Download Economic Components

ECONOMIC SYSTEM
COMPONENTS
Private Ownership

Control of productive resources
• land
• labor
• capital
• that are used to produce goods
and services
Supply and Demand

Consumers are the demand

Producers are the supply
• When demand is high prices go up
• When production is higher than
demand prices go down
Profit Motive


Desire to make money for goods
and services consumers want.
Most powerful force that drives
our economy
Competition


Have to offer the best product
or service for the lowest price.
Requires efficient management
of productive resources
Free Economic Choice

Individuals & businesses have
the right to make choices about
•
•
•
•
•
spending
earning
saving
investing
producing
Government
Involvement

Regulates taxes, spending and
monetary policies
Gross Domestic Product



The most frequently used
method for measuring economic
performance
Current value of all goods and
services produced in a country
in a year
GDP
Consumer Price Index


A common method for
measuring inflation
Measures monthly changes in
the price of about 400 goods
and services that people buy
regularly
LAW OF SCARCITY

All economic
systems are
based on the
fact that
resources are
limited while
needs and
wants are
unlimited !
Applies to:



Individuals
Businesses
Government
ANTI-TRUST LAWS

Prevents
• monopolies
• restraints of
trade
MONOPOLY

A single
company
controls the
entire supply of
a product or
service
PROGRESSIVE TAX

100
80
60
East
40
West
20
North
0
1st
Qtr
3rd
Qtr

Income Tax is
an example
People with the
higher incomes
pay the higher
tax