ECONOMICS

What is economics? –T–The study of how we manage our resources in the production and distribution of goods and services What is an economy? –T–The way a region uses its resources to provide goods and services to satisfy people’s wants and needs

Economic Systems System for producing, distributing, & consuming goods & services All countries ask: –W–What will be produced? –H–How will it be produced? –F–For whom will it be produced?

Barter: –P–People trade a good for a good –E–Example: Farmer A grows corn, and Farmer B has a diary farm. Farmer A trades some corn to Farmer B for some milk.

Traditional System: –s–social roles & culture determine how goods are made, sold, and bought –B–Based on customs that have been handed down for generations –C–Children will often be doing the same jobs as their parents –V–Very few still around

Command System: –g–government answers the 3 questions –C–Communism, socialism –N–No incentives for workers; equal pay –P–Production is low and quality of products is poor

Market System: -- based on individual choices & voluntary trade –B–Businesses all owned by the people –R–Role of government is very limited –P–People determine what will & will not be produced by buying or not buying products

Mixed System: –h–has features of traditional, command, and market systems –U–Uses the best part of every system

Economic Terms… Exports: –g–goods we sell to other countries (corn) Imports: –g–goods we buy from other countries (oil) Balance of trade: –D–Difference in value between exports & imports –W–Why is it important? Exporting (selling) more goods than importing (buying) means you make a profit, which is good

Trade barrier: –l–laws that governments use to limit trade between countries –M–Most common are tariffs and embargoes Tariff: –t–taxes or fees on imports Embargo: –g–government restrictions on imports or exports

Currency: –a–anything accepted as a medium of exchange (money) Currency exchange: –t–the rate at which one currency can be converted into another currency –E–Example: 1 US Dollar =.72 Euros

Economic Patterns of Nations Developing Nations: countries with few industries; very little technology; poor –M–Most people are subsistence farmers, raising enough food only to feed their families –F–Face many challenges: hunger & starvation, disease, unsafe water, poor education & medical services, unstable governments, war –E–Examples: most nations of Africa, Asia, and Latin America

Developed Nations: countries that have many industries and are technologically advanced –C–Commercial farms: owned by companies; use modern technology –A–About ¼ of world’s pop. live in developed nations –E–Examples: U.S., Britain, Canada, Australia

Factors of Production The elements needed for production of goods and services What are they? –H–Human capital (people to work, their knowledge & skills) –C–Capital goods (money, machines, factories, equipment) –N–Natural resources (raw materials) –E–Entrepreneurs (people who start the businesses)

Economics Personal Money Management

Economics What is a good? –S–Something that is made to be bought –E–Examples: cars, clothes, food What is a service? –S–Something someone is paid to do for someone else –E–Examples: cutting hair, mowing grass, driving a bus

What is a consumer? –S–Someone who buys a good or service What is a producer? –S–Someone who makes a good or performs a service What is distribution? –T–The process of moving products to their market

What is competition? –Rivalry between businesses to sell the most and make the biggest profit What is scarcity? –Lack of a particular resource (oil) What is abundance? –having more than enough of a particular resource (wheat)

Economics What is the law of supply & demand? –S–States that the price of a good rises or falls depending on how many people want it (demand) and on how much of the good is available (supply) –I–If demand is high (a lot of people want it), prices will be high because people will pay it –I–If demand is low, prices will be lower and more of the product will be available

What is an entrepreneur? –S–Someone who brings together resources to produce goods and services –E–Example: someone who starts their own business What is profit? –M–Money that is left over after costs of producing a product are paid

What is income? –M–Money a person receives in exchange for work or from the use of property What is spending? –U–Using money to buy goods and services What is saving? –P–Putting money aside for later use –W–Where? Piggy banks, banks, jars, under the mattress, etc.

What is investing? –U–Using money to earn money –E–Examples: stock market, property, etc. What is interest? –M–Money paid to a lender in exchange for borrowing money What is credit? –B–Borrowing money to buy something now and paying for it at a later date –E–Examples: cars, houses, large purchases, etc.

What is a budget? –P–Planning out how much money is to be spent, saved, and invested What is inflation? –A–A continual rise in the price of goods over a long period of time