Presentation on theme: "Lesson 3.1 WHAT IS AN ECONOMY?"— Presentation transcript:
1 Lesson 3.1 WHAT IS AN ECONOMY? GOALSDescribe market and command economies.Define the concept of supply and demand.Explain the effects of market structure on price.Describe the functions of business in a market economy.
2 SCARCITYScarcity occurs when people’s needs and wants are unlimited and the resources to produce the goods and services to meet those needs and wants are limited.Scarcity occurs in every economy.
3 COMMAND ECONOMYIn a command economy, the government determines what, how, and for whom products and services are produced.
4 MARKET ECONOMYIn a market economy, individuals decide what, how, and for whom goods and services are produced.
5 PRODUCTIVITYThe level of output that an industry or company gets from each worker or each unit of input into its products and services is called productivity.
6 SUPPLYQuantity Price40 $4030 $3020 $2010 $15Supply is how much of a good or service a producer is willing to produce at different prices.Suppliers are willing to supply more of a product or service at a higher price.Supply Curve$5040302010PriceQuantity
7 DEMANDQuantity Price40 $2030 $3020 $4010 $50Demand is an individual’s need or desire for a product or service at a given price.Individuals are willing to consume more of a product or service at a lower price.Demand Curve$5040302010PriceQuantity
8 WHEN SUPPLY AND DEMAND MEET Supply and Demand CurvesThe point at which the supply and demand curves meet is what is known as the equilibrium price and quantity.This is the price at which supply equals demand.Equilibrium Price$5040302010PriceQuantity
9 MARKET STRUCTURE AND PRICES When a company controls all of a market, it has a monopoly.
10 BUSINESS ACTIVITIES IN A MARKET ECONOMY ProductionMarketingProductDistributionPricePromotionManagementFinance
11 Lesson 3.2 THE CONCEPT OF COST GOALSIdentify various types of costs.Discover how different types of costs affect the prices entrepreneurs charge.
12 FIXED AND VARIABLE COSTS Fixed costs are costs that must be paid regardless of how much of a good or service is produced.Fixed costs are also called sunk costs.Variable costs are costs that go up and down depending on the quantity of the good or service produced.
13 MARGINAL BENEFIT AND MARGINAL COST Marginal benefit measures the advantages of producing one additional unit of a good or service.Marginal cost measures the disadvantages of producing one additional unit of a good or service.
14 OPPORTUNITY COSTOpportunity cost is the cost of choosing one opportunity or investment over another.
15 Lesson 3.3 GOVERNMENT IN A MARKET ECONOMY GOALSExplain the government’s effect on what is produced.Recognize the different roles the government plays in a market economy.
16 GOVERNMENT’S EFFECT ON WHAT IS PRODUCED PurchasesTaxesSubsidies
17 ROLES OF THE GOVERNMENT RegulatorInspectionLicensesProvider of public goodProvider of social programsRedistributors of income