Download Warm Up - Midlakes

Warm Up
Who decides what products will be
produced?
Individuals
• What roles do you think individuals play in the
economy?
– List!
Individual Roles in Economy
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Consumer
Saver
Investor
Producer
Earner
Borrower
Lender
Taxpayer
Recipient of government services
THE Conflict!
• The conflict between unlimited wants BUT
limited resources forces both individuals and
societies to make economic decisions
– What to produce
– How to produce
– For whom to produce
Productive Resources
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Land
Labor
Capital
Entrepreneurs/management
Let’s Create
Create a business and discuss what land, labor,
capital, and entrepreneurs/management you
will need
Economic Systems
• Every nation has an economic system
• An economic system is the way a nation uses
resources to produce goods and services
• Production is the creation of goods and services
• Producing goods and services require resources
– Human
– Non-human
• Is the study of how economic systems work
Traditional Economy
• The ways to produce products are passed
from one generation to the next
• Parents teach children how to produce goods
and services
• Tribes in remote areas of the world still
practice traditional economies
Command Economy
• The government owns most resources and
made most economic decisions
• Each company receives a plan from the
government that told it what to produce
• The government determines all prices, styles,
colors, and the amounts produced
• Individuals have no say in production or their
role in it
• Currently practiced: N.Korea and China
Market Economy
• The primary economic system in most
industrialized economies
• Known as a market or capitalist economy
• People own the resources and run the businesses
• People make all the decisions (what to produce,
how to produce, and for whom to produce)
• They set their own prices
• The purpose – to make a PROFIT $$$
• Profit=price-cost
Mixed Economy
• Some government controls
– Rate
– Limits on what businesses and individuals can do
• Some market controls
• The U.S. – with market economy dominat
Let’s Compare
• Compare a market economy to
– Traditional
– Command
– Mixed
• What are the similarities/differences?
What is Circular Flow of the Economy?
• Draw a circular flow model showing the roles
of households, businesses, and government in
a mixed capitalistic economy
Going to a Concert?
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Popular concert
Sold out? Shortage of tickets?
How many would buy for $25
More?
Law of demand: consumers will demand more
of a product at lower prices
Scarcity
• The basic problem facing every economy
• Consumer wants are greater than the
resources available to satisfy those wants
• Resources are limited
• In a market economy, you choose what
resources you will use to produce, how much,
and the price
• You create market forces of demand and
supply
Demand
• Law of Demand - the quantity of a good or service that
consumers are willing and able to buy at various prices
during a given time period
• When the relationship between price and quantity
demanded is shown on a graph, it is called a demand curve
• Downward from left to right (As price goes up, quantity
demanded goes down)
Supply
• Supply is the quantity of a product that producers
are willing and able to make available for sale at
various prices over a given time period
• Law of supply: producers are willing to offer more
of a product for sale at higher prices than at
lower prices
• As the price rises, the quantity supplied increases
• The relationship between price and quantity
supplied is shown in the supply curve
Equilibrium
• By combining the supply and demand curves on
the same graph, you can see how supply and
demand together determine how much of a
product will be produced and the equilibrium
price
• Equilibrium – price at which the quantity supplied
exactly equals the quantity demanded
• In other words, consumers are willing and able to
buy the same amount of the product as
producers are willing and able to supply
Draw in Equilibrium
Surplus
• Excess quantity supplied
• Eventually will force producers to lower the
price
• As price comes down, consumers will buy
more until it returns to equilibrium
Shortage
• Consumers are willing and able to buy a lot at
low prices
• They are willing to buy more than are
available for sale
• Producers will start raising the price again
until it reaches equilibrium
Challenges for the U.S/Market
Economies
• Unemployment
• Income and wealth gaps
• Other: Environmental pollution, economic
instability, discrimination
Using the Internet
• Employment data
– www.whitehouse.gov/fsbr/esbr/html
• Family income distribution
– www.census.gov/hhes/income/histinc/f02.htlm
Closure
• What factors determine what will be
produced and at what prices in a market
economy? Command economy?