What is

Economics
Chapter 1

Words to Know
Needs
Things that a person cannot live without
Food
Clothing
Shelter
Air

Words to Know
Wants
Things people would like to have but are
not necessary for survival
IPod
Cell phones
DVDs/Blue Ray
Luxury cars/trucks
Fashionable Clothing

Words to Know
Economics
Study of how people figure out ways to get
the things they need and want by making
choices.

Words To Know
Scarcity
Having a limited number of resources to
produce things that people need or want.
Example
Band concert and only so many tickets and seats
are available

Questions
Describe some needs & wants from the
story.
Describe some of the choices that
needed to be made
Write a wish list.
What might you have to do to get the
items on your wish list?

Words to Know
Goods
Things that can be seen, touched, and
bought or sold
Physical items
Sunglasses
Popcorn
CDs

Words to Know
Services
Activity performed by one person for another
person
Sales person
Doctor
Lawyer
Teachers
Auto mechanics

Factors of Production
How things we need are produced
4 factors of production

Land
Labor
Capital
Entrepreneur

Factors of Production
Land
All natural resources that are used to
produce a good
Things found in nature
Land
Crops
Water

Factors of Production
Natural Resources
Items from nature that can be used to create
goods and services
Coal
Wood
Sunlight
Water

Factors of Production
Labor
People are paid to do to produce goods
and services
Labor force
Made up of all the people who work for
money
Doctor
Assembly-line worker

Factors of Production
Capital
Anything used to produce goods and
services
Money
Tools
Machines
factories

Factors of Production
Entrepreneur
People who decide how to combine
resources to create new goods and services
Bring together land, labor & capital
Start new businesses
Make all the decisions to produce goods and
services

Economic Systems
Economic System
Organized way society provides goods &
services to meet the wants & needs of it
people

Economic Systems
Types

Command Economy
Market Economy
Mixed Economies
Capitalist Economy
Free Enterprise Economy

Economic Systems
Three questions to answer
WHAT should be produced
HOW should it be produced
WHO should receive the good or service

Economic Systems
Traditional Economy
Uses habits, customs & religion to answer
the WHAT, HOW & WHO questions
Passed down from generation to generation
Small communities
Work together

Traditional Economy
Advantage
Each person knows what role they play
Life is stable & predictable

Disadvantage
Difficult to change things
Lower standard of living because of little
change

Economic Systems
Command Economy
Government makes the economic decisions
Owns land & capital
Controls labor where they work & what they are
paid
Decides what to produce & how much it will cost

Consumers have NO say

Command Economy
Advantages
Public services are provided at little or no
cost to people
Can change direction quickly
Meets needs of people

Command Economy
Disadvantages
Doesnt meet wants of the people
Wages are similar no matter what job they
have
Rarely lose jobs even if performing poorly
Quality of products suffer

Economic Systems
Market Economy
People make economic decisions
What gets made
How goods & services are made
Who will consume the goods & services

Market Economy
Buyer & sellers exchange goods &
services
Each person specializes in producing or
providing goods & services
People sell what they have & buy what
they want

Market Economy
Advantages
Change based on what people want
Freedom
Producers make things that will sell
Consumers can buy what they want

Government has little control

Market Economy
Disadvantages
Doesnt provide enough services that people
value health care, education, justice
A lot of change
Producers worry about someone else
making a better product for less money

Mixed Economy

Market based economy

Government plays a role
Countries that use mixed economy

United States
Japan
Canada
Great Britain

Free Enterprise System

U.S. has a capitalist economy & a free
enterprise economy

Competition is allowed
Government has some involvement
People own the factors of production

Capitalism & Free

Enterprise
4 basic principles

Voluntary Exchange
Private Property Rights
Profit Motive
Competition

Capitalism & Free

Enterprise
Voluntary Exchange
People buy or sell what they want, when
they want
Transactions are good for the buyer and the
seller

Capitalism & Free

Enterprise
Private Property Rights
Right to do what you want with the things
they own
Cant interfere with rights of others
Keep rewards that you earn
Gives people desire to work hard & be
successful

Capitalism & Free

Enterprise
Profit Motive
Making money
Business owners make decisions about the
business
Decisions are made by amount of money
that will be made

Capitalism & Free

Enterprise
Competition
Producers what to sell products at the
highest price
Consumers what to buy products for the
lowest price

Governments Role

Protect citizens
Producers give information to consumers
Laws

Food, drugs & automobiles

Against false advertising
Protect environment
Individual freedoms

Individual Freedom
Discrimination
Treat a person a way based on race, gender,
religion or age

Federal Regulatory
Agencies
Environmental Protection Agency
Protect peoples health & environment

Equal Employment Opportunity

Commission (EEOC)
Enforcing civil rights laws

Federal Regulatory
Agencies
Federal Trade Commission (FTC)
Against monopolies

Food & Drug Administration (FDA)

Sets and enforces standards for food, drugs
and cosmetics

Federal Regulatory
Agencies
Occupational Safety and Health
Administration (OSHA)

Save lives
Prevent injuries
Protect health of workers