1. Unit 1: Language and Systems of Economics

2. Language of Economics…
Economics: the study of choice in a world of scarcity
Scarcity: limited resources for unlimited desires
Resources: anything used to make something else
Land: natural resources (oil, land, water, cattle, etc.)
Labor: people
Capital: human-made objects used to make others
Physical Capital: factories, tools, money
Human Capital: knowledge or skills a person has

3. Language Cont. Goods: physical objects Services: actions or activities
Need: something you must have to survive
Want: not needed for survival

4. Opportunity Cost Warm-Up (8/15)
Write a ½ to full page response on the following prompt:
Describe one of the biggest decisions you have had to make or think you will be making in the future. What were (are) the specific choices involved and why did you choose what you did. Are you happy with the results?

5. Opportunity Cost and PPF
The next best alternative given up as the result of a decision
Caused because limited resources
Example:
Playing sports or spending time with friends
The opportunity cost of playing sports is spending time with friends
Are you willing to give up friend and family time for the sport you love?

6. Production Possibility Frontier (PPF)
PPF: visual way to represent opportunity cost and trade-offs
Example: Soybeans v. Corn
At point A, if I produce 30,000 bushels of soybeans, I can only make 10,000 bushels of corn.

7. Efficiency, Underutilization, and Growth
Efficiency: producing maximum number of goods with resources available
Any point on the line
Underutilization: producing less goods that possible with resources available
Any point inside the line
Causes: decrease in resources (factory breaks down, labor strike, rising cost of goods, draught)
Growth: increase in max production at all points
Shifts line to right
Cause: increased land, labor, or new technology

8. Economic Systems
Economic System: way to choose, produce, and distribute resources
3 Major Questions:
1. Who decides what goods and services to be produced?
People?
Government?
2. Who makes those goods and gets the profits?
3. How are those goods distributed?
Money?
Rationing/Price Controls

9. Capitalism Characteristics…
1. People decide what goods to produce by their desires
Top Seller: Popsockets
2. Private Ownership of Business
Entrepreneurs make products to meet demand and earn profit
20 Billion Dollar Industry
Goods distributed by money
Those who can afford it, buy it
$10
Laisses-faire “hand’s off”
Government does not interfere with prices/products/production

10. Capitalism Cont. Market Based Pricing
Products: more scarcity/demand=high price
Hemophilia Medicine: $1000/pill
Labor: more scarcity/demand=more pay
Fast Food Worker: $16,000/year
Cardiologist: $350,000/year

11. Progressive Movement Cont.
Tried to improve working condition and living condition of workers
Caused by IR
Example: Karl Marx and Communism
Goal: Increase workers salary
Method: Armed Revolution (War)
Proletariat: working class
Bougousasi: Rich owning class

12. Progressivism Continued
Steps:
1. Workers overthrow government
2. Government takes factories from Bougous class
3. Money is divided equally to workers
Result: Russia becomes communist in 1910s

13. Communism Founder: Karl Marx (1818-1883)
Wrote Communist Manifesto
Time Period: Industrial Revolution
Great wealth for some, poverty for most
Terrible working conditions
Solution: Armed Revolt
1. Workers (proletariat) overthrow government
2. Government takes factories from Bougous class (factory owners)
3. Money is divided equally to workers

14. Characteristics of Communism
1. Centrally Planning
Gov. decides what to produce and how many to make
2. Government Owned All Businesses
Profits are redistributed to people
3. Price Control
Gov. sets price low to avoid price gouging
4. Welfare Programs:
Gov aid and housing given to poor
Authoritarian Control
One person makes all economic decisions

15. Market Failures and Socialism
Market Failure: a necessity that private businesses will not provide
Public Good: something that is…
Too expensive for one person to pay for
You cannot exclude non-payers
Example: Military Protection
Too expensive for one person
Army protects all, regardless of pay
Other Examples:
Space Program, Fire Department, Police Department, Roads

16. Socialism Characteristics
Government Ownership and Regulation of Key Industries
Healthcare, Education, Power, Water
Labor laws etc.
Wealth Redistribution
Tax Rich, give to poor
Welfare Program
Gov. aid to poor
Demand Based Pricing

17. Socialism Example: Sweden
Government Stats
Income Tax: Flat 57%
Sales Tax: 20%
28% GDP on Welfare
Government Services:
Complimentary Healthcare
Complimentary College
Minimum Wage: $20/hour
Average Salary: $4000/month
Cost of Living:
Big Mac Meal: $8.35
Rent: $1000/month
Gas: $5.50/gallon