Economics Economics Goals 7 - 9 Goals 7 - 9 Textbook reference Unit 6 (Ch. 17 – 21)
7.01 Describe the factors of production 7.01 Describe the factors of production and their impact on economic activityand their impact on economic activity
Economics stems from satisfying peoples needs and wants
The basic economic questions1. What to make?2. How much to make?3. How to make it?4. Who gets what is produced?
The answers help us decide how to use the factors of production
Factors of productionFactors of production
EntrepreneurEntrepreneur
CapitalCapital
LaborLabor
LandLand
FactorsFactorsOf Of
ProductionProduction
Examples?
7.02 Explain how scarcity influences producers & 7.02 Explain how scarcity influences producers & consumers to make choicesconsumers to make choices7.03 Examples of tradeoffs & opportunity costs7.03 Examples of tradeoffs & opportunity costs
UnlimitedUnlimited needs & wantsneeds & wants
Goods & Goods & ServicesServicesProducedProduced
DistributionDistributionFactorsFactors
OfOfProductionProduction
ConsumptionConsumptionLimitedLimited
resourcesresources
TradeoffsTradeoffs
OpportunityOpportunity
costscosts
7.04 Explain the impact of specialization, division of 7.04 Explain the impact of specialization, division of labor, & consumption and production increaseslabor, & consumption and production increases
We are not self sufficient. We specialize in our economic activities
We break down activities into smaller parts – Division of labor Result: we are more productive & it create a need for
markets Invention, innovation, & new technology
usually increase productivity What is the effect of these on price?
7.05 The impact of investment7.05 The impact of investment
Labor forceLabor force
Investment in Investment in Human capitalHuman capital
Investment inInvestment in physical capitalphysical capital
Increased labor productivityIncreased labor productivity
Increased outputIncreased output
Increased wagesIncreased wages Increased demandIncreased demand
7.06 Compare and contrast different 7.06 Compare and contrast different economic systemseconomic systems
Traditional Driven by custom, centered on the family unit Slow to adapt
Command Government owns & controls the factors of production Quota driven
Market Private ownership. Individuals own the factors of
production Driven by self interest
8.02 How the free market system encourages 8.02 How the free market system encourages private ownership and promotes initiativeprivate ownership and promotes initiative
The right to own property is one of the most important individual rights Protected by the 5th and 14th Amendments
Our market system depends on individual decisions and actions Private ownership and seeking profit leads to
production of goods, services, wealth, & investment
8.02 (cont)8.02 (cont)
Governments role in a free market economy: Maintain the health of the economy
Patents and copyrights Ensure competition
Antitrust laws
8.03 Explain the circular flow of 8.03 Explain the circular flow of economic activityeconomic activity
Businesses Households
Factors of ProductionFactors of Production
Goods and ServicesGoods and Services
IncomeIncome
Consumer SpendingConsumer Spending
8.04 Illustrate how supply and demand 8.04 Illustrate how supply and demand affect pricesaffect prices
Law of Demand - As the price of goods and services fall, the quantity demanded will rise.
Law of Supply - As the price of goods and services rise, the quantity supplied will rise.
Market Price - That price at which the quantity demanded is exactly equal to the quantity supplied. Also called equilibrium price.
8.05 Predict how prices change with 8.05 Predict how prices change with shortages or surplusesshortages or surpluses
Price Quantity
Demanded Supplied
5.00 10 60
4.00 15 50
3.00 25 40
2.00 40 30
1.00 55 10
8.06 Explain how changes in competition 8.06 Explain how changes in competition can affect price and outputcan affect price and output
Number ofFirms
Variety ofGoods
Control ofPrices
Barriers toEntry
Perfect Competition
Many None None None
MonopolisticCompetition
Many Some Little Low
Oligopoly A Few Some Some High
Monopoly One None Complete Complete
8.07 Describe the roles & functions of economic 8.07 Describe the roles & functions of economic institutions and business organizationsinstitutions and business organizations
BusinessForm
Advantages Disadvantages
Sole Proprietorship 1. Ease of formation2. Direct control3. Keep all profits
4. Unlimited liability5. Hard to raise capital6. May not have mgt
expertisePartnership 1. More avail capital
2. Complementarybusiness skills
3. Unlimited liability4. Interpersonal
conflicts5. Difficult to dissolve
Corporation 1. Limited liability2. Ease of raising
capital3. Professional mgt
4. Heavy taxation5. Cost of formation6. Government
restrictions
8.08 Evaluate the investment decisions 8.08 Evaluate the investment decisions made by individuals, business, & govt.made by individuals, business, & govt.
8.09 Describe the role of money in 8.09 Describe the role of money in trading, borrowing, & the governmenttrading, borrowing, & the government
What is it? Anything that serves as a medium of exchange,
a unit of account, and a store of value. Six characteristics:
1. Durable 2. Portable3. Divisible 4. Uniform5. Limited supply 6. Acceptable
Why is it valuable?
BankingBanking
Safely hold peoples money, pay them interest, and loan money to others at a higher rate of interest
Banks are the “fuel” that run the economy. They make money available for investment to help the economy grow
Started with goldsmiths in the middle ages
Banking servicesBanking services
Storing money FDIC Safe deposit box
Saving money1. Checking account 2. Savings account3. Money Market fund 4. Certificate of Deposit
Loans Fractional Reserve banking
Credit cards (Debit cards) ATM
9.01 Identify phases of the business cycle 9.01 Identify phases of the business cycle & economic indicators used to measure& economic indicators used to measure
Predicting the business cyclePredicting the business cycle
Leading indicators (change coming) They come before major changes in the cycle
Building permits Coincident indicators (change here)
How the economy is doing at the present time Rise in income
Lagging indicators (how long will it last) Signs that follow major changes in the cycle
New business applications
9.02 The impact of government 9.02 The impact of government regulation on economic activityregulation on economic activity
Protecting consumers and workers FDA, OSHA, CPSC, FDIC
Promoting competition FTC
Supervising labor-management relations NLRB
Protecting the environment EPA
Ensuring Economic Stability Fiscal Policy Monetary Policy
9.03 The impact of the movement of human 9.03 The impact of the movement of human & capital resources on the U.S. economy& capital resources on the U.S. economy
Decline of manufacturing Loss of jobs Need to retrain for new jobs Shift overseas where labor is cheaper
Population shifts Rust Belt to Sun Belt Increased immigration
9.04 The impact of current events on decisions 9.04 The impact of current events on decisions of consumers, producers, & governmentof consumers, producers, & government
New technological advances MP3, Blueray, microtechnology
War on terrorism Mobilization of the military Homeland Security Department
Subprime home loans Collapse of mortgage industry Federal government bailout of financial industry
9.05 The impact of international trade & global 9.05 The impact of international trade & global productsproducts9.06 How are domestic & international economies 9.06 How are domestic & international economies interdependentinterdependent The world is flat
We are increasingly interdependent with other countries We spend more on imports than we make on exports
(trade deficit) Equals about 25% of our GDP
Free trade The United Nations WTO NAFTA Helping developing countries (foreign aid)
9.07 The effects of Fiscal & Monetary 9.07 The effects of Fiscal & Monetary policy on the economypolicy on the economy
Fiscal Policy The use of government spending and revenue
collection (taxes) to influence the economy Conducted by Congress
Monetary Policy Actions the Federal Reserve System (the Fed)
takes to regulate the money supply Conducted by the Federal Reserve Board
Monetary policyMonetary policy
Fedactions
To fightinflation
To fightrecession
ReserveRequirement
Increase Decrease
DiscountRate
Increase Decrease
OpenMarketOperations
Sell Bonds Buy Bonds
Fiscal policyFiscal policy
Fiscalactions
To fightinflation
To fightrecession
Taxes Raise taxes Cut taxes
Spending Cutspending
Raisespending
9.08 The influence of environmental factors, economic 9.08 The influence of environmental factors, economic conditions, & policy decisions on individual economic conditions, & policy decisions on individual economic activitiesactivities
Visual summary . . . . . . . EconomicsVisual summary . . . . . . . Economics
P. 470 Mkt. principlesP. 512 Types of banksP. 515 Money supplyP. 525 Social securityP. 528 Spend & save
P. E28 Economic glossary
P. 540 Bus. CycleP. 550 Econ. ChallengesP. 557 Supply & demandP. 559 Circular flowP. 571 Global economy