into making a good or servicego into making a good or service Output is simple the amount of goods or Output is simple the amount of goods or

services being madeservices being made This is how the opportunity cost of lost This is how the opportunity cost of lost

production can be foundproduction can be found Producers have to be aware of the Law of Producers have to be aware of the Law of

Diminishing ReturnDiminishing Return

Productivity (cont.)Productivity (cont.)

►Law of Diminishing ReturnLaw of Diminishing Return As more and more of a As more and more of a variable inputvariable input

(Chefs) is combined with a (Chefs) is combined with a fixed inputfixed input (Kitchen Space), the amount of output per (Kitchen Space), the amount of output per input decreasesinput decreases

This is also true for customersThis is also true for customers►EX- Your first bowl of peppermint ice cream EX- Your first bowl of peppermint ice cream

may be great. Your second bowl may be may be great. Your second bowl may be good. Chances are you will loss enjoyment as good. Chances are you will loss enjoyment as you keep eating bowl-after-bowl of it.you keep eating bowl-after-bowl of it.

Productivity (cont.)Productivity (cont.)

►RecyclingRecycling When a good is reprocessed or reusedWhen a good is reprocessed or reused EX- Paper, Aluminum, PlasticEX- Paper, Aluminum, Plastic

►Education and TrainingEducation and Training People increase their knowledge, skills, People increase their knowledge, skills,

and value workersand value workers Some employers are willing to pay for Some employers are willing to pay for

people to go back to school & learn more people to go back to school & learn more about their tradeabout their trade

How do Economic How do Economic Systems Address Key Systems Address Key

Economic Factors Economic Factors (7.06)(7.06)

Economic SystemsEconomic Systems►Market Economy (Free Market Economy) Market Economy (Free Market Economy)

Producers are free to produce what they Producers are free to produce what they choose to produce and consumers are free to choose to produce and consumers are free to consume what they choose to consumeconsume what they choose to consume

►Command EconomyCommand Economy Economy where prices and production are Economy where prices and production are

controlled by the governmentcontrolled by the government

►Mixed Economy (Mixed Market Economy)Mixed Economy (Mixed Market Economy) Elements of both a Market and Command Elements of both a Market and Command

Economies are present Economies are present Represents more of what the US economy isRepresents more of what the US economy is

Market EconomyMarket Economy►Market is the organized exchange of goods, Market is the organized exchange of goods,

services and resources within a given region services and resources within a given region at a given timeat a given time

►Adam Smith’s Adam Smith’s Wealth of NationsWealth of Nations Is one of the most comprehensive defenses of a Is one of the most comprehensive defenses of a

free market economyfree market economy Argues the market is led by incentive on both Argues the market is led by incentive on both

sidessides

►Laissez-Faire Laissez-Faire French term meaning to leave alone, hands-offFrench term meaning to leave alone, hands-off Implies that government should not attempt to Implies that government should not attempt to

manipulate nor regulate the marketmanipulate nor regulate the market

Market Economy (cont.)Market Economy (cont.)

►““Invisible Hand”Invisible Hand” This is the unseen force that Smith said This is the unseen force that Smith said

would direct the economywould direct the economy Relies on 3 ConditionsRelies on 3 Conditions

►Competition- Many buyers and sellers Competition- Many buyers and sellers competingcompeting

►Capitalism- Ownership of capital by producing Capitalism- Ownership of capital by producing firmsfirms

►Free Enterprise- Freedom to buy/sell what one Free Enterprise- Freedom to buy/sell what one wisheswishes

Market Economy (cont.)Market Economy (cont.)►Profit MotiveProfit Motive

Producers have an incentive to produce what Producers have an incentive to produce what consumers want because to do so will make consumers want because to do so will make them moneythem money

► Incentives Incentives Influence choices made within an economyInfluence choices made within an economy EX- Low prices encourage people to buy moreEX- Low prices encourage people to buy more

►Private PropertyPrivate Property Property and capital that belongs to a personProperty and capital that belongs to a person

Market Economy (cont.)Market Economy (cont.)►Traditional SocietyTraditional Society

The basic economic decisions that are made The basic economic decisions that are made according to long-established patterns of according to long-established patterns of behavior that are unlikely to changebehavior that are unlikely to change

►Keynesian TheoryKeynesian Theory Advocates an aggressive governmental fiscal Advocates an aggressive governmental fiscal

policypolicy Fiscal PolicyFiscal Policy

►Govt’s strategy for using changes in public spendingGovt’s strategy for using changes in public spending

Deficit SpendingDeficit Spending►Practice of govts spending more than they have in Practice of govts spending more than they have in

revenuerevenue

Command EconomyCommand Economy

►Can also be called CommunismCan also be called Communism►CommunismCommunism

Society in which everyone does their best Society in which everyone does their best to contribute to the common goodto contribute to the common good

This is socialism at its ideal stageThis is socialism at its ideal stage SocialismSocialism

►Gov’t controls all capital and owns all propertyGov’t controls all capital and owns all property

Command Economy (cont.)Command Economy (cont.)

►Karl Marx’s Karl Marx’s Communist ManifestoCommunist Manifesto Attacked capitalism as an unjust system Attacked capitalism as an unjust system

that privileged the rich and exploited the that privileged the rich and exploited the poor working classpoor working class

Foundation for the Socialist/Communist Foundation for the Socialist/Communist SystemSystem

Believed that profit motive and incentive Believed that profit motive and incentive were unnecessary because people would were unnecessary because people would produce just as much through cooperationproduce just as much through cooperation

Economies of the WorldEconomies of the World

►Mixed EconomyMixed Economy USA (Gov’t runs some areas)USA (Gov’t runs some areas)

►Command EconomyCommand Economy CubaCuba

►Market EconomyMarket Economy England (USA is still considered in this)England (USA is still considered in this)

►CIA World Fact BookCIA World Fact Book