2.  To create goods and services for consumers  Profits are (hopefully) earned that then circulate money throughout the economy.

3.  Goods – tangible (you can touch it) › Ex. Car, cell phone, pencil  Services – intangible (you can’t touch it) › Ex. Haircut, Car Wash, Yard Work

4.  Land: natural resources › Ex. Trees, lakes, coal  Labor: HUMANS working › Ex. Cashier, Teacher  Capital: tools, machinery, robots, etc. › Ex. Cash register, lawn mower, computer  Entrepreneurship: owning a business › Ex. Truett Cathy (owner of Chic-fil-A)

5.  Scarcity – lack of resources (or not enough stuff) › Fundamental problem of economics  Must be able to distribute scarce resources using different methods › Rationing/Coupons › Money

6.  Demand – what consumers are willing to purchase at all available prices › Law of Demand – if the price increases, quantity demanded decreases, and vice versa

7.  Supply – what producers are willing to sell at all available prices › Law of Supply: if prices increase, quantity supplied increases, and vice versa

8.  Traditional economic system: based on customs, rituals, and habits › Usually run by an elder, chief, or medicine man › Jobs are handed down from family members › Do not like change – severe punishment for change › Ex. Amish, Alaskan/Canadian Inuits, Australian Aborigines

10.  Command Economic System: controlled by a central authority › Usually communist or socialist › Run by a dictator, authoritarian government, or totalitarianism › Jobs are chosen by the government system › Ex. Cuba, North Korea

12.  Market Economic System: people are allowed to control the system › Usually a democracy style government system › May be led by a President or central government group but they are chosen by the people › Ex. United States, England, Japan

14.  Free Enterprise System: businesses are allowed to run freely without much (or any) government control  Modified Free Enterprise System: businesses have a lot of freedom but the government regulates prices, goods sold, services provided, etc.

15.  Private Enterprise: Able to own a businesses without much interference from government › Usually able to sell whatever you wish, hire whomever you want, etc.

16.  Consumer Sovereignty: consumers choose all prices, what is sold, how much is sold etc.  Market Failures: a breakdown in the market causing a business to possibly fail › Negative/Positive Externalities: not involved in the situation but affected anyways  Ex. An airport expands = creates new jobs (positive), pollution/traffic/noise (negative)

17.  Can be hard to get loans  Hard to find reliable business partners  Hard to find reliable employees  Location  Competition  Hard to actually earn a profit › Inputs may be too expensive

18.  Two or more businesses competing for customers, sales, profit, etc.

19.  Want to use the least amount of inputs to create the most amount of outputs › Ex. Lemonade Stand  Cheap lemons, sugar, water = Inputs  Sell a lot of lemonade for as high a price possible = Outputs

20.  Division of Labor: one of the best ways to achieve productivity › Divide up jobs so workers perform fewer tasks › Ford created the assembly line for this purpose