Download Overview of the U.S. Economy

OVERVIEW OF THE
U.S. ECONOMY
Types of World Economies
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Traditional- based on certain customs and traditions
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Command- government makes all economic decisions
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Decide what will be made, how much, and who will own these goods
Pure Market- government plays no role at all in making economic decisions
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Usually represented by hunting and gathering societies
Goods and services exchanged without government involvement
Mixed- can include elements of traditional, command, and market economies
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Can be closer to pure markets or closer to command economies
The Free-Enterprise System
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Individuals have the right to:
Own property
• Make individual choices
• Compete with others in the economy
• Make economic decisions for their own benefit
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Two major groups of people in free-enterprise
system:
Consumers- people who decide to buy goods or
services
• Producers- person or company who provides
goods or services
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Consumers influence producers’ decisions
The Free-Enterprise System
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Producers use human resources
(labor to produce goods or
services) and natural resources
to meet demands of consumers
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Federal government in the U.S.
provides regulations, or
guidelines, for businesses
• How to use these resources
fairly and efficiently
The Circular Flow Model
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Consumers, producers,
and the government
interact with each other
in a free-enterprise
system
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The Circular-Flow Model
demonstrates how these
interactions/exchanges
takes place
Prices & The Marketplace
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Consumers want low prices while producers prefer high prices
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Supply & Demand
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Demand is the amount of a good or service a customer is willing to buy at various prices for a set
period of time
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If you want something and have the money to spend on it, you have contributed to the demand for that
product/service
Demand for a good/service is related to its price (law of demand)
When price goes up, demand drops
• When price goes down, demand increases
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Supply is the quantity of goods/services that producers are willing to offer at various prices for a set
period of time (supply can be affected by things like the weather)
Supply of a good/service is related to its price (law of supply)
Producers supply more when they can sell them at a higher price
• Producers supply less when they can only sell them at a lower price
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The Supply & Demand Curve
Prices & The Market Place
• Competition
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Sometimes businesses make the same
choice as to what to provide and for
whom
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These businesses are in competition
Competition is the economic rivalry
among businesses selling similar products
Encourages produces to improve or invent
new products
• Benefits consumers because it can lower the
price of goods/services
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Competition tends to increase supply- a
lack of competition can mean a lack of
supply
Prices & The Market Place
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Surpluses & Shortages
• When the Q (quantity) supplied is
greater than the Q demanded, there
is a surplus
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Surplus tells producers they are charging
too much or something else is wrong
with their product/service
When the Q demanded is greater
than the Q supplied, there is a
shortage
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Shortage tells producers they are
charging too little and need to raise their
prices
How Your Choices Affect the Economy
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You are free to save or invest your money
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Many ways to invest:
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Stocks and sharing in a company’s profits
Bonds that can be repaid to you with
additional interest
You can also invest in new businesses
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Venture capital helps entrepreneurs
develops ideas into products and pay for the
cost of running their business
How Your Choices Affect the Economy
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Business Investments
• Corporations use revenue from stocks and bonds to improve their businesses and
increase their profits
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Investment and Technology
• New technology is developed when companies invest money in technological
research and development
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Hire new employees, purchase new equipment, etc. etc.
Can bring new products to the market, improve efficiency, help increase profits
All investments involve a level of risk- successful investments not only benefit the
investor, but the economy as a whole
?
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What are the two major groups of a people in a free-enterprise system? Briefly describe
both.
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What is demand? Briefly describe the Law of Demand. Also, what is supply? Briefly
describe the Law of Supply as well
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What are three positive effects of competition in the market place?
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What is a surplus and what does it say to the producer? What is a shortage and what does
it say to the producer?
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How do entrepreneurs, small businesses, and corporations use revenue from investments?