ECONOMICS

ECONOMICS Economics - The social science that deals with the production, distribution, and consumption of goods and services. Resources – Things needed to make or obtain goods and services.

ECONOMICS Goods and Services - These are things people want. Goods - are physical things you can see and touch. - Food - Clothing - Cars - Houses

ECONOMICS Goods and Services Services – are things people do for others. - doctors - teachers - engineers - mechanics - lawyers

ECONOMICS Goods and Services Marketplace – A name for whenever people buy, sell, or trade goods and services. - Limited resources create a Scarcity, or not enough goods and services. - People will always want more of something they can’t get.

ECONOMICS Production Produced – Every good or service must be made. This is why they call it production. - You can put all of the types of resources that need to be produced into four categories: - Land, Labor, Capital, & Entrepreneurship.

ECONOMICS Production Land – (Natural Resources) things found in nature that are used in the production of goods. - minerals - water - plants - soil - animals - timber - oil

ECONOMICS Production Labor – The physical and mental work of people do to make goods or provide services. - All goods and services involve some human labor. Automated factories needs workers to design, build, and operate the machinery.

ECONOMICS Production Capital – Money, buildings, machinery, and tools used to make goods and services. - Machines - Tools - Railroads - Trucks - Planes

ECONOMICS Production Entrepreneurship – The skills to manage a business and the willingness to take risks in starting a business. Land, Labor, and Capital are all combined and organized. - Sometimes is the owner of the business and invests money to make a profit. - Sometimes hires a manager to help run the business.

ECONOMICS Production - Resources for production are available in different amounts in different parts of the world. - The United States, Europe, and other developed countries have a great amount of capital and entrepreneurship. - Developing countries often have large, poorly educated populations that provide inexpensive labor.

ECONOMICS Supply and Demand Economy – How nations, businesses, and individuals make and buy things. It is also how they save and spend money. Economists – People who study the economy.

ECONOMICS Supply and Demand - All wants and needs cannot be satisfied for everybody, all the time. Society must make choices by asking: - What should be produced? - How should it be produced? - Who gets what is produced?

ECONOMICS Supply and Demand Opportunity Cost – The opportunity you give up to other things when you make a choice. Example: You want to buy either an iPod or a book. You decide to buy the iPod. The opportunity cost is the book you could have bought.

ECONOMICS Supply and Demand Scarcity – People have unlimited wants but there are limited resources. Otherwise people will want more of what they can’t get. - There are not enough goods and services available to meet everyone’s needs at the same time.

ECONOMICS Supply and Demand Consumers – People who buy goods and services to satisfy their needs and wants. - Typically when businesspeople and economists talk about consumers they are talking about people as individuals or households purchasing goods and/or services.

ECONOMICS Supply and Demand Demand – How much of a good or service people are willing and able to buy at a particular price. Demand Curve – Line on a graph that shows the quantity of something consumers would be willing to buy at different prices.

Supply and Demand (Graph) ECONOMICS Supply and Demand (Graph) Supply Demand Price of an iPod Supply of an iPod

ECONOMICS Supply and Demand Supply – Goods or services that are available. Supply Curve – Line on a graph that shows the quantity of something that a producer is willing and able to sell at different prices.

Supply and Demand (Graph) ECONOMICS Supply and Demand (Graph) Supply Demand Price of an iPod Supply of an iPod

ECONOMICS Supply and Demand Market-Clearing Price – The price where consumers’ demand and producer’s supply are about the same.

Market-Clearing Price ECONOMICS Supply and Demand (Graph) Supply Demand Price of an iPod Market-Clearing Price Supply of an iPod

ECONOMICS Supply and Demand - If supply increases, but demand stays the same, the price will fall. - If supply decreases, but demand stays the same, the price will rise. - If demand increases, but supply stays the same, the price will rise. - If demand decreases, but supply stays the same, the price will fall.

Price – The amount you pay for a good or service. ECONOMICS Supply and Demand Price – The amount you pay for a good or service. - Price is determined by supply and demand. - The best price is where the demand curve crosses the supply curve.

ECONOMICS Supply and Demand Other things that affect Supply & Demand: - The amount of money we can spend. - Changes in people’s taste, preferences, and attitudes. - What we expect in the future. - The prices of goods and services. - The cost of production.

ECONOMICS Competition Free Market Economy – Property, resources, and the control of business belong to the individual owners. The United States is a free market economy. - People are free to take the risk of their businesses succeeding or failing.

ECONOMICS Competition Compete – In Economics, going against another business or businesses to get consumers to purchase their product. - In the real world, competition is imperfect. There are many factors that can affect prices.

Discounted – Giving a lower price for buying a larger amount. ECONOMICS Competition Discounted – Giving a lower price for buying a larger amount. Incentive – Encouragement for business to do something to keep prices low. - Most of the time, competition keeps prices low. Sometimes though, it causes a disadvantage.

ECONOMICS The World Market Interdependence – Nations depend on other nations for many goods and services. Imports – Goods brought into the United States from other countries. Exports – Goods sold to other countries from the United States.

International Trade – The buying and selling of goods among nations. ECONOMICS The World Market International Trade – The buying and selling of goods among nations. Absolute Advantage – One country does better than another country because of: A. Locations B. Climate C. Natural Resources

ECONOMICS The World Market Example: Columbia’s soil and climate give it an absolute advantage over the U.S. for growing coffee beans.

ECONOMICS The World Market Comparative Advantage – What a country does better than other things the country can do. Example: Columbia is more efficient at growing coffee beans than growing wheat.

ECONOMICS The World Market - Nations export items in which they have an absolute or a comparative advantage. - Trade is determined by: A. Geographical Location B. Politics C. Natural Resources

Regulate – Making rules and watching over to protect the consumers. ECONOMICS The Role of Government - Even though the United States is a free market system, the government still regulates markets by controlling the overall economy, making sure products are safe, and collecting taxes. Regulate – Making rules and watching over to protect the consumers.

ECONOMICS The Role of Government Public Sector – Part of the marketplace where the government makes or purchases goods and services for the people. Private Sector – Business and their customers trade privately-owned goods and services.

Public Works – Making highways, bridges, and government buildings. ECONOMICS The Role of Government Public Works – Making highways, bridges, and government buildings. - The state and local government pay for schools, poor families to help pay for living expenses and food, and prisons.

Trade-offs – Losing one item and in return gaining another item. ECONOMICS Consumers’ Choices Trade-offs – Losing one item and in return gaining another item. - Consumers look at price, purpose, quality, brand name, and appearance when thinking about buying a certain product.

Wholesale – When producers sell to businesses. ECONOMICS Producers’ Choices Wholesale – When producers sell to businesses. Retail – When businesses sell to consumers. - Producers look at demand, competition, resources, production, and distribution when considering what goods and services to offer.

ECONOMICS Producers’ Choices Profit – Money left over when the cost of resources is subtracted from the money made selling the business’s product. - This is why businesses want to keep the opportunity cost low.

Other kinds of Economies ECONOMICS Other kinds of Economies Command Economy – The government controls the prices, production, and labor. - Some countries who have this type of economy: - Cuba - North Korea

Other kinds of Economies ECONOMICS Other kinds of Economies Mixed Economy – The government has more control over production than in a market economy. However, private ownership and entrepreneurship still exist. - Some countries who have this type of economy: - Norway, Sweden, & Canada