Being an Economically Smart Citizen Unit 6, Day 3

Opener: 9/18/17 market economy - Most economic decisions are not made by the government, but by individuals looking out for their own and their families’ self-interests. Cost-benefit analysis -an economic model used to compare marginal costs and marginal benefits of a decision. Capitalism - a system in which citizens own most of the means of production. free enterprise – businesses compete for profit with a minimum of government interference. Incentives - rewards offered to try to persuade people to take certain economic actions.

Understanding Your Role in the Economy The United States has a market economy. Most economic decisions are not made by the government, but by individuals looking out for their own and their families’ self-interests.

Cost-Benefit Analysis Cost-benefit analysis is an economic model used to compare marginal costs and marginal benefits of a decision. You should choose an action when the benefits are greater than the costs. If costs outweigh benefits, you should reject the option.

Understanding Your Role in the Economy A market economy is participatory. The choices you make as a consumer affect the products that businesses make and the prices they receive for their products. Likewise, the products offered and their prices affect the choices you make.

Understanding Your Role in the Economy A market economy is based on capitalism, a system in which citizens own most of the means of production. It is also based on free enterprise– businesses compete for profit with a minimum of government interference.

Understanding Your Role in the Economy Keeping informed means reading news stories, listening to news reports, and gathering information about economic activities of businesses and government.

Understanding Your Role in the Economy Incentives are rewards offered to try to persuade people to take certain economic actions. Price is one incentive. Others are bonuses for salespeople and low credit rates for consumers. Knowing how incentives work will help you make wise choices.

Understanding Your Role in the Economy One role of government in the economy is to help maintain competitive markets. Another role is to provide services, such as education and national defense, that the private sector does not provide.

Understanding Your Role in the Economy Competition forces businesses to use society’s resources efficiently to produce goods and services people prefer and to produce quality products at low costs. Low production costs keep prices low for consumers.

Understanding Your Role in the Economy Government can use incentives to encourage people and businesses to take certain actions. For example, offering scholarships encourages more people to get higher education. Government can also discourage certain actions. For example, tax laws can punish companies that cause pollution.

Making Wise Choices Rational choice is choosing the alternative that has the greatest value from among comparable-quality products. You make a rational choice when you buy the goods and services that you believe will best satisfy your wants for the lowest possible cost.

Making Wise Choices Wise consumers will not all make the same choices. A rational choice is one that generates the greatest perceived value for any given expenditure. Wise decision making by individuals also benefits society by making the best use of scarce resources. Being fully informed is the best way to make the best economic as well as political decisions.

Economic Resources Unit 6, Day 4

Producing Goods and Services Economic output includes goods, or tangible products, and services–work performed for someone else. Four factors of production are needed to produce goods and services: natural resources, labor, capital, and entrepreneurs.

Producing Goods and Services Natural resources are all the gifts of nature that make production possible, such as land, rain, forests, and minerals.

Producing Goods and Services (cont.) Labor is the nation’s workforce or human resources. It includes the physical and mental talents of the people who help produce goods and services. Factors such as population growth, education, and war affect the quantity and quality of labor.

Producing Goods and Services (cont.) Capital, or capital goods, includes the tools, machinery, and buildings used to make other products. Capital goods are unique because they are themselves produced. Consumer goods satisfy wants directly; capital goods do so indirectly by aiding production of consumer goods.

Producing Goods and Services (cont.) Entrepreneurs are individuals who start new businesses, introduce new products, and improve management techniques. They are innovative and willing to take risks. They drive the economy because they use factors of production to produce new products.

Gross Domestic Product Gross Domestic Product (GDP) is a measure of the size of the economy. It is the total value, in dollars, of all final goods and services produced in the country during a single year. Final goods are goods sold to their users.

Gross Domestic Product (cont.) GDP does not count intermediate goods, which are components of final goods. It also does not count the sale of used goods, which do not represent new production. GDP is expressed in terms of money. This enables us to compare the relative worth of goods and services, which is more meaningful than simply numbers of products.

Gross Domestic Product (cont.) To compute GDP, identify all goods and services produced and their average prices. Multiply the number produced of each item by its average price. Then add up everything.

Gross Domestic Product (cont.) If the new GDP is higher than the previous one, then the economy is expanding. If it is lower, the economy is declining. Economists study GDP figures regularly to analyze business cycle patterns.

Gross Domestic Product (cont.) Standard of living is the quality of life based on the possession of necessities and luxuries that make life easier. When GDP grows faster than the population, there are more goods and services, on average, for us to enjoy. GDP does not measure society’s overall well-being. Other things–such as a reduction in crime and drug abuse and greater equality of opportunity–can make a country better off without raising GDP.

Opener 9/19/17 Natural resources - all the gifts of nature that make production possible, such as land, rain, forests, and minerals. Labor -the nation’s workforce or human resources. It includes the physical and mental talents of the people who help produce goods and services Capital, or capital goods - includes the tools, machinery, and buildings used to make other products. Entrepreneurs - individuals who start new businesses, introduce new products, and improve management techniques. Gross Domestic Product (GDP) - a measure of the size of the economy.

“Entrepreneurship ” Read the article titled “Entrepreneurship.” Answer the following Questions after reading the article and site the article in your answer. 1.How do entrepreneurs ideas benefit themselves as well as society? 2. Name 2 products and the person behind them that helped change society?