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Chapter 1
 What
is the difference
between a good and a
service?


Good: tangible
Service: intangible
 What
are some
consumer
goods/services?
 What are some
business
goods/services?
 Largest
producer of
goods and services
in the world?

United States
 Impact
of consumer
spending:
More jobs
 More money flow
 Increased standard of
living (What does this
mean?)
 Impact
of increased
consumption:
Pollution
 Conservation
 Managing waste


 **US
produces more
garbage per person
per year than the
residents of any
other country
 Economic
Resources: resources utilized to
create goods and services
 AKA: Factors of Production
 Three types:



Natural
Human
Capital
 Natural:
raw materials
supplied by nature
 Human: people who
produce goods and
services
AKA: Labor
 Ex: Entrepreneur: take
risk of using resources to
start new product

 Capital:
products and money used to create
goods and services

Money = Capital
 Resources:

Limited
limited or unlimited?
 Scarcity:
unlimited
wants, limited
resources


AKA: Basic
Economic Problem
Everyone is affected
 Scarcity
requires
us all to make
difficult decisions
 Example…
 Economic
Decision-Making: choosing which
wants, among several, are to be satisfied
 What occurs when you must make a decision:

Trade-Off:



Giving up one thing in order to have another
Example…
Opportunity Cost:


Weighing the options and looking at what is being
given up when a decision is made
Example…
 Steps
to DMP:
Define the problem
 Identify choices
 Evaluate choices
 Choose
 Act
 Review

 Economic




Questions:
What goods and services will be produced?
How will the goods and services be produced?
What needs and wants will be satisfied with the
goods and services produced?
**For whom will the goods and services be
produced?
 What
goods and services will be produced?
Resources readily available
 Resources that are limited
 Climate
 Focus of country
 Find balance in needs and wants of country

 How



will the goods and services be produced?
Best use of resources
Change in trends (ex: agriculture to industry)
Labor needs
 What



needs and wants will be satisfied?
Also answers the “For Whom?” question
Must determine what is most critical
Developed budget
 Economic
System:
the method by
which a country
answers the
previous questions
 Types




of Systems:
Command
Market
Traditional
Mixed
 Command:
AKA: directed,
planned
 Resources: owned
and controlled by
government
 Government makes
all decisions
 Personal economic
choices are limited

 Market:
AKA: capitalistic
Resources: owned and
controlled by the
people
 Questions answered
through consumer
activity
 Marketplace: where
goods and services
exchange hands
 Dollar votes: when
you build demand for
a product by making a
purchase


 Traditional:
AKA: Custom-based
Goods and services
are created based on
what has always been
done
 Questions are
answered based on
skills and available
resources
 Found in lessdeveloped questions
 Looking to meet basic
needs of the people


 Mixed:



Contains
characteristics of all
other systems
No pure systems exist
More economies are
moving from
command to market


Former Soviet Union
China

US Economic System
Capitalism: private ownership of resources
 Economic freedoms:






Free/private enterprise: freedom to open business
Private property: buy/dispose of personal items
Freedom of choice: spend money when/where you want
 Voluntary exchange: giving something of value (usually
money) in order to receive something of value
Profit: money left after bills are paid
 Profit motive: working hard to make more money
Competition: two people/groups going after same goal
 Consumers:


Person who buys
and uses goods and
services
Can be:




Individual
Business
Government
Create demand
 Producers:


People/organizations
that determine what
goods and services
will be available
Make decisions based
on demand
 Demand:
Quantity of goods and
services consumers
are willing and able
to purchase at a
particular price
 Direct impact on
prices
 Demand curve: shows
the relationship
between price and
quantity demanded

 Supply:
Quantity of goods and
services businesses
are willing and able
to provide at a
particular price
 Direct impact on price
 Supply curve:
relationship between
price and quantity
supplied

 Demand


Increase in demand = higher prices
Decrease in demand = lower prices
 Supply




impact on price:
Increase in supply = lower prices
Decrease in supply = higher prices
 Other

impact on price:
factors to influence price:
Competition
Quality of materials used
Unexpected events
 Market
price: point where supply and
demand equal (AKA: equilibrium point)