Louisiana’s Economy Chapter 3

Basic Economic Concepts Wants – things that people would like to have to make their lives more comfortable. Needs - Food, clothing, and shelter Goods – physical item such as food, clothing, cars, and houses. Services – activities people do for a fee (car repairs, house painting, etc.)

Basic Economic Concepts  A consumer is a person who satisfies a want or a need by buying a good or service  A producer is a person or business who uses resources to make goods or provide services

 A natural resource is a gift of nature, part of the natural environment such as water, trees, or minerals.  Human Resources are the people who produce the goods and provide the services.  Capital resources are the money and property – factories, tools, bridges, machines, etc. used to produce goods and services. Basic Economic Concepts

 Capital resources are limited and are often said to be scarce. Scarcity means that people need and want more than the available resources can provide.

Bellringer  1. Scarcity means ___________  A. people need and want more than is available  B. is the quantity of a good or service  C. the amount left after costs are subtracted from the price  D. Activities people do for a fee  2. _____________ is an example of a natural resource  A. Money  B. Machines  C. People  D. Water

 Supply and Demand Supply and Demand

Costs and Benefits: If you are given $50 to spend at the mall. You really want the new Madden game. You also really want a whole new outfit for the school dance on Friday. If you choose the outfit, then you wont be able to get the Madden game. The Madden game is your opportunity cost, the value of your second choice in a decision-making situation. Basic Economic Concepts

Supply and Demand: - Supply – is the quantity of a good or service offered for sale - Demand - is the quantity of a good or service consumers are willing and able to buy. - Profit – the amount left after costs are subtracted from the price Basic Economic Concepts

Exit Ticket Decide which of the following would be the opportunity benefit and opportunity cost in the following situation: After high school, John has to decide if he wants to begin working right away or if he wants to go to college. If John starts working right away, he will earn a paycheck faster. If he goes to college, it means he will be in school for another 4 years, but has the opportunity to make double what he would without the additional education. John decides to go to college because the long term benefits outweigh the benefit of a faster paycheck.

Bellringer 1. Thomas wants to take his girlfriend to dinner and movie but he only has $25. He decides to skip dinner and just go to the movie. The movie is ___________. A. The opportunity cost B. The tradeoff C. The opportunity benefit 2. If the demand for a product increase and the supply decrease, what will happen to the products price?  A. It will decrease  B. It will increase  C. It will increase and then decrease

Economic Question Basic Economic Concepts

Product or Service Development As a team, come up with either a good or service. Make sure to use the four economic questions in your planning. One person from you group will need to present your good or service to the class and answer all four economic questions.

 There are 3 types of economies.  1. Traditional economy  2. Command economy  3. Market economy Basic Economic Concepts

Bellringer  What are the four basic economic questions:  1.  2.  3.  4.

Traditional Economy In a traditional economy, customs, habits, and beliefs determine how the four basic economic questions are answered. Countries that use this type of economic system are often rural and farm-based. Basic Economic Concepts

Command Economy In a command economy, the government controls the economy and answers the four basic economic questions. Command economies are often seen in communist countries. Basic Economic Concepts

Market Economy In a market economy, individuals answer the four basic economic questions based on supply and demand. This economy is also known as free enterprise and is based on private ownership and freedom of individuals to make economic choices. Basic Economic Concepts

Bellringer 1. Which of the following is a renewable resource? a. Oil b. Gas c. Salt d. Pulpwood 2. Which of the following is a biological resource? a. Lignite b. Rice c. Wildlife d. Oil

Pop Quiz 1. Which of the following is a renewable resource? a. Oil b. Pulpwood c. Salt d. Natural gas 2. Which of the following is a biological resource? a. Lignite b. Wildlife c. Oil d. Sulphur

3. John wants to buy a new phone. He also wants to have money for car. John decides to wait on the phone to continue saving for the car. The phone is the ___________. A. The opportunity cost B. The tradeoff C. The opportunity benefit D. Supply 4. If the demand for a product increase and the supply decrease, what will happen to the products price? a) It will decrease b) It will increase c) It will increase and then decrease d) It depends on the market Pop Quiz

5. Which of the following is not an example of capital resources? a) Airports b) Trains c) Oil refineries d) Stores 6. The early European settlers were part of which type of economy? a) Command b) Free Enterprise c) Market d) Traditional Pop Quiz

7. When people’s wants and needs are higher than available resources. a) Supply b) Scarcity c) Demand d) Cost 8. Which of the following is not a Natural Resource? a) Forest b) Humans c) Oil d) Berries Pop Quiz

 An economic system uses human, natural, and capital resources to produce goods and to provide services. Louisiana’s economy produces a wide variety of goods and services. Goods and Services

Private Goods and Services Goods and services produced in a market economy. Private goods and services have clear owners and are not available to everyone. The benefits of private goods and services are limited to the owners. For example, if you buy and eat a hamburger, no one else is eating your hamburger.

Public Goods and Services Some goods and services are provided by the government because they are unlikely to be provided by private businesses. They are usually available to everyone. Public goods and services meet the needs and wants of society instead of individuals. For example, public education, police protection, public libraries and highways are all public services. Goods and Services

Louisiana in the U.S. and Global Economics  The first economic systems were simple barter economies involving basic items.  Today’s economic systems are interdependent. Producers and consumers rely on each other and on other economies to succeed.

 Advances in communication and transportation have resulted in worldwide trade.  As a result, the United States has developed new trade policies and agreements as part of the global economy.  The North American Free Trade Agreement (NAFTA) removed trade restrictions between the United States, Canada, and Mexico. Louisiana in the U.S. and Global Economics

 As a result of the NAFTA, some U.S. companies moved to Mexico because the cost of labor is cheaper there.  Fruit of the Loom closed several Louisiana factories employing thousands of workers. The economic impact was felt throughout the affected communities.  Tariffs are taxes on imported goods. Its purpose is to protect U.S. producers from the competition of cheap imported goods. Louisiana in the U.S. and Global Economics

Measuring the Economy  Economist gather information using economic indicators, to measure the economy to determine its success.  The amount of goods and services produced in the United States is measured by the gross domestic product, This is the total market value of all goods and services produced in the United States in a certain time period.  Prices are measured by the consumer price index, a monthly price survey for a list of goods and services. Its checks for increases or decreases.

 A steady increase in the consumer price index shows inflation, which means the buyer get less for his or her money because prices have increased.  If a person’s income does not increase with inflation they will not be able to buy as much.  Unemployment rates are another important indicator about the U.S. economy. The unemployment rate reports the percentage of people who are out of work and are looking for jobs.  If unemployment rates are low, the demand for workers is higher and producers have to pay more for this human resource. Measuring the Economy