Download Unit 4 Economic Foundations

Unit 4: Economic Foundations
Marketing Education
Name:________________________________
DIRECTIONS: Complete the following outline during the class discussion.
What Will You Learn?
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Why the economic resources are important.
How economies use the 4 economic utilities.
Why an understanding of scarcity is important.
Important characteristics of the different economic systems.
How price impacts supply and demand.
Why some products have elasticity of demand.
Why we use economic measurements.
How the phases of the business cycle affects the economy.
How government affects global trade.
I. Three Basic Economic Questions
A. All economies must answer the 3 basic economic questions of:
1. ___________ goods and services will be produced?
2. __________ will they produced?
3. For ___________ will they be produced?
II. Economic Resources
A. The ____________________is the way a nation makes economic choices about how the
nation will use its resources to produce and distribute goods and services.
B. The economic resources available include:
1. ___________________ Resources – anything in its natural state – oil, natural gas, coal, trees.
a. What country is the largest trading partner for the United States? ____________________
2. ___________________ Resources – money, tools, and equipment needed for production of
products or services.
3. ___________________ Resources – employees of the business.
4. _________________________ – the individual who takes the risk of owning and operating the
business.
III. Economic Utility
A. Economic ______________ is the amount of satisfaction, or ____________, a
consumer receives from the consumption of a particular product or service.
B. Businesses use economic utility to increase the chances that consumers will buy their
products or services.
C. The four types of utility:
1. _______________ utility is created by changes in the form or shape of a product to
make it useful.
2. ________________ utility is created by having a good or service at the location where
it is needed or wanted.
3. _______________ utility is created when a product or service is available when it is
needed or wanted by consumers.
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4. ____________________ utility is created when ownership of a good or service is
transferred from one person to another, but it may also occur through renting or
borrowing.
IV. The Problem of Scarcity
A. A study of economics begins with the basic economic problem of _________________.
B. People have ____________ wants and _________, but economic resources are limited.
C. _____________is the combination of unlimited needs and wants with limited resources.
D. Scarcity ______________ people and businesses to make economic choices.
V. The Economic Systems
A. A country’s economic system is classified based on how the country satisfies needs and
how resources are distributed.
1. _______________________ Economy – the individuals interact in the marketplace to
answer the questions.
2. ________________________ Economy – the government answers the questions.
3. _______________Economy – all economies are mixed.
B. Private/Free Enterprise, also called a _________ __________, is based on independent
decisions by businesses and consumers with limited government regulation.
C. ______________________ is another term used to describe Private/Free Enterprise.
D. _________ _____________ wrote a book called The Wealth of Nations in 1776 that
advocated Capitalism.
E. Characteristics of Private Enterprise
1. Resources are owned by individual producers.
2. _______________(a rivalry between 2 or more businesses) exists in the marketplace.
3. The ________ ______________ encourages businesses to efficiently provide
products, at a profit, that consumers need & want.
4. Consumers cast their “__________ __________” when they decide what to purchase.
5. Consumers place their individual _____, or view on the worth, of a product or service.
6. Government stays ____ of the exchange unless individuals or society will be harmed.
7. The _________________ form of government is most closely associated with this
type of economy.
F. Role of the Government in Our Free Enterprise Economy
1.
2.
3.
4.
To provide ______________to its citizens.
To support businesses and the growth of business.
To _____________ trade to protect consumers and workers.
To promote ________________in the marketplace.
G. Controlled/Command Economy
1. The ________________ answers the three economic questions.
2. __________________ is the political system in which the government owns and
operates everything.
3. This type of economy tends to have very poor infrastructure – refers to the condition
of the country’s roads, ports, sanitation facilities, and utilities.
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4. __________ ___________ is a good example of a controlled or command economy.
5. North Korea has the _____________ largest army in the world.
6. North Korea has the highest percentage of military personnel per capita of any nation
in the world.
7. North Korean children are up to 5 inches shorter and up to 14 pounds lighter than
children who were brought up in South Korea.
8. Adult men are 4 inches shorter and women are 2.5 shorter.
9. Malnutrition in North Korea is blamed for the height difference.
H. Mixed Economies
1.
2.
3.
4.
________ economies in the world today are mixed.
There is ____________ government involvement in all economies.
The government is the ___________ consumer of goods and services in the U.S.
The United States government is involved in the economy through laws and
regulations governing businesses.
5. The government provides _______________ for the economically disadvantaged
and ________________ for the elderly.
VI. Supply and Demand
A. ______________ refers to the quantity of a product consumers are willing and able to
purchase at a given price.
B. ______________ refers to the quantity of a product that producers are willing and able
to produce at a given price.
C. The Law of Supply
1. When the ____________ of a product is increased, producers will prefer to produce
more of that product.
2. When the price is decreased, less will be produced.
3. Businesses operate to make a profit and will prefer to supply more of those products
that offer the greatest profit potential.
D. The Law of Demand
1. When the ___________of a product is increased, less will be demanded.
2. When the price is decreased, more will be demanded.
E. The __________ ___________ is found when supply and demand curves meet. The
market price is also known as the equilibrium point.
F. _________________ ____________ exists when the amount of product supplied is
equal to the amount of product demanded.
G. Surplus Vs. Shortage
1. ________________ of goods occur when supply exceeds demand. When this
happens, businesses respond by lowering their prices in order to encourage people
to buy more of the product. This is a buyer’s market.
2. When demand exceeds supply, ______________ of products occur.
3. When shortages occur, businesses can raise prices and still sell their merchandise.
This is a seller’s market.
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Read the article about toy scalpers at Christmas and answer the following questions:
1. What characteristics of the Free Enterprise system do you see in this story?
2. What phase of the Business Cycle is relevant to this story?
3. Why was it so difficult for Toy’s “R” Us to predict demand for the product?
4. Do you believe toy scalping at Christmas is ethical or unethical?
VII. Elasticity of Demand
A. ______________ of ______________ describes the relationship between changes in a
product’s price and the demand for that product.
B. The elasticity of the product is based on the availability of substitutes.
C. Elastic Demand
1. ________________ demand means that the demand for the product will change
when the price of the product changes.
2. If the price increases, the demand will decrease.
3. If price goes down, the demand for that product will go up.
4. Elastic demand is a market situation in which a price decrease will increase revenue.
D. Inelastic Demand
1. _________________ demand occurs when the demand for a product is NOT
affected by changes in price.
2. Basic food products, such as milk and bread, have inelastic demand because they
are necessities.
3. A price decrease will decrease revenue.
VIII. Economic Measurements
A. _________________ is output per worker hour.
B. ____________ ______________ ______________ is a measure of the goods and
services produced using labor and property located in a country.
C. ________________ refers to rising prices. A low inflation rate (1-5 percent) shows
that an economy is stable.
D. The _____________ ___________ _______________ (CPI), also called the costof-living index, measures the change in price of some 400 retail goods and services
used by the average urban household.
E. The ___________________ rate is the percentage of the work force that is
unemployed at any given date
1. The higher the unemployment rate, the greater the chances of an economic
slowdown.
2. The lower the unemployment rate, the greater the chances of an economic
expansion.
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IX. The Business Cycles
A. Business cycles are the constant changes and _______and ____________ in
economic growth.
1. ________________ – the low point of a recession just before recovery begins.
2. ________________ – the high point of an economic recovery.
B. The Phases of the Business Cycle:
1. ___________________ is a period of economic growth and expansion. Nationwide
there is low unemployment, an increase in the output of goods and services, and
high consumer spending.
2. ____________________ is a period of economic slowdown. Unemployment begins
to rise, fewer goods and services are produced, and consumer spending decreases.
Recessions usually last 6-8 months, cut can last for a longer period of time.
3. _____________________ is a period of prolonged and deep recession. Consumer
spending is very low, unemployment is very high, and production of goods and
services is down significantly. Poverty results because many people are out of work
and cannot afford to buy food, clothing, or shelter.
a. A ________________ is a long and severe drop in the Gross Domestic Product.
4. ____________________ is a period of renewed economic growth following a
recession or depression. Recovery is characterized by reduced unemployment,
increased consumer spending, and moderate expansion by businesses. Periods of
recovery differ in length and strength.
X. Government & Global Trade
A. _________________ occurs when nations become connected through freely moving
imports and exports.
B. The ____________ ________________ is the welfare or state of being of the whole
planet or between several countries.
C. Balance of ______________ is the difference between the amount of a country's imports
and exports.
D. Trade Barriers:
1. An _______________ is a government prohibition against the shipment of certain
products to a particular country for economic or political reasons
2. A _______________ is a limit on the number of specific types of products that foreign
companies can sell in the country.
3. A _______________ is a tax placed on imported products to increase the price for
which they are sold.
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