Intro to Economics

1. Intro to Economics Civics & Economics M. Teal

2. Do Now • What is the difference between a want and a need?

3. Barter Simulation • Each of you has been given a sheet of paper. On this sheet of paper, you are given a particular good that you have. Example: “You have 4 bails of hay”. The sheet of paper also states a good that you want. Example: “You want 5 pigs” • The goal of the simulation is for you to trade with your classmates so that your “want” is the same thing as your “have” • In order to trade, you should tear your sheet of paper at the dashed line. You may trade away your “have”, but you must keep your original “want” • When your new “have” matches your original “want”, return to you seat.

4. Barter is a type of trade in which goods or services are directly exchanged for other goods and/or services, without the use of money.

5. Barter

7. Money is anything that is generally accepted as payment for goods and services and repayment of debts.

8. vote on the characteristics of money that you think are most necessary • Durability • Portability • Acceptability • Divisibility • Stability in value

9. “The Story of Money” https://docs.google.com/a/cms.k12.nc.us/file/d/0B6tgXhprC8x2a1pmSExuNUt2QWs/edit

10. “The Story of Money” • 1. Commodity money- money whose value comes from a natural resource or good out of which it is made. Examples of commodities that have been used as mediums of exchange include gold, silver, copper, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, and candy. • 2. Representative money- money that consists of token coins, other physical symbols such as certificates that can be reliably exchanged for a fixed quantity of a commodity such as gold, water, oil, food, etc. • 3. Currency- coins and paper money • 4. Fiat money- money used as the circulating medium of exchange that is not backed by or directly convertible into any specific physical commodity, but rather has value because the society that created the system that has assigned it value

11. “The Story of Money” • 5. Legal tender- money that by law cannot be refused as a medium of exchange • 6. Checkbook money/demand deposits- An account from which deposited funds can be withdrawn at any time without any notice to the bank that is holding it. • 7. Savings deposits- accounts maintained by banks that pay interest but cannot be used directly as money. Customers must transfer the money to a demand deposit or into cash to use this money as a medium of exchange. • 8. Timed deposit- a money deposit at a banking institution that cannot be withdrawn for a certain period of time.

12. Our high school has decided to issue its own money and you have been asked to design the currency and create a table of the value of the currency in relation to certain commonly used school supplies. • The money should: • Be colorful with multiple illustrations that relate to high school life and their school in particular • Meet the major characteristics of effective money discussed during class • Have at least three difference denominations (divisible units)

13. Do Now Make a list of resources used in the production of this car.

14. The factors of production are the resources used to produce. • Capital Goods - a man-made factor of production used by labor in making other products. Includes tools, factories, machines, etc. • Labor - any form of human effort exerted in production. Also called human resources. • Natural resources - productive resources that are provided by nature - such as land, air, water, forests, coal, iron ore, oil, and minerals. • Entrepreneurship - the individual responsible for combining and organizing natural resources, capital goods, and labor to produce a good or service. Role could involve assuming the risks of business failure and/or providing the creativity and managerial skills necessary for production to take place.

15. Factors Of Production Poster

16. Entrepreneurs Consideration • Scarcity- Nearly all resources are scare, meaning there is a limited supply available to meet unlimited wants. In a free and open market, the more scare a resource is, the more expensive it is. • This is an inverse economic relationship. When a fruit is out of season, supply is more scarce. This causes the price to increase because it is more valuable.

17. Entrepreneurs Consideration 2. OpportunityCost- Because resources are scarce, he choice to use a resource in one way means not using it in another. For example, to using a field to grow tobacco means the field cannot be used to grow soy beans

18. Entrepreneurs Consideration 3. Productivity- is a measure of the amount of output produced by a given amount of inputs. It reflects how efficiently resources are being used. This is also referred to as measuring efficient use of the factors of production. For example, the productivity of a farmer (labor) increases with the use of a tractor (capital). Investing in human capital is one way to increase productivity. • Human capital refers to the quality of labor resources, which can be improved through investments in education, training, and health

19. Entrepreneurs Consideration • In order for an entrepreneur to realize a profit, he/she must produce at a cost lower than the market price for the good or service. Profit is the money left over from selling a good or service after the cost of buying productive resources have been paid.

20. Entrepreneurs Consideration • The entrepreneur must minimize the use of scarce resource in production and maximize the productivity of the factors used in production to keep cost as low as possible.

21. Economic Decision Making

22. Do Now • What is Economics?

23. Economics is the study of how people make decisions in a world where wants are unlimited but resources are limited. • Needs are things that are required for survival, such as food, clothing, and shelter. • Wants, on the other hand, are things we would like to have—things that improve our quality of life, such as entertainment and vacations.

24. Doing so requires people to consider 3 fundamental economic questions: • WHAT is produced? • HOW is it produced? • WHO consumes what is produced?

26. An economic system is a particular set of social institutions which deals with the production, distribution, and consumption of goods and services in a particular society.

27. Explain that there are 4 types of economic systems • Traditional • Command • Market • Mixed • While all societies face the same economic questions, the way these questions are answered determines the type of economic system of that society

29. Which Type of Economic System? • Type: • How do you know?

30. Do Now • Brainstorm meaning of the word “Price.” • Consider the following: • What is a price? Are prices negotiable? Explain. • Who sets prices? If no one person sets prices, how are they determined? • What characteristics of a product make you willing to pay a higher price for it compared to other products? • Why don’t businesses charge low enough prices so that everyone can afford to buy their goods/services? On the other hand, why don’t businesses charge as much money as they possible can for their goods? • What current events or events in recent history can you think of that relate to prices being too high or too low? How long did this event last? What caused the event?

31. PPT accompaniment for the Consortium's Supply, Demand, and Market Equilibrium

32. Introduction to Demand • In the United States, the forces of supply & demand work together to set prices. • Demand is the desire, willingness, & ability to buy a good or service. • Supply can refer to one individual consumer or to the total demand of all consumers in the market (market demand).

33. Introduction to Demand A demand schedule is a table that lists the various quantities of a product or service that someone is willing to buy over a range of possible prices.

34. Introduction to Demand • A demand schedule can be shown as points on a graph. • The graph lists prices on the vertical axis and quantities demanded on the horizontal axis. • Each point on the graph shows how many units of the product or service an individual will buy at a particular price. • The demand curve is the line that connects these points.

36. Introduction to Demand • The demand curve slopes downward. • This shows that people are normally willing to buy less of a product at a high price and more at a low price. • According to the law of demand, quantity demanded and price move in opposite directions.

37. Introduction to Demand • We buy products for their utility- the pleasure, usefulness, or satisfaction they give us. • What is your utility for the following products? (Measure your utility by the maximum amount you would be willing to pay for this product) • Do we have the same utility for these goods?

38. Introduction to Demand • One reason the demand curve slopes downward is due to diminish marginal utility • The principle of diminishing marginal utility says that our additional satisfaction tends to go down as we consume more and more units. • To make a buying decision, we consider whether the satisfaction we expect to gain is worth the money we must give up.

39. Changes in Demand • An increase in the Price of Widgets from $3 to $4 will lead to a decrease in the Quantity Demanded of Widgets from 6 to 4. Change in the quantity demanded due to a price change occurs ALONG the demand curve

40. Changes in Demand • Demand Curves can also shift in response to the following factors: • Buyers (# of): changes in the number of consumers • Income: changes in consumers’ income • Tastes: changes in preference or popularity of product/ service • Expectations: changes in what consumers expect to happen in the future • Related goods: compliments and substitutes • BITER: factors that shift the demand curve

41. Changes in Demand • Prices of related goods affect on demand • Substitute goods a substitute is a product that can be used in the place of another. • The price of the substitute good and demand for the other good are directly related • For example, Coke Price Pepsi Demand • Complementary goods a compliment is a good that goes well with another good. • When goods are complements, there is an inverse relationship between the price of one and the demand for the other • For example, Peanut Butter Price Jam Demand

42. Changes in Demand • Several factors will change the demand for the good (shift the entire demand curve) • As an example, suppose consumer income increases. The demand for Widgets at all prices will increase.

43. Changes in Demand • Demand will also decrease due to changes in factors other than price. • As an example, suppose Widgets become less popular to own.

44. Changes in Demand Changes in any of the factors other than pricecauses the demand curve to shift either: Decrease in Demand shifts to the Left (Less demanded at each price) OR Increase in Demand shifts to the Right (More demanded at each price)

45. Demand Practice Answers

46. 1. The income of the Pago-Pagans declines after a typhoon hits the island. Price D D1 Quantity

47. 2. Pago-Pagan is named on of the most beautiful islands in the world and tourism to the island doubles. Price D1 D Quantity

48. 3. The price of Frisbees decreases. (Frisbees are a substitute good for boomerangs) Price D D1 Quantity

49. 4. The price of boomerang t-shirts decreases, which I assume all of you know are a complementary good. Price D1 D Quantity

50. 5. The Boomerang Manufactures decide to add a money back guarantee on their product, which increases the popularity for them. Price D1 D Quantity