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Answering Important Questions

Answering Important Questions. Ch 2.1, p.23. Words. Economic system Factor payment Profit Safety net Standard of living Innovation Traditional economy. In the beginning…. Questions to ask for new biz: What goods and services should be produced? How to do it? Who consumes them?

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Answering Important Questions

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  1. Answering Important Questions Ch 2.1, p.23

  2. Words • Economic system • Factor payment • Profit • Safety net • Standard of living • Innovation • Traditional economy

  3. In the beginning… • Questions to ask for new biz: • What goods and services should be produced? • How to do it? • Who consumes them? • Answered by economic system: the structure of methods and principles that a society uses to produce and distribute S & G

  4. Who consumes • Determined by: • Factor payments: the income ppl receive in return for supplying factors of production (land, labor, capital, etc.) • Sort of like Revenue • Profit: amount of money, in excess of expenses!

  5. USA Societal Values • Efficiency • Freedom • Security • Equity!?!?!

  6. Equity can mean 2 things…

  7. Societal Values, Con’t.d • Growth • Standard of living: lvl of prosperity • Innovation: New ideas into use • BEWARE: sometimes these goals conflict

  8. Random BS • Traditional Economy • The book assumes that we live in one – although that’s impossible • “an economic system that relies on habit, custom or ritual to decide the three key economic questions.”

  9. Q & A • Why does the gov’t. provide a safety net for its people? • What must happen for a nation’s standard of living to improve? • Why aren’t workers paid the same amount in factor payments for the resources they provide?

  10. The Free Market Ch 2.2, p.29

  11. Dictionary • Market • Specialization • Free market economy • Household • Firm • Factor vs. product market • Self-interest • Incentive • Competition • Invisible hand • Consumer sovereignty

  12. Why have markets? • So buyers and sellers can exchange things • Duh. And yes.

  13. Dublin

  14. Free Market Ideas • If everyone is specialized, then the Free Market can do it’s thing. • We want to measure people in households as a team, b/c they aren’t just self-interested and they also pool resources • Firms, on the other hand, are businesses. They perform differently.

  15. Factor vs. Product Markets • FM: the arena of exchange in which firms purchase factors of production from households • PM: homes buy S&G from firms

  16. Self-Regulating • People who are either lazy, selfish or simplistic often refer to the economy as self-regulating • That is absurd • Self-interest, competition and some mythical “invisible hand” (coined by Adam Smith) do NOT form the whole of our economy.

  17. Pros/Cons • Free Market • Controlled Market

  18. So many questions • How does specialization makes us more efficient? • What is the difference btwn a household and a firm?

  19. Centrally Planned Economies Ch 2.3, p.35

  20. Vocab • Centrally planned economy • Command economy • Socialism • Communism • Authoritarian

  21. Karl Marx

  22. The Big Idea • Central Economy: an economic system in which the gov’t. makes all decisions on the three questions • Command Economy: another name for same as above

  23. Econ • Attn: Grease!!! • PRESENTATIONS MONDAY • SNL clip • Notes • Vocab Showdown • Propaganda Vid: Communism

  24. Socialism vs. Communism • Socialism is NOT a complete economic system, but rather a PHILOSOPHY. • People should share wealth • Communism is a political system. Gov’t. owns everything and makes all decisions • They are often authoritarian, requiring strict obedience – to a powerful central gov’t.

  25. Two Commies • USSR vs. China • How were/are they different? • China is a bit more ‘free market’ oriented

  26. Shanghai

  27. Moscow

  28. Questions • What does a centrally planned econ stifle that a free market encourages? • What’s the difference btwn socialism and communism?

  29. Plan • Attn: ORAL PRESENTATIONS MONDAY • Cows!! • Finish Game • Quiz • Notes • Madoff or Shark Tank Clip?

  30. Mixed Economies Ch 2.4, p. 39

  31. Key Terms • Laissez faire • Private property • Mixed economy • Economic transition • Privatization • Free enterprise

  32. Rise of Mixed Econs • Laissez faire hasn’t really worked for us. • So we’ve started to mix things up • Gov’t owns some things and private individuals own others • Private vs. Public property

  33. Oak Hall

  34. PK Yonge

  35. The Transition • Transitioning to a mixed economy usually involves one of two movements: • Privatization • Gov’t acquisition

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