What is Economics Chapter 1. Words to Know Needs Things that a person cannot live without Food Clothing Shelter Air.

What is What is EconomicsEconomics

Chapter 1Chapter 1

Words to KnowWords to Know

NeedsNeeds Things that a person Things that a person cannotcannot live without live without

FoodFood ClothingClothing ShelterShelter AirAir


WantsWants Things people would like to have Things people would like to have but are but are

not necessarynot necessary for survival for survival IPodIPod Cell phonesCell phones DVD’s/Blue RayDVD’s/Blue Ray Luxury cars/trucksLuxury cars/trucks Fashionable ClothingFashionable Clothing


EconomicsEconomics StudyStudy of how people figure out ways to get of how people figure out ways to get

the things they the things they need and wantneed and want by by making making choices.choices.

Words To KnowWords To Know

ScarcityScarcity Having a Having a limited number of resourceslimited number of resources to to

produce things that people need or want.produce things that people need or want. ExampleExample

Band concert and only so many tickets and seats Band concert and only so many tickets and seats are availableare available

QuestionsQuestions

Describe some needs & wants from the Describe some needs & wants from the story.story.

Describe some of the choices that Describe some of the choices that needed to be madeneeded to be made

Write a wish list.Write a wish list. What might you have to do to get the What might you have to do to get the

items on your wish list?items on your wish list?


GoodsGoods Things that can be seen, touched, and Things that can be seen, touched, and

bought or soldbought or sold Physical itemsPhysical items

SunglassesSunglasses PopcornPopcorn CD’sCD’s


ServicesServices Activity performed by one person for another Activity performed by one person for another

personperson Sales personSales person DoctorDoctor LawyerLawyer TeachersTeachers Auto mechanicsAuto mechanics

Factors of ProductionFactors of Production

How things we need are producedHow things we need are produced 4 factors of production4 factors of production

LandLand LaborLabor CapitalCapital EntrepreneurEntrepreneur


LandLand All natural resources that are used to All natural resources that are used to

produce a goodproduce a good Things found in natureThings found in nature

LandLand CropsCrops WaterWater


Natural ResourcesNatural Resources Items from nature that can be used to create Items from nature that can be used to create

goods and servicesgoods and services CoalCoal WoodWood SunlightSunlight WaterWater


LaborLabor People are paid to do to produce goods People are paid to do to produce goods

and servicesand services Labor forceLabor force

Made up of all the people who work for Made up of all the people who work for moneymoneyDoctorDoctorAssembly-line workerAssembly-line worker


CapitalCapital Anything used to produce goods and Anything used to produce goods and

servicesservices MoneyMoney ToolsTools MachinesMachines factoriesfactories


EntrepreneurEntrepreneur People who decide how to combine People who decide how to combine

resources to create new goods and servicesresources to create new goods and services Bring together land, labor & capitalBring together land, labor & capital Start new businessesStart new businesses Make all the decisions to produce goods and Make all the decisions to produce goods and

servicesservices

Economic SystemsEconomic Systems

Economic SystemEconomic System Organized way society provides goods & Organized way society provides goods &

services to meet the wants & needs of it services to meet the wants & needs of it peoplepeople


TypesTypes Command EconomyCommand Economy Market EconomyMarket Economy Mixed EconomiesMixed Economies

Capitalist EconomyCapitalist Economy Free Enterprise EconomyFree Enterprise Economy


Three questions to answerThree questions to answer

WHAT should be producedWHAT should be produced HOW should it be producedHOW should it be produced WHO should receive the good or serviceWHO should receive the good or service


Traditional EconomyTraditional Economy

Uses habits, customs & religion to answer Uses habits, customs & religion to answer the WHAT, HOW & WHO questionsthe WHAT, HOW & WHO questions

Passed down from generation to generationPassed down from generation to generation Small communitiesSmall communities Work togetherWork together

Traditional EconomyTraditional Economy

AdvantageAdvantage Each person knows what role they playEach person knows what role they play Life is stable & predictableLife is stable & predictable

DisadvantageDisadvantage Difficult to change thingsDifficult to change things Lower standard of living because of little Lower standard of living because of little

changechange


Command EconomyCommand Economy

Government makes the economic decisionsGovernment makes the economic decisions Owns land & capitalOwns land & capital Controls labor – where they work & what they are Controls labor – where they work & what they are

paidpaid Decides what to produce & how much it will costDecides what to produce & how much it will cost

Consumers have NO sayConsumers have NO say


AdvantagesAdvantages

Public services are provided at little or no Public services are provided at little or no cost to peoplecost to people

Can change direction quicklyCan change direction quickly Meets needs of peopleMeets needs of people


DisadvantagesDisadvantages

Doesn’t meet wants of the peopleDoesn’t meet wants of the people Wages are similar no matter what job they Wages are similar no matter what job they

havehave Rarely lose jobs even if performing poorlyRarely lose jobs even if performing poorly Quality of products sufferQuality of products suffer


Market EconomyMarket Economy People make economic decisionsPeople make economic decisions

What gets madeWhat gets made How goods & services are madeHow goods & services are made Who will consume the goods & servicesWho will consume the goods & services

Market EconomyMarket Economy

Buyer & sellers exchange goods & Buyer & sellers exchange goods & servicesservices

Each person Each person specializesspecializes in producing or in producing or providing goods & servicesproviding goods & services

People sell what they have & buy what People sell what they have & buy what they wantthey want


AdvantagesAdvantages

Change based on what people wantChange based on what people want FreedomFreedom

Producers make things that will sellProducers make things that will sell Consumers can buy what they wantConsumers can buy what they want

Government has little control Government has little control


DisadvantagesDisadvantages

Doesn’t provide enough services that people Doesn’t provide enough services that people value – health care, education, justicevalue – health care, education, justice

A lot of changeA lot of change Producers worry about someone else Producers worry about someone else

making a better product for less moneymaking a better product for less money

Mixed EconomyMixed Economy

Market based economyMarket based economy Government plays a roleGovernment plays a role Countries that use mixed economyCountries that use mixed economy

United StatesUnited States JapanJapan CanadaCanada Great BritainGreat Britain

Free Enterprise SystemFree Enterprise System

U.S. has a capitalist economy & a free U.S. has a capitalist economy & a free enterprise economyenterprise economy Competition is allowedCompetition is allowed Government has some involvementGovernment has some involvement People own the factors of productionPeople own the factors of production

Capitalism & Free Capitalism & Free EnterpriseEnterprise

4 basic principles4 basic principles

Voluntary ExchangeVoluntary Exchange Private Property RightsPrivate Property Rights Profit MotiveProfit Motive CompetitionCompetition


Voluntary ExchangeVoluntary Exchange

People buy or sell what they want, when People buy or sell what they want, when they wantthey want

Transactions are good for the buyer and the Transactions are good for the buyer and the sellerseller


Private Property RightsPrivate Property Rights

Right to do what you want with the things Right to do what you want with the things they ownthey own

Can’t interfere with rights of othersCan’t interfere with rights of others Keep rewards that you earnKeep rewards that you earn Gives people desire to work hard & be Gives people desire to work hard & be

successfulsuccessful


Profit MotiveProfit Motive

Making moneyMaking money Business owners make decisions about the Business owners make decisions about the

businessbusiness Decisions are made by amount of money Decisions are made by amount of money

that will be madethat will be made


CompetitionCompetition

Producers what to sell products at the Producers what to sell products at the highest pricehighest price

Consumers what to buy products for the Consumers what to buy products for the lowest pricelowest price

Government’s RoleGovernment’s Role

Protect citizensProtect citizens Producers give information to consumersProducers give information to consumers Laws Laws

Food, drugs & automobilesFood, drugs & automobiles Against false advertisingAgainst false advertising Protect environmentProtect environment Individual freedomsIndividual freedoms

Individual FreedomIndividual Freedom

DiscriminationDiscrimination Treat a person a way based on race, Treat a person a way based on race,

gender, religion or agegender, religion or age

Federal Regulatory Federal Regulatory AgenciesAgencies

Environmental Protection AgencyEnvironmental Protection Agency Protect people’s health & environmentProtect people’s health & environment

Equal Employment Opportunity Equal Employment Opportunity Commission (EEOC)Commission (EEOC) Enforcing civil rights lawsEnforcing civil rights laws


Federal Trade Commission (FTC)Federal Trade Commission (FTC) Against monopoliesAgainst monopolies

Food & Drug Administration (FDA)Food & Drug Administration (FDA) Sets and enforces standards for food, drugs Sets and enforces standards for food, drugs

and cosmeticsand cosmetics


Occupational Safety and Health Occupational Safety and Health Administration (OSHA)Administration (OSHA) Save livesSave lives Prevent injuriesPrevent injuries Protect health of workersProtect health of workers

What is Economics Chapter 1. Words to Know Needs Things that a person cannot live without Food Clothing Shelter Air.

Documents

new goods

madehow goods services

knowwantsthings people

wish list

limited number of resources

economic decisionswhat

thingslower standard

customs religion