1. Principles of Economics
Unit 1 - Understanding the Role of Economics in the Global Economy

2. Objectives & Competencies
Explain the three basic economic questions answered by any economy (035)
Identify characteristics of free enterprise (aka Market Economy) (039)
Explain supply, law of Supply, demand, Law of Demand, and economic equilibrium (040)

3. Agenda DECA Updates Bell Ringer Question
How do economic decisions and policies affect your daily life?
Direct Instruction – Types of Economies, Supply vs. Demand
Activity – M&Ms (Yum! )
Review – Multiple Choice Questions
Closure – TNT, Test in 2-3 classes

4. What is an Economy?
How do economic decisions and policies affect your daily life? An economy is a nation’s method for making economic choices that involve how it will use its resources to produce and distribute goods and services to meet the needs of its production. Scarcity of economic resources forces every country to develop an economic system that determines how resources will be used. Each economic system has its advantages and disadvantages.

5. What Is an Economy? What Creates an Economy?
Economists use the term factors of production when they talk about economic resources.
factors of production
Resources that are comprised of land, labor, capital, and entrepreneurship.
resources
All the things used in producing goods and services; a source of aid or support that may be drawn upon when needed.

6. What Is an Economy? Economy What Creates an Economy? Manufacturing
Buying
Economy
Selling
Transporting
economy
The organized way a nation provides for the needs and wants of its population.
Investing

7. What Is an Economy? What Creates an Economy? Land Labor Capital
Entrepreneurship
Provides raw materials
Full- and part-time workers, managers, and professional people
Money, buildings, infrastructure
Organizing factors of production to create goods and services
infrastructure
The physical development of a country,such as roads, ports, and utilities.
entrepreneurship
The skills of people who are willing to invest their time and money to run a business; the process of starting and operating your own business.

8. 3 Basic Economic Questions
What should be produced?
How should it be produced?
Who should share in what is produced?
Deciding to use a resource for one purpose means giving up the opportunity to use it for something else.
This is called opportunity cost.
The methods and labor used as well as the quality of items produced are important factors.
In most societies, people can have as many goods and services as they can afford to buy.

9. The Three Economic Questions
What Is an Economy?
Types of Economic Systems
The Three Economic Questions

10. The Three Economic Questions
What Is an Economy?
Types of Economic Systems
The Three Economic Questions

11. Different Types of Economies
Different economic systems answer the three basic economic questions in different ways.
Economic systems
the methods societies use to distribute resources

12. What Is an Economy? Types of Economic Systems Traditional Economy
Market Economy
Command Economy
Mixed Economy
traditional economy
An economic system in which habits, traditions, and rituals answer the basic questions of what, how, and for whom.
market economy
An economic system in which there is no government involvement in economic decisions.
command economy
A system in which a country’s government makes all economic decisions regarding
what, how, and for whom.

13. Market Economies
A market economy can also be called a private enterprise system, the free enterprise system, or capitalism.
market economy
an economic system in which economic decisions are made in the marketplace

14. Characteristics of a Market Economy
Market Economies
Characteristics of a Market Economy
Resources are privately owned
Citizens can own their own homes, land, and businesses
Business owners decide how their businesses will be run
Business owners decide what to produce and sell
Business owners decide what to charge
Government works to promote free trade and prevent unfair trade practices
Consumers choose their occupations and where to live
There is an uneven distribution of income

15. Market Economies
The higher the price for goods or services, the less consumers will buy.
The lower the price, the more consumers will buy.
price
the amount of money given or asked for when goods and services are bought or sold

16. Market Economies
There is a relationship between price, supply, and demand.
supply
the amount of goods and services that producers will provide at various prices
demand
the amount or quantity of goods and services that consumers are willing to buy at various prices

17. Market Economies
Supply and demand interact with each other to form the equilibrium price.
equilibrium price
the point at which the quantity demanded and the quantity supplied meet

18. Supply, Demand, and Equilibrium

19. Supply, Demand, and Equilibrium

20. Supply, Demand, and Equilibrium

21. Market Economies
Competition among similar businesses is one of the basic characteristics of a free enterprise system.
Profit motive is the desire to make a profit.

22. Command Economies
In a command economy, the government owns and controls all the resources and businesses.
command economy
an economic system in which a central authority makes the key economic decisions

23. Characteristics of a Command Economy
Command Economies
Characteristics of a Command Economy
The government dictates what will be produced, how it will be produced, and who will get the goods
There is little choice of what to buy
Goods are not considered necessities
Prices are controlled by the state
There is no competition and little incentive to produce a better product
Highly skilled workers may earn the same as low-skilled workers

24. Command Economies
A moderate command economy is also known as socialism.
In a moderate command economy, there is some form of private enterprise, but the state owns major resources.

25. Mixed Economies
Most nations have a mixed economy, which combines elements of capitalism and socialism.
mixed economy
an economy that contains both private and public enterprises.

26. How does a market system decide what will be produced?
A market system decides what is to be produced through supply and demand in the marketplace.

27. In a market system, what determines how many goods and services an individual can buy?
It is through one’s income—mostly generated by working.

28. Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true?
More technology is used in the country with fewer workers, increasing worker productivity.

29. M&Ms – Yum! 

30. 1. How many basic economic questions are there?
two
three
What should be produced? How should it be produced? Who should share in what is produced?

31. 2. In a market economy, economic decisions are primarily made:
by the government
in the marketplace
A market economy can also be called a private enterprise system, the free enterprise system, or capitalism.

32. 3. In a market economy, citizens are responsible for:
being informed
making careful decisions
all of the above
In a market economy, citizens can own their own homes, land, and businesses.

33. 4. The amount or quantity of goods and services that consumers are willing to buy at various prices is:
supply
demand
equilibrium
capacity
The higher the price, the less consumers will buy

34. 5. The contest between businesses to attract customers is:
profit
competition
Profit is the reward for taking a risk and starting a business.

35. 6. Most nations have a: market economy command economy mixed economy
In a mixed economy, the market makes more decisions regarding the allocation of resources than the government.

36. Closure – Today We Learned
How does a market system decide what will be produced?
A market system decides what is to be produced through supply and demand in the marketplace.
In a market system, what determines how many goods and services an individual can buy?
It is through one’s income—mostly generated by working.
Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true?
More technology is used in the country with fewer workers, increasing worker productivity.

37. Closure – Next Time Economic Activity Indicators The Business Cycle
Alphabet Soup!
GDP, GNP, CPI, etc
The Business Cycle
Looking Ahead
Test after next lesson – 2 blocks out
We will review for the test
You will have a study guide