ECONOMICS UNIT 3

Economics The Social Science dealing with making choices about using resources and spending money Economy- country’s basic way of producing and trading goods. Producers- those who make and sell goods and or services Consumers- those who buy goods and or services

Needs vs Wants Needs – essential for living Wants- luxury

LAW OF SCARCITY All things are limited. In order to get something you must always give up something else.

Economic Choices (producers) A) What should be produced? B)For whom should we produce? C)How should we produce the item? D)What is the cost?

Factors of Production Land- Includes natural resources Labor- human effort Capital – money, equipment, machines and buildings to turn raw material into a finished product. Management- person who organizes the business

Three types of Economies Traditional – Decisions made based on past accepted customs (norms) – People are self sustaining – Middle Ages

Types of Economies Continued Market Specialization led to trade – People make decisions – Money took the place of bartering – USA Adam Smith ( )- considered the father of modern economics. – –

Types of Economies Continued Command – Decisions made by ruler – Associated today with Dictatorships

Law of Supply and Demand As prices go UP, producers produce more and consumers demand less. As prices go DOWN, producers produce less and consumers demand more. Equilibrium Point (Price)- Place where the supply and demand curve meet.

Key Economic Terms Price- Supply- Demand Interest- (both good and bad) Credit- Opportunity Cost- Shortage- Surplus- Incentives Single Proprietorship- Partnership- Corporation ***Market Economy is also known as- (3 other terms)