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Principles of Economics. Unit 1 - Understanding the Role of Economics in the Global Economy. Objectives & Competencies. Explain the three basic economic questions answered by any economy (035) Identify characteristics of free enterprise (aka Market Economy ) (039)

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principles of economics

Principles of Economics

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

objectives competencies
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)
agenda
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
what is an economy
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.

what is an economy1
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.

what is an economy2
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

what is an economy3
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.

3 basic economic questions
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.

what is an economy4
What Is an Economy?

Types of Economic Systems

The Three Economic Questions

what is an economy5
What Is an Economy?

Types of Economic Systems

The Three Economic Questions

different types of economies
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
what is an economy6
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.

market economies
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

market economies2
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

market economies3
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

market economies4
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

market economies5
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.

command economies
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

command economies2
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.

mixed economies
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.

slide26

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.

slide27

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.

slide28

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.

1 how many basic economic questions are there
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?

2 in a market economy economic decisions are primarily made
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.

3 in a market economy citizens are responsible for
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.

slide33
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

5 the contest between businesses to attract customers is
5. The contest between businesses to attract customers is:
  • profit
  • competition

Profit is the reward for taking a risk and starting a business.

6 most nations have a
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.

closure today we learned
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.
closure next time
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