what is economics? economics: the production, distribution, and consumption of goods and services....

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What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services in a community. Capitalism: when “economics” is primarily a function of individuals and private corporations, NOT the state.

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Page 1: What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services

What is economics?Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services in a community.

Capitalism: when “economics” is primarily a function of individuals and private corporations, NOT the state.

Page 2: What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services

CAPITALI$M

Page 3: What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services

Key Economic-Political Questions

Who should decide what goods and services will be produced?

Individuals (private) or the govt. (public)?How should goods and services be distributed and exchanged within a state?

Should the govt. try to “spread the wealth”?

What social services should a govt. provide?

Should the govt. establish a “safety net” to help the “losers” in capitalism?

Page 4: What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services

The Basics to ALL Economies:The 4 Factors of Production

Page 5: What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services

Origins of CapitalismAdam Smith’s The Wealth of Nations (1776) argued that when all individuals are free to pursue their own private interests, an “invisible hand” works to promote the general welfare.

The govt. should play a very limited, laissez-faire (“hands off”) role in society: defense and foreign relations, and police and courts to protect private property, health/safety, and the free market.

Page 6: What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services

Capitalism in the U.S.

NO nation has a truly laissez-faire, free enterprise system.

Most capitalist nations, like the U.S., have a MIXED economy (private enterprise + govt. participation/regulation).

Most people believe that the govt. should have a stake in “promoting the general welfare” of the people.

Page 7: What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services

OUR Economic System:The Free Enterprise System/Capitalism

Page 8: What is economics? Economics: the production, distribution, and consumption of goods and services. “The Economy” is the exchange of goods and services

More about Competition…In a free enterprise economy, prices are determined by the Law of Supply and Demand.

When demand for a product goes UP, prices go UP.

When supplies of a product go UP, prices go DOWN. (Think iPods and iPhones.)

Competition helps to hold down prices AND keep product quality high because consumers try to buy the best product at the lowest price.

The govt. keeps competition in the marketplace by preventing and breaking up monopolies (companies that have a stranglehold on a certain market).