unit 1: introduction to economics. chapter 1 section 1-2 standards cte (ecn) 2.1 apply the concepts...
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Unit 1: Introduction to Unit 1: Introduction to EconomicsEconomics
Chapter 1 Section 1-2STANDARDSCTE (ECN) 2.1 Apply the concepts of basic economics. CTE (ECN) 2.3 Analyze economic problems and goals of society.
CTE (ECN) 2.4 Analyze the economic problem of scarcity.
CTE (ECN) 2.5 Assess the importance of natural resources and their relationship to economics decision making.
OBJECTIVES1.Explain what economics is and how scarcity affects economic change.2.Summarize the concept of opportunity cost.3.Describe how people make decisions by thinking at the margin.
Unit 1: Unit 1: Intro to EconSet up your Notes.
Write your EQ!
Essential Question
• How can we make the best economic choices?
Key Terms• Economics: the study of how people seek to satisfy
their needs and wants by making choices• Scarcity: the principle that limited amounts of goods
and services are available to meet unlimited wants • Factors of production: the resources that are used to
make goods and services: Capital, Labor, and Land • Capital: any human-made resource that is used to
produce other goods and services• Physical capital: the human-made objects• Human capital: the knowledge and skills of a worker
Key Terms• Opportunity cost: the most desirable
alternative given up as the result of a decision
• Cost/benefit analysis: a decision-making process in which you compare what you will sacrifice and gain by a specific action
• Marginal cost: the extra cost of adding a unit• Marginal benefit: the extra benefit of adding
a unit
Scarcity• How does scarcity force people to make
economic choices?• Scarcity forces all of us to make choices by
making us decide which options are most important to us.
• The principle of scarcity states that there are limited goods and services for unlimited wants. Thus, people need to make choices in order to satisfy the wants that are most important to them.
Economics begins with the idea that people cannot have everything they need and want.
Entrepreneurs & Scarcity• Entrepreneurs play a key role in turning scarce
resources into goods and services.• Entrepreneurs are willing to take risks in order to
make a profit. • Develop original ideas• Start businesses• Create new industries• Fuel economic growth
• An entrepreneur’s first task is to assemble the factors of production: land, labor, and capital
Entrepreneur Process
Factors of ProductionLAND LABOR CAPITAL
NATURAL RESOURCES
PEOPLE EFFORT HUMAN MADE RESOURCE
FERTILE FARM LAND
MEDICAL CARE BUILDINGS
OIL / COAL CLASS INSTRUCTION
EQUIPMENT / TOOLS
IRON / MINERALS / GYM
BUILDING A CAR COLLEGE EDUCTION
WATER PAINTING A PICTURE
JOB TRAINING
TREES REPAIRING A TV JOB EXPERIENCE
Discussion• How does opportunity cost affect decision
making?• Every time we choose to do something, like
sleep in late, we are given up the opportunity to do something less, like study an extra hour for a big test.
• When we make decisions about how to spend our scarce resources, like money or time, we are giving up the chance to spend that money or time on something else.
Trade Off Examples• Businesses make trade-offs when
they decide how to use their factors of production.• A farmer who uses his or her land
to plant broccoli, for example, cannot use that same land to plant squash.
• Governments also make trade-offs when they decide to spend their money on military needs instead of domestic ones, and vice versa.
The most desirable alternative somebody gives up as a result of a decision is the opportunity cost.The most desirable alternative somebody gives up as a result of a decision is the opportunity cost.
Quick Write: •Why does every choice involve an opportunity cost?• We always face an opportunity cost.
When we select one alternative, we must sacrifice another. The choices we have to give up are trade-offs.
Thinking on the Margin
• When you decide how much more or less to do, you are thinking on the margin.• Deciding by thinking on the margin
involves comparing the opportunity costs and benefits.
• This decision-making process is called a cost/benefit analysis.
Marginal Costs and Benefits• To make good decisions on the margin, you
must weigh marginal costs against marginal benefits.• The marginal cost is the extra cost of adding one
unit such as sleeping an extra hour or building one extra house.
• The marginal benefit is the extra benefit of adding the same unit.
• Once the marginal costs outweigh the marginal benefit, no more units can be added.
Decision-Making on the Margin• Like opportunity cost, thinking at the
margin applies not just to individuals, but to businesses and governments as well.• Employers think at the margin when
they decide how many workers to hire.• Legislators think at the margin when
they decide how much to increase government spending on a particular project.
Cost/Benefit AnalysisExtra Study Time vs Extra Sleep Time Example
• What is the opportunity cost of one extra hour of sleep? What is the benefit?
Summary and Assignment• Now that you have learned how opportunity
costs affect decision making, go back and answer your Essential Question.• How can we make the best economic choices?
Assignment: Chapter 1, Section 1 Review QuestionsChapter 1, Section 2 Case Study
Chapter 1 Section 3
OBJECTIVES1.Interpret a production possibilities curve.2.Explain how production possibilities curves show efficiency, growth, and cost.3.Explain why a country’s production possibilities depend on its resources and technology.
Unit 1: Unit 1: Intro to EconSet up your Notes.
Write your EQ!
STANDARDSCTE (ECN) 2.1 Apply the concepts of basic economics. CTE (ECN) 2.3 Analyze economic problems and goals of society.
CTE (ECN) 2.4 Analyze the economic problem of scarcity.
CTE (ECN) 2.5 Assess the importance of natural resources and their relationship to economics decision making.
Key Terms• Production possibilities curve: a graph that shows alternative
ways to use an economy’s productive resources• Production possibilities frontier: a line on a production
possibilities curve that shows the maximum possible output an economy can produce
• Efficiency: the use of resources in such a way as to maximize the output of goods and services
• Underutilization: the use of fewer resources than an economy is capable of using
• Law of increasing costs: an economic principle which states that as production shifts from making one good or service to another, more and more resources are needed to increase production of the second good or service
Production Possibilities• Economists often use graphs to analyze
the choices and trade-offs that people make.
• A production possibilities curve is a graph that shows alternative ways to use an economy’s productive resources.• To draw a production possibilities curve,
an economist begins by deciding which goods or services to examine.
Production Possibilities Curve• The table below shows six different combinations of watermelons and shoes that Capeland could produce using all of its factor resources.
• How many watermelons can Capeland produce if they are making 9 million pairs of shoes?
Production Possibilities Frontier• The line on a production possibilities curve that
shows the maximum possible output an economy can produce is called the production possibilities frontier.• Each point on the production possibilities
frontier reflects a trade-off. These trade-offs are necessary because factors of production are scarce.
• Using land, labor, and capital to make one product means that fewer resources are left to make something else.
Quick Write• How does a nation decide what and how
to produce?• To decide what and how to produce,
economists use a tool known as a production possibilities curve.• This curve helps a nation’s economists
determine the alternative ways of using that nation’s resources.
Production Curve: Efficiency• A production possibilities frontier
represents an economy working at its most efficient level.
• Sometimes an economy works inefficiently and it uses fewer resources than it is capable of using. This is known as underutilization.
Production Curve: Growth
• A production possibilities curve can also show growth. • When an economy grows, the curve shifts to the
right.• However, when an economy’s production
capacity decreases, the economy slows and the curve shifts to the left.
Production Curve: Cost• Production possibilities curves can be used to
determine the opportunity costs involved in make an economic decision.• Cost increases as production shifts from
making one item to another.• The law of increasing costs helps explain the
production possibilities curve.• As we move along the curve, we trade off more and
more for less and less output.
Law of Increasing Costs
Technology and Education
• Technology can increase a nation’s efficiency.
• Many governments spend money investing in new technology, education, and training for the workforce.
How the Economy Works
Summary and Assignment• Now that you have learned about how a nation
decides what and how to produce, go back and answer the Chapter Essential Question.• How can we make the best economic choices?
Assignment• Chapter 1, Section 3 Review Questions• Begin the “Kitchen Challenge”
• We will complete the Kitchen Challenge tomorrow during class. RELAX
Chapter 2 Section 1-3
STANDARDSCTE (ECN) 2.1 Apply the concepts of basic economics.CTE (ECN) 2.2 Differentiate between economic systems. CTE (ECN) 2.3 Analyze economic problems and goals of society.
OBJECTIVES1.Answer the three primary economic questions. 2.Discuss characteristics and advantages of a free market. 3.Evaluate centrally planned economies. 4.Discuss mixed economics and compare to free markets.
Unit 1: Unit 1: Intro to EconSet up your Notes.
Write your EQ!
Vocabulary• economic system: the structure of methods and principles that a
society uses to produce and distribute goods and services• safety net: a set of government programs that protect people
who face unfavorable economic conditions • standard of living: level of economic prosperity• traditional economy: an economic system that relies on habit,
custom, or ritual to decide the three key economic questions. Traditional economies rely on habit, custom, or ritual and revolve around the family. There is little room for innovation or change.
• Economic equity: is another economic goal that is defined differently in different societies. Each society must decide how to divide its economic pie.
Economic Efficiency
• Societies answer the three economic questions based on the importance they attach to various economic goals.
• Because resources are always scare, societies try to maximize what they can produce using the resources they have.• If a society can accurately assess what to
produce, it increases economic efficiency.
Q#1 What should be produced• Each society must decide what to produce
in order to satisfy the needs and wants of its people.
• Because resources are limited, each decision that a society makes about what to produce comes at an opportunity cost.
Q#2 How should things be produced? • As a society decides how to produce its goods and services, it
must consider how best to use its land, labor, and capital.
Q#3 Who should get what is produced? • This question is largely determined by how
societies distribute income.• Through factor payments, including
profits, societies can determine who will be the consumers of the goods and services produced.
Quick Write:
•How does a society decide who gets what goods and services?
Free Market Economy• A free market economy is characterized by:
• Households and firms• Factor and product markets• Self-interest• Competition• Economic freedom, efficiency, and equity
• The three key economic questions are made by voluntary exchange in the marketplace.
• Choices made by individuals determine what gets made, how it is made, and how much people can consume of the goods and services produced.
• In a free market system, individuals and privately owned businesses own the factors of production.
Advantages of a Free Market• Under ideal conditions,
free market economies meet the following economic goals:• They respond to rapidly
changing conditions.• They have a large degree
of economic freedom.• They encourage
economic growth.• They lend themselves to
consumer sovereignty. What free market principle does this cartoon illustrate?
Centrally Planned (Command)• In a centrally planned economy (also known as a
command economy), the government, rather than individual producers and consumers, answer the key economic questions.• The government owns both land and capital.• The government also controls where people work and
what they are paid.• Command economies oppose:
• Private property• Free market pricing• Competition• Consumer choice
Centrally Planned Examples
• socialism: a range of economic and political systems based on the belief that wealth should be distributed evenly throughout society
• communism: a political system in which the government owns and controls all resources and means of production and makes all economic decisions
• authoritarian: describing a form of government which limits individual freedoms and requires strict obedience from their citizens
Disadvantages• Nations with command economies often have
trouble meeting the basic economic goals.• The complex bureaucracy of a command economy is
not efficiently run and does not adjust quickly to market changes.
• There is minimal, if any, economic freedom.• Innovation is not rewarded and thus economic growth
is stilted.• There is no economic equity.
• However, command economies do guarantee jobs and income and can be used to jump-start selected industries.
Summary & Assignment
Now that you have learned about how a nation decides what and how to produce, go back and answer the Your Essential Question.
Assignments: •Begin Webquest Chapter 2 and Chapter 2 Review Worksheet. •Both Due Wednesday.
Chapter 2 Section 3-4
STANDARDSCTE (ECN) 2.1 Apply the concepts of basic economics.CTE (ECN) 2.2 Differentiate between economic systems. CTE (ECN) 2.3 Analyze economic problems and goals of society.
OBJECTIVES1.Answer the three primary economic questions. 2.Discuss characteristics and advantages of a free market. 3.Evaluate centrally planned economies. 4.Discuss mixed economics and compare to free markets.
Unit 1: Unit 1: Intro to EconSet up your Notes.
Write your EQ!
Vocabulary
• laissez faire: the doctrine that government generally should not intervene in the marketplace
• private property: property that is owned by individuals or companies, not by the government or people as a whole
• mixed economy: a market-based economic system in which the government is involved to some extent
Vocabulary
• economic transition: a period of change in which a nation moves from one economic system to another
• privatization: the process of selling businesses or services operated by the government to individual investors, and then allowing them to compete in the marketplace
• free enterprise system: an economic system in which investments in firms are made in a free market by private decision rather than by state control
Mixed Economics
• A mixed economy is characterized by:• A market-based economy with some
government intervention• Government helps societies meet needs
that would be too difficult for them to meet under a totally free market economy, such as education
• Government protects property rights and ensures that exchanges in the marketplace are fair
Circular Flow Model of a Mixed Economy
Comparing Mixed Economies
• Most modern economies are mixed economies. • The figure below shows a continuum of mixed economics in
today’s world.• Why is China a little bit farther to the right on the diagram?
Government Intervention
• The American government intervenes in the economy by:• Keeping order• Providing vital services• Promoting general welfare
• Federal and state laws protect private property.• The marketplace operates with a limited
degree of government regulation.
• The United States enjoys a high level of economic freedom.• Foreign investment
and free trade is encouraged
• The banking industry operates under relatively few restrictions
• Foreign-owned banks have few additional restrictions
Summary & Assignment
Now that you have learned about how a nation decides what and how to produce, go back and answer the Your Essential Question.
Assignments: •Continue Webquest Chapter 2 and Chapter 2 Review Worksheet. •Both Due Wednesday.
Chapter 3 Section 1-2
STANDARDS•CTE (ECN) 5.0 Students will analyze the role of government in a free enterprise system.
• CTE (ECN) 5.1 Connect concepts related to government’s role in a free enterprise system.
• CTE (ECN) 5.2 Formulate and analyze the components of gross national product (GNP), gross domestic product (GDP) and national income.
• CTE (ECN) 5.3 Investigate and differentiate the types of taxes.
• CTE (ECN) 5.4 Analyze the concept of governmental distribution of wealth.
• CTE (ECN) 5.5 Analyze cause/effect of inflation and recession.
• CTE (ECN) 5.6 Investigate and analyze the impact of the American financial structure, including banking and monetary policy.
• CTE (ECN) 5.7 Investigate and analyze governmental policies and their economic consequences at the national, state and local levels.
OBJECTIVES1. Define the basic principles of
the U.S. free enterprise system and business roles.
2. Explain why the government may intervene in the marketplace and their role in the free enterprise.
3. Discuss why the government tracks and seeks to influence macroeconomics.
4. Analyze the factors that increase productivity.
Unit 1: Unit 1: Intro to EconSet up your Notes.
Write your EQ!
Vocabulary• legal equality: the principle that everyone has the
same legal rights• free contract: the principle that people may decide
what agreements they want to enter into• voluntary exchange: the principle that people may
decide what, when, and how they want to buy and sell
• eminent domain: the right of a government to take private property for public use
• public discourse laws: laws requiring companies to provide information about their products or services
Vocabulary
• macroeconomics: the study of economic behavior and decision-making in a nation’s economy
• microeconomics: the study of the economic behavior and decision-making in small units, such as households and firms
• gross domestic product: the total value of all final goods and services produced in a country in a given year
Free Enterprise• Characteristics of a free enterprise include:
• Profit motive
• The American economy rests on recognition of the profit motive as a key incentive. In a free enterprise businesspeople make decisions based on what will increase their profits.
• Open opportunity
• The American principle of open opportunity says that anyone can compete in the marketplace.
The United States is considered by many to be a “land of opportunity.”
Why Free Enterprise?• There are Benefits:
• Free enterprise makes it possible for people who have ideas and persistence to start businesses and make themselves successful.
• Free enterprise also offers a great deal of economic freedom to the consumer.
• It is Written in our constitution: • Fifth Amendment, which protects private property from being
taken from a citizen without due process. (Remember Eminent Domain does exist though…)
• Sixteenth Amendment in 1913 stated Congress could levy an income tax on individuals and businesses.
• Constitution guarantees people and businesses the right to make contracts.
Three Key Economic Rights
• Legal equity• American free enterprise believes in the principle that
everyone has the same legal rights.• Private property
• The free enterprise system allows people to make their own decisions about their own property.
• Freedom to buy and sell• People can decide what agreements to enter into, as
well as what, when, and how they want to buy and sell.
US Government
Roles in the marketplace• Carrying out the
constitutional responsibilities
• Making sure that producers provide information
• Protecting the health, safety, and well-being of consumers
The U.S. government encourages growth and stability by:
• Tracking business cycles• Promoting a high
employment rate• Keeping prices stable• Encouraging the
development of new technologies
• Taking pride in the American work ethic
Goals of the Gov:•High employment•Economic growth•Stability and security
• All of the agencies to the left represent ways the federal government intervenes in the marketplace.
• Identify one agency meant to protect each of the following: (a) public safety, (b) fair competition, (c) equality.
Negative Regulation Effects• Rules are costly to implement• Regulations stifle competition• Increased government spending in
human labor, for the oversight.• The Government is too involved in
companies doing business, opening the doorway for unethical choices.
• Taxation is used to regulate companies, instead of policy when policy is to hard to enforce.
Government Advantage
• The government promotes innovation and invention to help maintain the country’s technological advantage by:• Funding research and development projects at
universities• Establishing their own research institutions,
like NASA• Granting patents and copyrights, which are an
incentive to innovation
GDP and Economics• During a period of growth, GDP goes up and
in a period of contraction, GDP goes down.• This pattern of a period of expansion
followed by a period of contraction is called a business cycle.• Changes in the business cycle take place because
individuals and businesses, acting in their own self-interest, make decisions about factors such as prices, production, and consumption.
GDPEven under the free enterprise system, the government intervenes to influence macroeconomic trends. One measure of the nation’s economic well-being is gross domestic product (GDP).
Quick Write: Do you think the GDP is a good representation of our economy? Can we tell economic success from this data? Why or why not.
Summary & Assignment
Go back and answer the Your Essential Question!
Assignments: •Chapter 3 Section 1-2 Worksheet FRONT and BACK
Chapter 3 Section 3-4
STANDARDS•CTE (ECN) 5.0 Students will analyze the role of government in a free enterprise system.
• CTE (ECN) 5.1 Connect concepts related to government’s role in a free enterprise system.
• CTE (ECN) 5.2 Formulate and analyze the components of gross national product (GNP), gross domestic product (GDP) and national income.
• CTE (ECN) 5.3 Investigate and differentiate the types of taxes.
• CTE (ECN) 5.4 Analyze the concept of governmental distribution of wealth.
• CTE (ECN) 5.5 Analyze cause/effect of inflation and recession.
• CTE (ECN) 5.6 Investigate and analyze the impact of the American financial structure, including banking and monetary policy.
• CTE (ECN) 5.7 Investigate and analyze governmental policies and their economic consequences at the national, state and local levels.
OBJECTIVES1. Analyze market failures as
public goods and services.2. Evaluate how the government
allocates some resources by managing externalities.
3. Identify the main programs through which the government redistributes income.
4. Describe how the government encourages private efforts to help the needy.
Unit 1: Unit 1: Intro to EconSet up your Notes.
Write your EQ!
Vocabulary• public sector: the part of the economy that involves the
transactions of the government• private sector: the part of the economy that involves the
transactions of individuals and businesses• free rider: someone who would not be willing to pay for a
certain good or service but who would get the benefits of it anyway if it were provided as a public good
• market failure: a situation in which the free market, does not distribute resources efficiently. These are the primary reason we have a free enterprise and not a free market!
• externality: an economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume
Vocabulary• poverty threshold: an income level below that which
is needed to support families and households• welfare: government aid to the poor• cash transfers: direct payment of money by the
government to the poor, disabled, or retired people• in-kind benefits: goods and services provided for
free or greatly reduced prices• grant: a financial award given by a government
agency to a private individual or group in order to carry out a specific task
Public Goods• The government provides public goods when the cost to
the individual is greater than the benefit.• In the case of most public goods it is simply not practical
for a private business to provide the service, charge those who benefit, and exclude nonpayers from using the source. The benefit of all having it is more than the cost of paying for all to have the good.
• Public goods can be used by any number of consumers without reducing the benefits to any single consumer.
• Public goods are financed by federal and local taxes.
Firefighters are good examples of public goods.
QW: What two criteria must be present for a public good?• The benefit to each
individual is less than the cost that each individual would have to pay if it were provided privately.
• The total benefits to society are greater than the total cost.
What are the side effects? • Positive Externalities
• Represent the beneficial side effects of public goods.• Can also be generated by the private sector.• Allow someone who did not purchase a good to enjoy part of the benefits of that good.
• Negative externalities • Public good have to be paid for by someone other than the producer.• Many people disagree with public goods they have to pay for.
Issues with Public Goods• The free-rider problem suggests what would
happen if the government stopped providing public goods: People would refuse to pay and many services would be eliminated.
• Public goods are examples of a market failure, where the free market does not distribute resources efficiently. EX: Road Construction
• Many economists feel that the private sector produces more positive externalities that the government does.
Why Public Goods & Services? • In a free market, the wealth is spread unevenly
throughout society, which leaves some people below the poverty threshold.
• The U.S. Bureau of the Census sets the poverty threshold based on the cost of the goods a family needs to buy.
• To help the poor, and to prevent wide spread poverty and disease the government programs take money from some people and redistribute it to others.
• The government provides a safety net to groups like the very young, the very old, the sick, the poor, and the disabled through various federal, state, and local government programs.
Welfare Specifics• This system began during the Great Depression and
continues today.• Critics of welfare claim that it discourages productivity
and further aggravates poverty.• In 1996, new welfare reforms limited the amount of
time people could receive welfare payments and gave states more freedom to experiment with antipoverty programs.
• Temporary Assistance for Needy Families (TANF) - sends welfare payments directly to the states, which design and run their own welfare programs.
Other Programs• Social Security - collects money from current workers and
redistributes funds to retired and disabled persons.• Unemployment Insurance - provides temporary money to
workers who have lost their jobs as long as recipients offer proof that they have made efforts to get work.
• Worker’s Compensation - provides state funds to workers injured on the job.
• Subsidized housing - qualified people are allowed to rent housing for less than the regular rent.
• Legal aid - qualified people receive legal advice at no charge.• Education - government also funds educational programs
from preschool to college. Including your free public education
QW: How does tax law provide an incentive to help the needy?• How does tax law provide an incentive to help
the needy?• Federal tax laws allow both individuals and
corporations to take tax deductions for charitable donations.
• The government may also provide grants and other assistance to organizations that provide social services.
Summary & Assignment
Go back and answer the Your Essential Question!
Assignments: •Chapter 3 Section 3-4 Worksheet FRONT and BACK