The Principles of Our Market Economy. Chapter 14.1. By PresenterMedia.com. Circular Flow of Economic Activity. Circular Flow. Example: You want a new stereo system in your car, so you go to Best Buy and buy one. You exchange your money for a good that you want.
You want a new stereo system in your car, so you go to Best Buy and buy one. You exchange your money for a good that you want.
You also happen to work for the Geek Squad at Best Buy. You exchange your labor for an hourly wage.
These two exchanges are connected because you buy a stereo with the money you earn from working.
Creates a “FLOW”
People exchange labor for wages and purchase from many businesses
American economy is based on this flow
All American businesses together: PRODUCERS
Turn to page 378, look at the diagram, & answer the following:
What is a market?
“The Market” determines:
Competition = market operates according the “laws” of supply and demand
Demand: The amount of a product or service that buyers are willing and able to buy at different prices.
Supply: the amount of a product that producers are willing and able to offer at different prices.
Producers also balance the cost with the benefit
You must combine these two laws to understand the market. CANNOT HAVE ONE (S or D) W/O THE OTHER
Affect each other oppositely:
The price at which buyers and sellers agree to trade
If you place supply and demand curves on a graph, the market price is the point at which the two lines meet.
How will a decrease in price affect the supply of strawberries?
AT $2.00 a basket, how many baskets of strawberries could be sold, and why?
Local AT&T Store
1.) At approximately what market
price does it shows a balance
in the quantity of iPhones
supplied and the quantity of
demand being demanded?
Please indicate the number of
iPhones being supplied to
meet the demands.
2.) It is the holidays, the market
price for an iPod has shifted
from $300 to $400, please
explain the price change
effect on the supply and the
effect on the demand.
3.) Why do you think that the price
change from $300 to $400
affected the supply and
demand? In other words, what
are the reasons behind it?
Price per iPhone ($)
Number of iPhones Demanded
Complete the Supply and Demand Worksheet individually.
Go over answers as a class.
Demand can be influenced by more than just price
A business: an organization that combines land, labor, and capital to produce goods or services
When starting a businessmust decide how their business is going to be owned.
Three basic types of business ownership in the USA:
Owned by one individual
Most common form70%
Two or more people share ownership
In USA: law firms, medical groups, etc.
Advantages and disadvantages are the same as sole owner except:
Separate from the people who own it and legally as a single person
More than one person owns it
expensive to start
Corporations dominate our economy90% of total sales in the USA