1. Economic Principles

2.  Economics:the study of how human beings allocate scarce resources to produce various commodities and how those commodities are distributed for consumption among the people in society.

3. Types of Economies  Command Economy – an economic system in which all nonhuman productive assets are owned by the government in the name of the people and in which the government decides what is produced, how it is produced, and how the output is distributed.

4. Types of Economies (Cont.)  Market Economy – an economic system in which the basic questions of what, how and for whom to produce are resolved primarily by buyers and sellers in the market.

5. Definitions  Scarce Resources: the limited resources for production relative to the demand for goods and services.  Commodities: any economic good, but usually used to refer to basic raw materials such as oil or metals.

6. Definitions (Cont.)  Capital: the means of production, including computers, buildings, machinery and tools; as well as, the financial capital or money necessary to make your product.

7. Supply and Demand  Supply: the relationship between the quantities of a good or service that sellers wish to market at any particular time and the various prices that can exist for the good or service.

8. Supply and Demand  Demand: the relationship between the quantities of a good or service that consumers desire to purchase at any particular time and the various prices that can exist for the good or service.

9. Law of Supply  The quantity supplied of a good or service varies directly with its price; the lower the price the smaller the quantity supplied, and the higher the price the larger the quantity supplied.

10. Law of Demand  The quantity demanded of a good or service varies inversely with its price; the lower the price the larger the quantity demanded and the higher the price the smaller the quantity demanded.

11. Supply and Demand Curve

12. Equilibrium Price  The price at which the quantity of a good or service offered by suppliers is exactly equal to the quantity that is demanded by purchasers in a particular period of time.

13. Labor