Download Goal 8 PPT

Goal 8
Analyze Features of the US
Economic System
Comparing Economic Systems
• Three Fundamental
Questions:
1) What will be
produced?
2) How will it be
produced?
3) For whom will it be
produced?
• Four Economic
Systems:
1) Traditional
2) Command
3) Market
4) Mixed
Free Enterprise System
• Driven by:
1) Voluntary Exchange (individuals and
businesses freely choose to exchange
goods)
2) Government – enforces laws to keep
system going (gives out patents and
copyrights) through regulation
Free Enterprise System – Good
and Bad
• Good Effects:
1) Private Property
(people own their own
land, not gov’t)
2) Productivity and
Efficiency increase
3) Invention and
Innovations are more
likely
• Bad Effects:
1) Less security (lack of
government security)
2) Full Employment not
likely (no guarantee to get
a job)
3) Lack of Equity
(inevitably some are
helped and others are hurt
by this economy)
Circular Flow Diagram
• Household and Firm
• Product Market and
Factor Market
• Government Role
Supply
• Law of Supply (As
price increases,
Quantity increases)
• Supply Schedule and
Supply Curve
• Profit Motive means
that producers will
produce more things if
they can get more
profit for it
Shifting Supply
• Effect of Input Costs
• Technology
• Subsidies (always
increase)
• Taxes (always decrease)
• Regulations and
Deregulations
• Future Price Expectations
• Number of Suppliers
Demand
• Law of Demand (As
price increases,
Quantity decreases)
• Demand Schedule and
Demand Curve
• Consumers want less
of a product if the
price of that product
goes up
Shifting Demand
• Personal Disposable
Income
• Consumer Expectations
• Size of Population
• Consumer Tastes (New
Taste in Products)
• Price of Complement
• Price of Substitute
Supply and Demand Together
• When Quantity Supplied
is greater than Quantity
Demanded, there is a
surplus and a price floor
(minimum wage)
• When Quantity Demanded
is greater than Quantity
Supplied there is a
shortage and a price
ceiling (rent control)
Graphs of Price Ceiling and Price
Floor
Market Competition
•
Four Factors for Perfect Competition:
1)
2)
3)
4)
Large numbers of buyers and sellers
Products have the same quality
No major barriers to enter the market
Free Exchange of Prices
Types of Market Competition
Perfect Competition –
many firms, no variety,
no barriers, no price
control by business
Oligopoly – few firms,
some variety, high
barriers, high price
control
Monopolistic
Competition – many
firms, some variety, low
barriers, little price
control
Monopoly – one firm, no
variety, complete
barriers, complete price
control
Types of Monopolies
• Conglomerates – large companies that consist of
several businesses (most of which are unrelated)
• Vertical Merger – company buys a company that
produces materials for the original company
(Firestone Tires bought by Toyota)
• Horizontal Merger – company buys a competing
company (Honda bought by Toyota)
• MNC (Multinational Corporation) –
conglomerates that include businesses in different
countries
• Trusts – large monopolies (anti-trust laws ban
these)
Types of Businesses
Sole Proprietorship –
has limited life and
unlimited liability,
owned by one person
Partnership – owned by
two or more people,
sometimes as
cooperatives
Corporation – owned
by stockholders, has
limited liability and
unlimited life but also
double taxation
Franchise – purchasing
local rights to a
trademark corporation,
requires paying fees to
original company
Nonprofit –
organization that does
not make profit on
selling goods
SBA (Small Business
Administration) – helps
sole proprietorships
and partnerships grow
Labor Unions
• Types
1) Craft – skilled workers
only
2) Industrial – both skilled
and unskilled
3) Open – allow all
workers
4) Closed – allows just
workers in labor unions
• History
1) National Labor
Relations Act
2) Fair Labor
Standards Act
3) Social Security Act
4) Taft-Hartley Act
Solving Labor Disputes
• Labor Unions can:
1) Collectively
Bargain
2) Use a mediator
3) Use an arbitrator
4) Use a strike
(includes picketing)
• Businesses can:
1) Do nothing
(concede to the union)
2) Use a lockout
3) Use an injunction
Money History
• Barter System – trade goods that one
possesses (solved by medium of exchange)
• Creation of currency (coins)
• Use of gold standard (representative money)
• Use of legal tender (fiat money)
Types of Money and Institutions
Savings Account Checking
Account
Debit Card
Credit Card
Certificate of
Deposits (CDs)
Commercial
Banking
Credit Unions
Savings and
Loan
Associations
Stocks and
Mutual Funds
Bonds (savings,
treasury,
corporate, junk)
Insurance (life,
health, liability)
Pension Funds
FDIC
Federal Reserve
Bank
Collateral
(objects used as
money)