1. Economics The Basics

2. The Four Factors of Production  Factors of Production: resources necessary to produce goods and services Natural Resources – all “gifts of nature” that make production possible fertile fields, abundant rainfall, forests, mineral deposits Labor – human resources; both mental and physical efforts people contribute to the production of goods Capital – tools, machinery, and buildings used to make other products are also a result of production Capital Goods - satisfy goods indirectly by aiding production of consumer goods  - bulldozers, hammers Consumer Goods - satisfy wants directly  - clothing, food, bikes Entrepreneur - individuals that start new businesses, introduce new products, and improve management techniques

3. The VERY Basics  Needs: things that are required for survival Ex. Food, water, clothing, shelter  Wants: things that we would like to have Ex. Entertainment, vacations, and other items that make life more comfortable and enjoyable  Goods: tangible products that we use to satisfy our wants and needs Ex. Books, cars, video games  Services: work that is performed for someone else Ex. Haircuts, oil change

4. We Can’t Always Get What We Want…  Scarcity: when we don’t have enough productive resources to produce all of the things that we would like to have Productive resources can be things such as natural resources, time, but especially MONEY!!! Results in consumers having to make alternative choices  1. Trade-Off: alternative you face if you decide to do one thing rather than another Ex. If you come to tutoring, you have less time for an afternoon nap, but will do better on tests  2. Opportunity Cost: the cost (what you give up) of the next best use of your time or money when you choose to do one thing rather than another Ex. If you get an after school job, you won’t be able to join the basketball team and possible get a scholarship

5. Types of Costs  Fixed Costs: costs that are the same no matter how many units of a good are produced Ex. Mortgage and rent payments are the same every month  Variable Costs: expenses that change with the number of products produced Ex. Wages, raw materials, utilities change depending on what is used  Marginal Costs: the extra cost of producing one additional unit of output Ex. If its costs $1500 to produce 30 bike helmets and $1550 to produce 31 bike helmets, the change in cost is $50 and the change in the number of units is 1, so the marginal cost is $50.

6. Increasing Productivity  Productivity- the degree to which resources are being used efficiently to produce goods and services  Technology- the processes or methods used to make goods and services

7. Increasing Productivity Continued  Assembly Line  Division of Labor: breaking down a job into small tasks performed by different workers  Specialization  People, businesses, or countries concentrate on goods or services that they can produce better than anyone else  Comparative Advantage

8. Labor Unions  Labor Unions - workers who band together to have a better chance to obtain higher pay and better working conditions - 2 Types  Craft of trade unions - workers who perform the same skills  Industrial Union - brings together different types of workers who all belong to the same industry  Ex. United Auto Workers

9. Labor Unions Continued  Organization Local Level - members in a factory, company, or geographic area - negotiates contracts and monitors the terms of contract National Level - craft or industrial unions that represent unions nationwide - send organizers to help employees campaign to set up new unions, to help negotiate new contracts, etc. Federation Level AFL-CLO

10. Labor Unions Continued  Arrangements closed shop- employees must be members of union to be hired  -illegal since the passing of Taft-Hartly Act in 1947 union shop- companies may hire nonunion people, but those workers must join the union once they begin working modified union shop- workers do not have to join the union but they can choose to do so

11. Labor Unions Continued  Negotiations and Conflict collective bargaining- officials from the union and from the company meet to discuss the term of the workers new contract mediation- bringing in a 3rd party who tries to help both sides reach an agreement by meeting with each side and reaching a compromise arbitration- 3rd party listens to both sides and decides how to settle the situation  decision is final strike- all workers in a union refuse to go to work lockout- company blocks workers from entering the building until they agree to accept its contract terms

12. Types of World Economies  Command Economy- an economic system in which the major economic decisions are made by the central government  Communism/ China/ Cuba  socialism- belief that the means of production should be owned and controlled by society, either directly or through the government  Market Economy - system in which individuals own the factors of production and make economic decisions through free interaction (Capitalism)  U.S. economy  Mixed Economy- economic system combining characteristics of more than one type of economy  Product Market- a market where producers offer goods and services for sale  Traditional Economy- an economic system in which the decisions of what, how, and for whom o produce are based on custom or habit

13. The 3 Types of Businesses  Sole Proprietorships- businesses owned and operated by a single person  + Advantages + full pride in owning businesses receives all profits flexibility in decision-making  - Disadvantages - unlimited liability owner is financially responsible for any and all problems related to the business difficult to raise $ needed to run a business or enable it to grow attracting qualified employees

14. The 3 Types of Businesses Cont’d  Partnerships- business owned by two or more people  articles of partnership- legal document identifying how much $ each individual will contribute and what role each will play, as well as how profits will be split + Advantages + able to raise more $ many talents brought in -Disadvantages- unlimited liability

15. The 3 Types of Businesses Continued  Corporation- businesses recognized by law that has many of the rights and responsibilities of an individual  must obtain a charter, getting government approval to organize  stockholders elect a board of directors to act on their behalf  + Advantages + easy to raise $ can easily expand and grow Board of Directors can hire professional mangers to run the business ownership can be transferred easily limited liability the corporation, not the owners are responsible for its debts  -Disadvantages- expensive and complex to set up owners have little to say in management increased government regulation double taxation  Company’s profits taxed, and then stockholder’s profits taxed