what is economics? economics studies the production, consumption, and distribution of _____________...
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What is Economics?
• Economics studies the Production, Consumption, and Distribution of _____________ goods and services for a society with __________ wants and _________.
scarceunlimited
needs
What is Economics?
Basic questions answered by an economic system– Production (what is produced)
• ________________ (things used to make goods and provide services)- Tools, Natural Resources, Human Resources)
• ___________ (What are the needs or wants)– Consumption (how much is produced)
• ______________• _____________
Resources
Demand
ResourcesDemand
What is Economics?
Basic questions answered by an economic system– How are goods produced?
• Capital- ____________ to get started and ______________ needed to make product
• ______ and _________ Resources- materials to make good and energy to support production
• ____________- Workers• _____________- People who plan and
supervise the production
moneyequipment
Land NaturalLabor
Management
What is Economics?
Basic questions answered by an economic system– Distribution (for whom are the goods
produced)• Marketing
– Getting the product to the ______________– Advertising – Selling– ______________
consumer
Storage
Scarcity
Limited supply of resources– Requires trade-offs
or ____________• What you don’t
choose, in favor of something else
choice
Opportunity Costs/Incentives
Limited supply of resources– ____________ costs
• The ________ value of the good or activity you ________ in favor of something else
– Incentives• ___________ the
selection/trade-off
OpportunityhighestGave up
Influence
Economic systems
Free Market (buying/selling) Economy– Individual _______________
• People have the freedom to _________ the product they want
– ________ sovereignty • the individual consumer make economic
_________________ (buy/sell/produce)– _______________
• people to start businesses to make ________
Choicechoose
Consumer
decisionsProfit
profit
Economic systems
Free Market Economy (cont)– _______________
• Businesses are free to _________________ with others
– ________ ownership of property/resources• Individuals _________ the means of production
Competitioncompete
Privateown
Economic systems
Command Economy– Centrally planned economy
• Government makes ____ economic decisions• Decides what, how many, how, and who gets it
– Central ownership of property/resources• __________________ provides necessary raw
materials, money, and labor– Lack of consumer choice
• The ___________________has little influence in economic decisions
all
Government
individual
Economic systems
Command Economy– Pros
• Government can set the _________ of goods• Consumers are assured ___________ when
they are available– Cons
• No _______________• No ____________• Goods may be ___________ made• Individuals have little economic ___________.
They must _______ where the government tells them.
pricesgoods
competitionchoice
poorlyfreedom
work
Economic systems
Mixed Market Economy– Most ___________ economic system in
the world– ____________ and ____________ act as
decision makers in the private sector– ______________ acts as the decision
maker in the public sector• Areas such as roads, mail, water, police,
military
common
Individuals Businesses
Government
Economic systems
Mixed Market Economy (cont.)– ___________ government role than in the
Free Market Economy• Government monitors to prevent businesses
from cheating or abusing workers and consumers, making sure products are safe, protecting the environment
– ______________– __________ and ____________
Greater
IncentivesSupply Demand
Entrepreneurs
People who start new ____________ ____________ their ________ and
_______ to build a _________ business __________- Reward of success
businessesRisk moneytime profitableProfit
Forms of Business Organization
Sole Proprietorship– ______ owner who ___________ the business,
income, assets, and risks. Usually _________ businesses (restaurant, beauty parlor, gas station)
– Pro- You’re the ______. Get to decide what to do, ______, charge, make or _____, hours to work
– Con- You take all the _______. You provide all the _________, pay the bills, hire and fire. If the business fails you lose ______ you put into it.
One controlssmall
bossbuy sell
risksmoney
all
Forms of Business Organization Partnership
– Business which _______ or more people own.
– Pro • People can pool their ______________ if they
don’t have enough individually• Can ___________ different skills, share the
workload, duties and decisions– Con
• If business fails each partner is ____________ for the ____________ amount of the loss
• __________________ between partners. May have to be solved in __________
two
Money/capital
combine
responsibletotal
Disagreementscourt
Forms of Business Organization
Corporation– A large business that has many ________. – A corporation is treated as an __________.
– Sells shares of ownership called
__________. – People who buy shares are called
_________________. – Stockholders _____________ in company
profits and risks.
ownersindividual
stock
shareholdersshare
Forms of Business Organization Corporations
– Pro• Many people/shareholders ________ the risk• Limited _________- Shareholders only risk the
money they ________. They are not responsible for all the ___________ of the corporation.
• Shareholders have a say in how the business is run __________ their shares. The more shares you own the more ____________ you have
– Con• May _________ the money you invested
shareliability
debtinvest
By votingvotes
lose
Supply/Demand/Price
The interaction of __________ and ____________ determines _________
__________ determines who ________ goods and services
Supply high-price ___________ Supply low-price __________ Many producers-price _________ Few producers-price _________
supply
demand price
Price acquires
low
high
low
high
Supply/Demand/Price
Demand high- Price _________ Demand low- Price ________
high
low
Business Cycle
General prosperity. People buying Goods. Businesses hiring and producing More goods and services.
Boom period. Economy peaking.Businesses working at full capacity
Economy starting to slow down. Peoplebuying less. Businesses cutting back.
Recession. Production at low point. High unemployment.Reduced spending on goods.
Inflation
____ money in the economy than there are goods and services to spend it on
Increased demand causes _____ to rise Increased prices due to this is called
__________ __________ the buying power of the
people’s money Hurts people on a _________ income
More
prices
inflationReduces
fixed
INFLATION-ADJUSTED PRICE
YEAR PRICE PER GALLON INFLATION-ADJUSTED PRICE
195019551960196519701975198019851990199520002005
.27.30.31.31.35.53
1.131.191.131.141.662.10
2.192.192.051.921.761.922.682.161.691.461.882.10
Role of government in the economy
Supporting marketplace ____________– Enforcing _____________ legislation– Supporting business ____________– Discouraging the development of
____________________– Engaging in ___________ trade
competition
Anti-trust
start-ups
monopolies
global
Role of government in the economy Regulating business
– FCC (Federal Communications Commission)• ______________ radio and television.
Controls the transmissions frequencies.– EPA (Environmental Protection Agency)
• ____________ the environment. Enforces pollution control laws.
– FTC (Federal Trade Commission)• Has the power to investigate businesses.
Prevents ____________ and _________trade practices. Can order them to stop breaking laws.
Regulates
Protects
monopolies unfair
Role of government in the economy
Providing public _______ and __________– Interstate ______________– __________ service– National ______________– Financed by tax revenue and borrowed funds
and user fees
goods services
highways
Postal
Defense
Role of government in the economy
Protecting consumer and property rights– Contracts are __________ by law. Protect
private ownership– Government agencies protect public
__________ and _____________– Laws protect _____________ rights
enforced
health safety
consumer
Role of government in the economy Issues money
Effects of Gov. Taxing, Spending, and Borrowing 16th Amendment
– Established national __________ tax for U.S.– Taxes are collected by the IRS (_________
_____________ ___________) Relationship between tax change and private
and business spending– Tax __________ leads to decrease in private
spending (people have _______ money to spend)– Tax __________ leads to increase in private
spending (people have _______ money available to spend)
incomeInternal
Revenue Service
Increaseless
decreasemore
Effects of Gov. Taxing, Spending, and Borrowing
Relationship between taxes and government spending– ___________ government spending may
increase taxes– Decreased government spending may
____________ taxes
More
lower
Effects of Gov. Taxing, Spending, and Borrowing
Relationship between government spending and the economy– Increased government spending ________
demand, employment, and production– __________ government spending
reduces demand which may slow the economy
increases
Decreased
Effects of Gov. Taxing, Spending, and Borrowing
Relationship between government borrowing and funds for individual and business borrowing– Increased government _________ reduces
funds available– Decreased government borrowing
_________ funds available
borrowing
increases
Characteristics of Private Financial Institutions
Commercial Banks, Credit Unions, Savings and Loans, – Receive _________ (FDIC insures $ in
banks)– Make ______– Pay __________ on deposits– Encourage __________ and investments
deposits
loans
interest
savings
Federal Reserve System Purposes
– The central _______ of the United States– Has the duty to maintain the value of our
__________ (fight inflation)– Regulates banks to ensure the soundness
of the ________ system and safety of deposits
– Acts as the federal government’s bank– Maintains a _________ economy– Regulates the _________ supply
banking
currency
bank
stablemoney
Business Cycle
General prosperity. People buying Goods. Businesses hiring and producing More goods and services.
Boom period. Economy peaking.Businesses working at full capacity
Economy starting to slow down. Peoplebuying less. Businesses cutting back.
Recession. Production at low point. High unemployment.Reduced spending on goods.
Gross Domestic Product (GDP)
Measures the ___________ of the economy– Total dollar value of
all final goods (complete and ready for sale) and services produced within the ________ in a year.
Gross Domestic Product (GDP)
Measures the _________ of the economy– Total dollar value of
all final goods (complete and ready for sale) and services produced within the ______ in a year.
growth
country
Global Economy
Worldwide markets All nations buy and sell goods Nations trade internationally to increase
their wealth Countries specialize in the production of
particular goods and services
International Trade Why? Countries obtain goods and services they
may not produce efficiently Buy goods or services at a lower price Sell goods and services to other countries Technological advances lower costs of
production Specialization promotes efficiency and
economic growth
Career Opportunities Career Planning- self assessment Employers prefer workers with a strong work
ethic Skills and education levels lead to higher
income Supply and Demand influence job income Employers favor individuals with
technological skills Technological advancements create new jobs
Fiscal Responsibility
Careful spending decisions Saving and investing in the future Having insurance Keeping to a budget Using credit wisely Understanding contracts, warranties
(fix) and guarantees (replace)