Presentation on theme: "Principles of Economics"— Presentation transcript:
1 Principles of Economics Unit 1 - Understanding the Role of Economics in the Global Economy
2 Objectives & Competencies Explain the three basic economic questions answered by any economy (035)Identify characteristics of free enterprise (aka Market Economy) (039)Explain supply, law of Supply, demand, Law of Demand, and economic equilibrium (040)
3 Agenda DECA Updates Bell Ringer Question How do economic decisions and policies affect your daily life?Direct Instruction – Types of Economies, Supply vs. DemandActivity – M&Ms (Yum! )Review – Multiple Choice QuestionsClosure – TNT, Test in 2-3 classes
4 What is an Economy?How do economic decisions and policies affect your daily life? An economy is a nation’s method for making economic choices that involve how it will use its resources to produce and distribute goods and services to meet the needs of its production. Scarcity of economic resources forces every country to develop an economic system that determines how resources will be used. Each economic system has its advantages and disadvantages.
5 What Is an Economy? What Creates an Economy? Economists use the term factors of production when they talk about economic resources.factors of productionResources that are comprised of land, labor, capital, and entrepreneurship.resourcesAll the things used in producing goods and services; a source of aid or support that may be drawn upon when needed.
6 What Is an Economy? Economy What Creates an Economy? Manufacturing BuyingEconomySellingTransportingeconomyThe organized way a nation provides for the needs and wants of its population.Investing
7 What Is an Economy? What Creates an Economy? Land Labor Capital EntrepreneurshipProvides raw materialsFull- and part-time workers, managers, and professional peopleMoney, buildings, infrastructureOrganizing factors of production to create goods and servicesinfrastructureThe physical development of a country,such as roads, ports, and utilities.entrepreneurshipThe skills of people who are willing to invest their time and money to run a business; the process of starting and operating your own business.
8 3 Basic Economic Questions What should be produced?How should it be produced?Who should share in what is produced?Deciding to use a resource for one purpose means giving up the opportunity to use it for something else.This is called opportunity cost.The methods and labor used as well as the quality of items produced are important factors.In most societies, people can have as many goods and services as they can afford to buy.
9 The Three Economic Questions What Is an Economy?Types of Economic SystemsThe Three Economic Questions
10 The Three Economic Questions What Is an Economy?Types of Economic SystemsThe Three Economic Questions
11 Different Types of Economies Different economic systems answer the three basic economic questions in different ways.Economic systemsthe methods societies use to distribute resources
12 What Is an Economy? Types of Economic Systems Traditional Economy Market EconomyCommand EconomyMixed Economytraditional economyAn economic system in which habits, traditions, and rituals answer the basic questions of what, how, and for whom.market economyAn economic system in which there is no government involvement in economic decisions.command economyA system in which a country’s government makes all economic decisions regardingwhat, how, and for whom.
13 Market EconomiesA market economy can also be called a private enterprise system, the free enterprise system, or capitalism.market economyan economic system in which economic decisions are made in the marketplace
14 Characteristics of a Market Economy Market EconomiesCharacteristics of a Market EconomyResources are privately ownedCitizens can own their own homes, land, and businessesBusiness owners decide how their businesses will be runBusiness owners decide what to produce and sellBusiness owners decide what to chargeGovernment works to promote free trade and prevent unfair trade practicesConsumers choose their occupations and where to liveThere is an uneven distribution of income
15 Market EconomiesThe higher the price for goods or services, the less consumers will buy.The lower the price, the more consumers will buy.pricethe amount of money given or asked for when goods and services are bought or sold
16 Market EconomiesThere is a relationship between price, supply, and demand.supplythe amount of goods and services that producers will provide at various pricesdemandthe amount or quantity of goods and services that consumers are willing to buy at various prices
17 Market EconomiesSupply and demand interact with each other to form the equilibrium price.equilibrium pricethe point at which the quantity demanded and the quantity supplied meet
21 Market EconomiesCompetition among similar businesses is one of the basic characteristics of a free enterprise system.Profit motive is the desire to make a profit.
22 Command EconomiesIn a command economy, the government owns and controls all the resources and businesses.command economyan economic system in which a central authority makes the key economic decisions
23 Characteristics of a Command Economy Command EconomiesCharacteristics of a Command EconomyThe government dictates what will be produced, how it will be produced, and who will get the goodsThere is little choice of what to buyGoods are not considered necessitiesPrices are controlled by the stateThere is no competition and little incentive to produce a better productHighly skilled workers may earn the same as low-skilled workers
24 Command EconomiesA moderate command economy is also known as socialism.In a moderate command economy, there is some form of private enterprise, but the state owns major resources.
25 Mixed EconomiesMost nations have a mixed economy, which combines elements of capitalism and socialism.mixed economyan economy that contains both private and public enterprises.
26 How does a market system decide what will be produced? A market system decides what is to be produced through supply and demand in the marketplace.
27 In a market system, what determines how many goods and services an individual can buy? It is through one’s income—mostly generated by working.
28 Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true?More technology is used in the country with fewer workers, increasing worker productivity.
30 1. How many basic economic questions are there? twothreeWhat should be produced? How should it be produced? Who should share in what is produced?
31 2. In a market economy, economic decisions are primarily made: by the governmentin the marketplaceA market economy can also be called a private enterprise system, the free enterprise system, or capitalism.
32 3. In a market economy, citizens are responsible for: being informedmaking careful decisionsall of the aboveIn a market economy, citizens can own their own homes, land, and businesses.
33 4. The amount or quantity of goods and services that consumers are willing to buy at various prices is:supplydemandequilibriumcapacityThe higher the price, the less consumers will buy
34 5. The contest between businesses to attract customers is: profitcompetitionProfit is the reward for taking a risk and starting a business.
35 6. Most nations have a: market economy command economy mixed economy In a mixed economy, the market makes more decisions regarding the allocation of resources than the government.
36 Closure – Today We Learned How does a market system decide what will be produced?A market system decides what is to be produced through supply and demand in the marketplace.In a market system, what determines how many goods and services an individual can buy?It is through one’s income—mostly generated by working.Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true?More technology is used in the country with fewer workers, increasing worker productivity.
37 Closure – Next Time Economic Activity Indicators The Business Cycle Alphabet Soup!GDP, GNP, CPI, etcThe Business CycleLooking AheadTest after next lesson – 2 blocks outWe will review for the testYou will have a study guide