Download Chapter One - Warren Hills Regional School District

Economics
Economics is the study of how wealth (anything
of value) is created and distributed.
Microeconomics
The study of the decisions made by
individuals and businesses
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Macroeconomics
The study of the national
and global economies
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Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Four Economic Questions
WHAT goods and
services
will be produced?
HOW will they be
produced?
FOR WHOM will
they be produced?
WHO owns and
controls the major
factors of
production?
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Factors of Production
***Resources used to provide goods and services
WHO owns and
controls the
major factors of
production?




Land and natural resources
Labor
Capital
Entrepreneurship
***The answer to this question will tell you what
type of Political System that country has.
Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Factors of Production
Land
Elements in their natural state that can be used in
production
Ex: minerals, water, land, forests, even air
Labor
Human resources such as managers and
employees
Ex: employee knowledge and skills
Capital
Equipment used to produce other goods
Ex: money, buildings, tools, machines
Entrepreneurship
Ownership of a business
Ex: starting a business (planning, managing,
risk)
Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Economic Systems
 Market economy
• Individual an businesses determine what, how, and for
whom goods and services will be produced. Price is
based on the market (capitalism)
 Command economy
• Government controls most of the factors of production
and determines what, how, and for whom goods and
services will be produced (socialism and communism)
 Mixed economy
• Aspects of a market and a command economy are used
to make these decisions (capitalism and socialism)
****The United States has a mixed economy****
Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Political Systems
 Capitalism
• Private citizens are free to go into business for themselves
• Produce whatever they choose, and distribute what they
produce
 Socialism
• Government decides what will be produced, how it will be
produced, and who owns and controls the factors of
production.
 Communism (extreme socialism)
• Government owns and controls all factors of production.
• Plans production to meet the needs of the state.
• Dictates occupations, wages, and prices.
Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Adam Smith’s Capitalism
Laissez-faire = “let them do”
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Measuring Economic Performance
 Productivity: The average level of output per worker
 Gross Domestic Product (GDP): all goods and services
produced within the boundaries of a country
 Real Domestic Product (RDP): the total value of a
nation's goods or services that have been adjusted for
inflation
 Consumer Price Index (CPI): monthly index that tracks
the prices paid by consumers
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Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Inflation/Deflation
Deflation: The
increase in the price of
products.
general decrease in
the price of products.
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Inflation: The general
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Supply and Demand


Supply
The quantity of goods and
services that producers are
willing and able to provide
When Supply > Demand,
the Price goes DOWN
Slide 10


Demand
The willingness and
ability of consumers to
buy goods and services
When Demand > Supply,
the Price goes UP
Output (GDP)
The Business Cycle
Peak
Trough
Time
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11
When economy is…
..Growing/Recovery.. ..Slowing/Recession..



People buy goods and
services
Jobs are created
Businesses are hiring



Slide 12
People buy fewer goods
and services
Fewer people are hired;
there are layoffs
Businesses are not
growing
National Debt
The National Debt is the total amount the
federal government owes.
National DEBT as of
Oct 2013
$16,738,158,460,000
Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Competition
Perfect Competition
 Many buyers and sellers offering the same product
(ex: corn, wheat, peanuts)
Monopolistic Competition
 Many sellers offering similar but not identical products
 Gain a competitive edge through product differentiation
– unique features, attention-getting brand name, unique
packaging, special services (ex: clothing, shoes)
Oligopoly Competition
 A few large sellers (ex: automobiles, cereals)
Monopoly
 One seller that sets its price based on demand
(ex: public utilities)
Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.