1. What is Economics?
There are many definitions for the term Economics. Let us examine one:
__________is the study of how people use scarce resources in an economy to meet their unlimited demands.
Economics is primarily concerned with the __________

2. Macro – Big Picture
Micro – Individual people or businesses

3. Economics:
_______________the branch of economics that studies decision making for the economy as a whole, rather than individual parts.
Macroeconomic decision making considers “__________” policies.
National income and savings, gross domestic product, gross national product, consumer and producer price indexes, consumption, unemployment, foreign trade, inflation, investment and international finance.
Economists seek to understand fluctuations in business cycles and the elements that contribute to long-term economic growth, which are vital to the creation of sound economic policies by governments and businesses.

4. Economics:
_____________is the branch of economics that studies decision making by individuals, families, or businesses.
Supply and demand determine the price of goods and services so microeconomics also studies how prices factor into economic decisions, and how those decisions, in turn, affect prices.

5. REVIEW
The study of the behavior of firms, individual markets, and households is called:
A) normative economics.
B) positive economics.
C) macroeconomics.
D) microeconomics.
The study of the behavior of the overall economy is called:
The study of a trade agreement with China is called:

6. Understanding the Economic Environment
_________a system of managing the productive and employment resources of a country, community, or business.
___________is a condition of increasing production and consumption in the economy.
__________________is a wavelike pattern of economic activity that includes temporary phases from boom to bust.
________________occurs when production is at a high capacity, unemployment is low, retail sales are high, and prices and interest rates are low or falling.
____________ is generally a decline in business “a recurring period of decline in total output, income, employment, trade, usually lasting __________________and marked by widespread contractions in many sectors of the economy.”
___________is a severe downward phase of the economic cycle where unemployment is very high, prices are very low, the level of living decreases sharply, and economic activity virtually ceases. Usually > _________& decrease of at least ___________
____________A situation where someone of working age is not able to get a job but would like to be in full time employment.
Note: if you left workforce & don’t look for work, you are not counted in this rate

7. Phases of the Business (Economic Cycle)
Expansion
(Prosperity)
Recession
(or Depression)
Recovery
Business Production and Retail Sales
Average growth rate expected
in economy
GDP in Economy

8. Unemployment Rate What is the current Unemployment Rate?
Formula: # of people looking for work DIVIDED by (# of people working PLUS # of people looking for work)
Assume that, in the US population, 95 million people worked for pay last week, 5 million people did not work for pay but had been seeking a job & 5 million people did not work for pay and had not been seeking a job for the past several months. The unemployment rate, given these numbers, is:
a. 5% b. 8% c. 10% d. 20% e. 45%

9. Functions of Money: (SUM)

10. Characteristics of Money (PUDDAL)

11. MONEY QUESTIONS
At the grocery store last week, you purchased $93.25 worth of groceries. You paid for the groceries in cash. You gave the cashier four $20 bills, a $10 bill, three $1 bills, and a quarter. What is the primary function of money exhibited here?
2. At the grocery store last week, you had to decide whether to buy the 14.5 oz. can of diced tomatoes for $1.75 or the 28 oz. can of diced tomatoes for $2.55.
What is the primary function of money exhibited here?

12. Economic Indicators
____________: used by economists to estimate the entire money supply within an economy, and by governments to direct policy and control inflation over medium and long-term time periods.
3 types:
______ = cash and checking account deposits
_____ = ____ + savings accounts & money market accounts
_____ = _____+large deposits and other large, long-term deposits.
Since 2006, ______ is no longer tracked by the U.S. central bank.

13. Money Characteristics
Use the following to answer question below
Agricultural products
Savings Accounts
Gold
Currency
Credit Cards
Checking Accounts
Refer to the above list. Which of the choices from below from the list would be considered money in the US economy?
A) 1, 3, 4
B) 2, 5, 6
C) 2, 4, 6
D) Only

14. MONEY QUESTIONS
1. When a consumer wants to compare the price of one product with another, money is being used primarily for which function?
A) store of value.
B) unit of account.
C) checkable deposit.
D) medium of exchange.
2. Which of the following is the most important advantage of the medium of exchange function of money?
A) money transfers purchasing power from the present to the future.
B) money measures the relative worth of products.
C) money reduces the complications of barter.
D) money allows people use credit cards instead of currency

15. Economic Indicators
______________for evaluating the __________ of our economy, the latest business cycles and how consumers are spending and generally faring.
Various economic indicators are released ________________.

16. Understanding Economic Indicators
Tracking these indicators may help understand the direction of the economy:
_________________-- the value of all goods and services produced by workers and capital located in the United States____________________.
GDP = Individual Consumption + Government Expenditures + Individual/Business investments (NOT STOCKS/BONDS)+ US Exports – US Imports. NOTE: This formula EXCLUDES FINANCIAL ASSETS (STOCKS/BONDS) & ALL PAYMENTS FROM GOV TO INDIVIDUALS
Gross domestic product that has been adjusted for inflation is called ____________
_______________– measures the average change over time in the prices paid by consumers for goods and services.
_____________– a steady rise in the general level of prices.
When inflation occurs, the purchasing power of the dollar goes down
____________– A general decline in prices, often caused by a reduction in the supply of money or credit. (______________)

17. Why GDP Matters:
GDP (economic production) has a large impact on nearly everyone within that economy.
When GDP declines for two consecutive quarters or more, by definition the economy is in a “recession”. (lower interest rates, higher unemployment, etc)
Meanwhile, when GDP grows too quickly and fears of inflation arise, the Federal Reserve often attempts to stimulate the economy by raising interest rates.

18. GDP EXAMPLES (state whether it’s Included of Excluded from GDP)
The government’s purchase of a new submarine for the Navy
A barber’s income from cutting hair
The services of a mechanic in fixing the radiator on his own car
Cashing a U.S. government bond

19. Economic Cycle Effects

20. GDP Review
A purely financial transaction will not be counted in GDP. Why?
If Apple builds a new factory in the United States, what part of the GDP formula would this be considered?

21. Supply & Demand
__________ refers to how much (quantity) of a product or service is desired by buyers.
The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship.
__________ represents how much the market can offer.
The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price.
The correlation between price and how much of a good or service is supplied to the market is known as the supply relationship.
_____________is a reflection of supply and demand.

22. Supply & Demand
According to the law of demand, when the price of an item goes up, the quantity ___________.
According to the law of supply, higher prices prompt producers to _________.
Prices on goods and services are determined _______________________
In perfect competition, prices are controlled by __________________

23. SCARCITY
______________ is the condition in which human wants are forever greater than the available supply of time, goods, and resources.
There are always limits on the economy’s ability to satisfy unlimited wants.
Scarcity is a fact of life throughout the world.
Individuals and countries never have all the goods and services that they wish.

24. Scarcity
Scarcity always exists because there is not enough of all goods and services to satisfy everyone’s needs and wants.
_____________If resources become scarce, competition for those resources increases. That means prices go up, because people are willing to pay more to beat the competition in getting resources. Extreme scarcity can mean there are not enough resources at any price, and an economy can collapse as a result.
___________When companies have to compete for employees, wages tend to rise. Scarcity of labor can mean better pay for employees, but if labor becomes so scarce that companies can't operate, businesses may collapse. This would create more scarcity as products and services decline.
Tangible Items that Become Scarce: Real estate, commodities and supplies can become scarce. If you invest in scarce tangible items, you can expect prices of those items to go up and your income from investing to increase as a result.

25. Opportunity cost
Rearrange the following words to find the definition of opportunity cost – then write it in your notebook.
next best alternative
that could have
Opportunity cost
been chosen.
is the cost of the

26. Elasticity

27. Elasticities
____________are both economic concepts used to describe changes in the buyer’s and supplier’s behavior in relation to changes in price.
___________refers to changes in demand/supply that can occur with the slightest price change.
_________occurs when the demand/supply does not change even when prices change.

28. What couldn’t you live without?
Goods, which are ________, usually have easily replaceable substitutes.
Goods, which are ________, are usually necessities or goods which are habit forming.

29. Calculating Price Elasticity
HERE ARE THE STEPS:
STEP 1: Get the percentage change in QUANTITY DEMANDED by taking (NEW Demand MINUS OLD Demand) DIVIDED BY OLD DEMAND
STEP 2: Get the percentage change in PRICE by taking (NEW PRICE MINUS OLD PRICE) DIVIDED BY OLD PRICE
STEP 3: STEP 1 DIVIDED BY STEP 2
Price is elastic if the answer is more than 1 & Inelastic if less than 1.
NOTE: When we analyze price elasticities we're concerned with their absolute value, so we ignore the negative value

30. Example Problem…
Yesterday, the price of envelopes was $3 a box, and Julie was willing to buy 10 boxes. Today, the price has gone up to $3.75 a box, and Julie is now willing to buy 8 boxes. Is Julie's demand for envelopes elastic or inelastic?

31. Lazy-Boy brand recliners (chairs) Plain (no logo or design) sweatshirt
Rank the following products in order from least to highest price elasticity of demand:
Lazy-Boy brand recliners (chairs)
Plain (no logo or design) sweatshirt
Sugar.

32. Markets
A ___________ is any place or method used by buyers and sellers to exchange goods and services.
A ____________is the freedom of consumers and businesses to buy and sell products with a minimum of government restrictions.
Consumers are free to buy or not buy.
Both consumers and businesses benefit from exchange.
Driven By Profit Motive

33. Traditional Economic System
Prior to the invention of money, ancient communities used barter as a means of trade.
This form of trade allowed people to access one good or service in exchange for another.
This system had its own problems which eventually led to the development of money.

34. Types of Economic Systems
Command/communist system
Socialist
Capitalist/market economic system
Mixed economic system

35. Economic Systems
All Economic systems must answer the same 3 questions:
________to make?
_______to make it?
________ gets it? (_____ is it made for)

36. Three Fundamental Economic Questions
The What question requires an economy to decide the mix and quantity of goods and services that it will produce.
The How question decides about the combination of technology and resources to use for producing goods and services.
The For Whom question decides which people receive the goods and services produced. It is concerned with how the economic pie is divided.

37. Market/Economic System
In a _____________economic system the economic questions are answered based on the forces of demand and supply.
Government has ___________influence in decision making as the private sector is the main economic player.
Goods and services are produced based on the demand producers perceive will come from the consumer.

38. Capitalism
The market economic system is commonly referred to as the capitalist system. Other names include:
The Laissez faire System (hands off)
the government interference in the economy is minimal.
The Free Enterprise System

39. Adam Smith
The economic and political ideology called ___________ was developed by __________.
His thinking was that government __________interfere with the economy or it may disrupt trade and people’s ability to become prosperous.

40. Benefits of the Marketing/Capitalist System
Private individuals own businesses and their entrepreneurship and risk taking is rewarded with large profits.
In a capitalist system, most property ___________
Government has little say in how businesses are operated.
The forces of demand and supply lead to the production of goods or services that consumers require.

41. Challenges with the Market/Capitalist Economy
Only goods and services that are profitable will be produced.
This type of economy demonstrates clear __________ with a very few wealthy and many poor individuals.
Market economies focus on free trade and this can lead to exploitation of labor in less developed countries to produce cheaper goods.
These economies can lead to large monopolies or takeovers where competition is nonexistent and prices are high.

42. Market/Capitalist Economy
In theory, there is no economy that is truly free. This is because at some point there is government involvement in major issues.
One country that operates closest to a free market economy is the ______________

43. Socialism
____________ believe that there must be ____________ between the classes, by having a single class that is neither superior nor inferior to any other.
Socialists’ core belief is that humans thrive or die depending on their social relations and that all of our actions are shaped and determined by the social structure.
____________ thought that the idea of a ______________government was desirable, but that the competition created inequalities were not.
Socialism came about in the late 18th century reacting to liberalism and its emphasis on competition. Two classes divided this society:
Bourgeoisie (upper class that controls the government, economy, and all of society through their wealth and influence)
Proletariat (the lower class of society – the basic workers – underpaid and mistreated because of capitalism)
Social structure is, usually determined by wealth. Where private property is concerned socialists feel that everything produced in society is a “social product,” and that without society that product could not have been produced.
If one class is wealthier, then the product is distributed unevenly, which causes tensions between the classes, creating a breakdown in social relations.

44. SOCIALISM Advocates _____________of all resources.
is an economic system characterized by social ownership of the means of production and co-operative management of the economy.
Under socialism, a government owns and controls major industries, such as steel, electricity, and agriculture.
The trouble with Socialism is that eventually you run out of other people's money.

45. Examples of Socialist Economy
Denmark
Finland
Netherlands
Canada
Sweden
Norway
Ireland
Belgium

46. The Command (Communist) Economy
In the ____________, commonly referred to as the ___________, the government controls all aspects of decision making.
The communist ideology was developed
by __________. He felt that a market
system led to oppression of the poor.

47. Command Economy
What? One person ( a dictator) or a group of government officials (central planning committee) decide what is to be produced
How? The government owns all the factors of production and makes all the decisions about production
Who? The government decide who receives what is produced in the economy

48. Benefits of a Command Economy
The _________t makes all decisions on what is to be produced in the country.
This means that only profitable ventures are pursued.
All workers are compensated equally irrespective of the job they do.
Government owns all industries and businesses.
There is no class structure showing the extremely rich or poor.
Wealth is evenly distributed.

49. Disadvantages of the Command Economy
This systems stifles productivity as workers are not driven.
They are paid the same for any job done.
Entrepreneurship is not encouraged and so there is no thriving business sector.
The government makes decisions on the distribution of goods and so citizens can seek illegal ways to obtain additional goods.

50. Mixed Economic System
The ________________strikes a good balance between the command economy and the market economy.
It is both the private sector and public sector/government, working together to satisfy the demands of the people.
The government is usually in charge of major industries such as health, education and transportation.

51. Key features of Mixed Economies
Citizens are usually required to pay taxes in order for government to provide the necessary social services.
Government and private individuals own property and businesses.
Consumers are provided with necessary services even if it is not a profitable venture. (Government has an obligation)
Citizens of the country have a wider choice.

52. Challenges of a Mixed Economy
Taxes may be high in order for the government to maintain the services they provide.
Workers are not as productive as the market economy as competition is not as high.
The private sector’s refusal to provide a necessary service might lead to additional burden on the government.

53. Examples of the Mixed Economy
There are many examples of the Mixed Economy as it is the most popular system.
The United States
The United Kingdom
Many territories in the Caribbean (Trinidad and Tobago, Jamaica, Barbados etc.)
France