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Civics
Economics Unit
1. The Basic Economic Problem
a. How to meet unlimited wants with limited resources
2. The 3 Basic Economic Questions
a. What to produce?
b. How to produce it?
c. For whom are we going to produce it?
3. The Four Factors of Production
a. Land – Natural Resources
b. Labor – human effort directed to producing g/s
c. Capital – Money, machines, buildings, tools
d. Management (Entrepreneur) – the person that combines the first 3
elements and takes the risk of business.
4. Choices
a. “life is like a quarter”
b. Scarcity – (not enough) forces us to make choices
5. Trade-off – choosing one thing over another
6. Opportunity Cost – the last best thing you didn’t buy
7. Specialization – trying to be better at something than anyone else
8. Division of Labor – breaking down of a job into separate smaller tasks
9. Assembly Line – (Ford) the use of DOL to produce a cheaper, better
product
10. Human Capital – Human labor used in the workplace.
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11. Diminishing returns – When the output declines as more labor or
appliances are added.
12. Output v. Input – The concept trying to make sure that input doesn’t
exceed output. We want to be productive, growing, not decline or
stagnate.
13. Economic Systems – there are no PURE economic systems
a. Traditional Economic System- answers the three BEQ’s “as we always
have” – uncharted islands, Rain Forests, Desert Nomads
b. Market Economic System- The consumers answer the BEQ’s. If they
don’t like the product the producers won’t make the product. US,
Japan
c. Controlled Economic System- The gov’t answers the BEQ’s for the
people. China, Korea, Cuba
d. Mixed Economic System- Both the people and the gov’t answer the
BEQ’s. Great Britain, Australia, Sweden
14. Gov’t v. Economic Systems – the ‘ism’s are not governments, they are
economic systems.
15. 3 Important Characteristics of the American Economic System –
a. Private Property – owning property for your own use
b. Profit Motive – The desire to make money
c. Competition – attracting consumers
16. Communism v. Socialism
a. Communism – an economic system in which the central gov’t directs all
major economic decisions
b. Socialism – an economic system in which gov’t owns some of the
factors of production and distributes the products and wages
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17. Consumers v. Producers
a. Consumers are the people that buy a product and use it.
b. Producers are the makers of the products, not the user of it.
18. The Law of Demand – As price goes up, demand goes down; as price goes
down, demand goes up.
19. The Law of Supply – As price goes up, supply goes up; as price goes down,
supply goes down.
20. Shortage – not enough to go around (scarcity)
21. Surplus – more than enough to go around, leftovers
22. Elastic Demand – any products that are changed by price have an elastic
demand. (LOD), the demand for that product will change (clothes, shoes).
This product is easily substituted for.
23. Inelastic Demand – products where price doesn’t change demand. These
products aren’t easily substituted for. (Milk, Diapers, Feminine Products)
24. Mergers – a combination of 2 or more companies to form a single business
25. Horizontal Mergers – Merger of 2 companies within the same field.
(Banks, Airlines)
26. Vertical Mergers – Mergers of similar businesses who combine. (PepsiPizza Hut)
27. Conglomerates – Mergers of businesses that have little or nothing in
common. (Coke)
28. Government Corporations – US Gov’t businesses that operate with in the
business structure (US Postal Service, Amtrak, National Park Service)
29. Monopolies, Oligopolies, Pure Competition
a. Monopolies – exclusive ownership or control of one business or
resource
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b. Oligopolies – where there are a few that control a business or
resource
c. Pure Competition – where there are many businesses that try to
control a sector of the market
30. Types of Businesses
a. Sole Proprietor – 1 owner of a business (unlimited liability)
b. Partnership – 2 or more own a business (unlimited liability)
c. Corporation – Many owners (stockholders) of a business (limited
liability)
d. Limited v. Unlimited Liability – Unlimited liability (responsibility) for
debts of the business fall hard on SP’s and Partnerships. Stockholders
are protected from this loss.
31. Labor Unions – Association of workers organized to improve wages and
working conditions
32. Types of Investing
a. Life Insurance – money paid to cover your death. Whole life is paid to
cover you as long as you pay the premiums. Term life insurance only
covers you for a period of time.
b. Stocks – Investing in ownership of a company
c. Bonds – Letting the Gov’t borrow your money with a promise to repay
it over a period of time with interest
d. Certificate of Deposit (CD) – letting a bank borrow your money for a
period of time
e. Mutual Funds – Combining money of many people to buy stocks
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f. Money Markets – investing for retirement in 401k’s or IRA accounts
32. Credit
a. Credit – using someone else’s money with the promise to pay later
b. Credit Cards – evil plastic cards that are too easy to use
c. Interest – what you pay to use someone’s money
33. Functions of Money –
a. medium of exchange –
b. units of measure –
c. store of value –
34. Characteristics of money
a. transportable
b. divisible
c. acceptable
35. The types of money
a. Currency (paper) – different denominations of bills
b. Currency (coins) – minted solid coins
c. Checks – same power as currency
d. Credit – different types; cards such as Visa, Mastercard, American
Express, be careful of Credit.
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36. The Federal Reserve System –
a. The banks bank – They loan money to banks or hold the banks extra
cash
b. Federal Deposit Insurance Corporation – Help to make sure that the
persons money is protected
37. Forecasting the Economic Future
a. Leading economic indicators – Unemployment, Housing Starts, House
purchases, Car Sales, Stock Market, Inflation, Interest Rates
b. Gross Domestic Product – the total dollar value of all-final goods and
services produced in a country during a single year.
c. Real GDP – shows the economy’s production after the distortions of
price increases have been removed.
38. Production v Services
a. Downsizing – to reduce the workforce
b. Out-sourcing – sending jobs to other places to save money
c. Comparative Advantage – the ability of a country (or state) to produce
a good at a lower opportunity cost than another
d. Trade Barriers/Tariffs – some countries will try to place taxes on
certain products to protect their native products
e. NAFTA- North American Free Trade Agreement
f. Interdependence – Where countries depend on each other for
products (coffee)
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39. Taxes – Paid to cover the cost of Government
a. Progressive Tax – a tax that takes a larger amount of your money that
you earn
b. Regressive Tax – takes a larger percentage from people with lower
incomes
c. Sales Tax – tax placed on items sold
d. Excise Tax – tax placed on certain items to be paid my users
e. Income Tax – tax placed on money earned
f. Property Tax – tax placed on Real Property (house, car)
g. County Manager – person in charge of the county, works with the
Commissioners and the Mayors of the towns to set the property tax
rates
h. Mayor Council Form of Gov’t – appointed by the County Commissioners
i. Use Tax – tax on products or services you use (toll roads)
40. Tight v. Loose Monetary Policy
a. Tight – to try to increase the value of our money (scarcity)
b. Loose – to let the money flow out, it lowers the value of money
c. NIMBY- Not In MY Back Yard – American Protectionism
d. Balanced Budget – sometimes we must increase taxes or cut programs
to balance the National Budget. Always a cause for concern.
e. Deficit – Owing money to other people or countries. Paying out more
than we are bringing in.
41.
Budget – a plan of income use
42.
a.
b.
c.
d.
The Business Cycle – The ups and downs of the economy.
Peak – the highest point
Contraction – sometimes called Recession as the economy slows down
Trough – the lowest point of the economy
Expansion – where the economy starts to show growth