Principles of Economics

1. Principles of Economics Unit 1 - Understanding the Role of Economics in the Global Economy

2. Objectives & Competencies • Explain the three basic economic questions answered by any economy (035) • Identify characteristics of free enterprise (aka Market Economy) (039) • Explain supply, law of Supply, demand, Law of Demand, and economic equilibrium (040)

3. Agenda • DECA Updates • Bell Ringer Question • How do economic decisions and policies affect your daily life? • Direct Instruction – Types of Economies, Supply vs. Demand • Activity – M&Ms (Yum! ) • Review – Multiple Choice Questions • Closure – TNT, Test in 2-3 classes

4. What is an Economy? How do economic decisions and policies affect your daily life? An economy is a nation’s method for making economic choices that involve how it will use its resources to produce and distribute goods and services to meet the needs of its production. Scarcity of economic resources forces every country to develop an economic system that determines how resources will be used. Each economic system has its advantages and disadvantages.

5. What Is an Economy? What Creates an Economy? Economists use the term factors of production when they talk about economic resources. factors of production Resources that are comprised of land, labor, capital, and entrepreneurship. resources All the things used in producing goods and services; a source of aid or support that may be drawn upon when needed.

6. What Is an Economy? What Creates an Economy? Manufacturing Buying Economy Selling Transporting economy The organized way a nation provides for the needs and wants of its population. Investing

7. What Is an Economy? What Creates an Economy? Entrepreneurship Land Labor Capital Provides raw materials Full- and part-time workers, managers, and professional people Money, buildings, infrastructure Organizing factors of production to create goods and services infrastructure The physical development of a country,such as roads, ports, and utilities. entrepreneurship The skills of people who are willing to invest their time and money to run a business; the process of starting and operating your own business.

8. 3 Basic Economic Questions What should beproduced? How should it be produced? Who should share in what is produced? Deciding to use a resource for one purpose means giving up the opportunity to use it for something else. This is called opportunity cost. The methods and labor used as well as the quality of items produced are important factors. In most societies, people can have as many goods and services as they can afford to buy.

9. What Is an Economy? Types of Economic Systems The Three Economic Questions

10. What Is an Economy? Types of Economic Systems The Three Economic Questions

11. Different Types of Economies Different economic systems answer the three basic economic questions in different ways. Economic systems • the methods societies use to distribute resources

12. What Is an Economy? Types of Economic Systems TraditionalEconomy MarketEconomy CommandEconomy MixedEconomy traditional economy An economic system in which habits, traditions, and rituals answer the basic questions of what, how, and for whom. market economy An economic system in which there is no government involvement in economic decisions. command economy A system in which a country’s government makes all economic decisions regarding what, how, and for whom.

13. Market Economies A market economy can also be called a private enterprise system, the free enterprise system, or capitalism. market economy an economic system in which economic decisions are made in the marketplace

14. Market Economies

15. Market Economies The higher the price for goods or services, the less consumers will buy. The lower the price, the more consumers will buy. price the amount of money given or asked for when goods and services are bought or sold

16. Market Economies There is a relationship between price, supply, and demand. supply the amount of goods and services that producers will provide at various prices demand the amount or quantity of goods and services that consumers are willing to buy at various prices

17. Market Economies Supply and demand interact with each other to form the equilibrium price. equilibrium price the point at which the quantity demanded and the quantity supplied meet

18. Supply, Demand, and Equilibrium

19. Supply, Demand, and Equilibrium

20. Supply, Demand, and Equilibrium

21. Market Economies Competition among similar businesses is one of the basic characteristics of a free enterprise system. Profit motive is the desire to make a profit.

22. Command Economies In a command economy, the government owns and controls all the resources and businesses. command economy an economic system in which a central authority makes the key economic decisions

23. Command Economies

24. Command Economies A moderate command economy is also known as socialism. In a moderate command economy, there is some form of private enterprise, but the state owns major resources.

25. Mixed Economies Most nations have a mixed economy, which combines elements of capitalism and socialism. mixed economy an economy that contains both private and public enterprises.

26. How does a market system decide what will be produced? A market system decides what is to be produced through supply and demand in the marketplace.

27. In a market system, what determines how many goods and services an individual can buy? It is through one’s income—mostly generated by working.

28. Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true? More technology is used in the country with fewer workers, increasing worker productivity.

29. M&Ms – Yum! 

30. 1. How many basic economic questions are there? • two • three What should be produced? How should it be produced? Who should share in what is produced?

31. 2. In a market economy, economic decisions are primarily made: • by the government • in the marketplace A market economy can also be called a private enterprise system, the free enterprise system, or capitalism.

32. 3. In a market economy, citizens are responsible for: • being informed • making careful decisions • all of the above In a market economy, citizens can own their own homes, land, and businesses.

33. 4. The amount or quantity of goods and services that consumers are willing to buy at various prices is: • supply • demand • equilibrium • capacity The higher the price, the less consumers will buy

34. 5. The contest between businesses to attract customers is: • profit • competition Profit is the reward for taking a risk and starting a business.

35. 6. Most nations have a: • market economy • command economy • mixed economy In a mixed economy, the market makes more decisions regarding the allocation of resources than the government.

36. Closure – Today We Learned • How does a market system decide what will be produced? • A market system decides what is to be produced through supply and demand in the marketplace. • In a market system, what determines how many goods and services an individual can buy? • It is through one’s income—mostly generated by working. • Some nations can produce more goods with fewer workers than other countries that have more workers. How can that be true? • More technology is used in the country with fewer workers, increasing worker productivity.

37. Closure – Next Time • Looking Ahead • Test after next lesson – 2 blocks out • We will review for the test • You will have a study guide • Economic Activity Indicators • Alphabet Soup! • GDP, GNP, CPI, etc • The Business Cycle