Economics

1. Economics Mr. Marchand

2. I. Introduction • Needs • Wants • Scarcity • Economics is the study of how we satisfy unlimited wants and needs using limited resources.

3. A. Economic Assumptions • Rational Behavior • Respond to incentives • Do what benefits, avoid what harms • Voluntary Exchange • Free trade of goods and services • Opportunity Cost • More of one thing means less of another. • Cost of doing the next best thing with time and resources.

4. B. Three Basic Economic Questions • WHAT to produce? • Decide between options. • HOW to produce it? • What effects will different methods have? • FOR WHOM shall it be produced? • Who will benefit? • Every society needs to answer these three questions.

5. C. Different Economic Systems • Traditional economy • Questions answered according to tradition, customs, and religious practices. • Village and family based. • Bartering • Paul the carpenter makes furniture for John the farmer in exchange for corn.

6. C. Different Economic Systems • Command Economy • Individuals have little control • Government owns & controls economy and makes all decisions. • One person, small group, or central planners. • No private ownership • Government answers each question (What, How and For Whom) • North Korea; Cuba

7. C. Different Economic Systems • Market Economy • Individuals decide each question (What, How, Form Whom) • Government does not interfere in economy • Let the market decide • Underground economy, 19th Century Britain

8. C. Different Economic Systems • Mixed Economy • Elements of Traditional, Command, and Market economies • Most nations have mixed economies • Federal, state, and local governments make laws to regulate some areas of business. • Public and private sectors contribute to economy. • Ex: Defense spending can boost economy. • Government intervenes from time to time.

9. II. Supply and Demand

10. Market Graph

11. Demand • The desire, willingness, and ability to buy a good or service. • All three must be present. • Law of Demand: • Price and Quantity Demanded move in opposite directions. • As price increases, quantity demanded decreases.

12. Demand Curve

13. Supply • Quantities of a good or service that producers are willing to sell at all possible market prices. • Law of Supply • Price and quantity supplied move in the same direction. • As price increases, quantity supplied increases.

14. Supply Curve

15. The Market

16. III. What Makes the US earn Money?

17. How is change introduced? • Entrepreneurs • Person who has possession of a new enterprise, venture, or idea and assumes responsibility for its success or failure. • Three Types • Inventors • Innovators • Marketing

18. Famous Entrepreneurs • Sam Walton • Walmart, Sam’s Club • Steve Jobs • Apple Computer • Madame CJ Walker • Beauty and Hair Products • Beulah Louise Henry • Variety of Inventions

19. IV. Banking & Financial Institutions • Money • Three Functions • Medium of Exchange • Store of Value • Measure of Value • Types • Salt, animal hides, gems, tobacco • Coins and currency • Money has value because we have confidence in it.

20. Financial Institutions • Banks • Safe place to deposit, save, and borrow money. • Federal Deposit Insurance Corporation (FDIC) • Insures money • If a bank closes, you still get your money

21. Federal Reserve • The banker’s bank • Holds the U.S. Government’s money • When banks need to borrow money, they borrow from “The Fed”.

22. Budgeting • Blueprint of how to raise and spend money. • Done by individuals, groups, governments. • Federal, State, and Local • Questions to Consider • Income • Supplement • Needs and costs • Wants and costs The President and Congress work together to create the federal budget each year.

23. Government Income & Expenses • Taxes • Income tax • Payroll tax (Social Security and Medicare) • Excise tax (gas, tobacco, alcohol) • Estate tax (when a wealthy person dies their inheritance is taxed) • Expenditures • Social Security, Medicare, Medicaid • National Defense • Interest on Debt