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Warmup 4/12/12

Warmup 4/12/12. What are the 4 factors of production?. The American Economic System. Basic Economic Unit Part II. Types of Economic Systems. Traditional. Characteristics: Little Change Based on Custom How answer the economic questions? How they always have. Command. Characteristics

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Warmup 4/12/12

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  1. Warmup 4/12/12 • What are the 4 factors of production?

  2. The American Economic System Basic Economic Unit Part II

  3. Types of Economic Systems

  4. Traditional • Characteristics: • Little Change • Based on Custom • How answer the economic questions? • How they always have

  5. Command • Characteristics • Government controls means of production • Little individual influence • Communism & Socialism • How answer the economic questions? • Government does

  6. Socialism • Gov. owns some factors of production and distributes products and wages

  7. Communism • Socialism under the dictatorship of the communist party

  8. Market • Characteristics: • Private individuals control the factors of production • Individual freedom • How questions answered? • By businesses and consumers

  9. Mixed • Characteristics: • Some individual freedom some government control • How are questions answered? • Individuals do but have some government intervention

  10. All economies are actually mixed. What determines whether an economy is considered market or command depends on the level of • Government involvement.

  11. Who developed the principles of a market economy? • Adam Smith

  12. What was the Wealth of Nations? • Smith’s book that explained the principles of Capitalism

  13. What did Smith mean by Laissez-faire economics? • “To let alone” • Government should stay out of marketplace except to ensure competition

  14. The Invisible Hand • Belief that individuals on their own would work for own self-interest • Would be guided by “invisible hand” to use resources efficiently

  15. Warmup • Describe the 4 types of markets.

  16. Characteristics of Market/Free Enterprise System • Little or no government intervention – governments role in econ. is to ensure competition • Free Enterprise – Competition with little gov. interference • Freedom of Choice – individuals can choose what work to do and what we buy

  17. Characteristics Continued • Private Property – right to own and use our property as we choose within certain legal limits • Profit Incentive – the driving force of capitalism, the ability to accumulate wealth • Competition – the struggle between buyers and sellers to get the best products at lowest prices

  18. What does the Circular Flow Model illustrate? • How resources, goods and services, and money flow in a circular pattern

  19. Market • The exchange of goods and services between buyers and sellers

  20. Factor Market • Where productive resources (the factors of production) are bought and sold

  21. Consumer Sector • Workers earn wages, salaries, and tips in exchange for labor.

  22. Product Market • Market where goods and services (finished products) are offered for sale

  23. Business Sector • Workers spend their incomes at businesses in exchange for goods and services.

  24. What happens when less is exchanged in the circular flow? • The economy shrinks, productivity goes down

  25. What happens when more is exchanged? • Economy grows, productivity increases

  26. What is productivity? • The amount of output that can be produced by a set amount of resources in a given period of time

  27. Productivity • Goes up when can produce the same amount of output in less time Or • When can produce more output with same amount of resources in same time

  28. Increasing Productivity • Specialization when people, businesses or countries focus on what they do best • Division of Labor breaking down of a job into small parts performed by different workers • Investing in Human Capital spending to improve worker skills

  29. What do these practices create between individuals, communities and nations? • Economic Interdependence creates dependence between people for goods and services

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