Download - Economics
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EconomicsMr. Marchand
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I. Introduction
•Needs•Wants•Scarcity
•Economics is the study of how we satisfy unlimited wants and needs using limited resources.
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A. Economic Assumptions
•Rational Behavior▫Respond to incentives▫Do what benefits, avoid what harms
•Voluntary Exchange▫Free trade of goods and services
•Opportunity Cost▫More of one thing means less of another.▫Cost of doing the next best thing with time
and resources.
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B. Three Basic Economic Questions• WHAT to produce?
▫Decide between options.• HOW to produce it?
▫What effects will different methods have?
• FOR WHOM shall it be produced?▫Who will benefit?
• Every society needs to answer these three questions.
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C. Different Economic Systems•Traditional economy
▫Questions answered according to tradition, customs, and religious practices.
▫Village and family based.
▫Bartering Paul the carpenter
makes furniture for John the farmer in exchange for corn.
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C. Different Economic Systems
•Command Economy▫Individuals have little control▫Government owns & controls economy
and makes all decisions. One person, small group, or central
planners. No private ownership
▫Government answers each question (What, How and For Whom)
▫North Korea; Cuba
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C. Different Economic Systems•Market Economy
▫Individuals decide each question (What, How, Form Whom)
▫Government does not interfere in economy
▫Let the market decide▫Underground
economy, 19th Century Britain
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C. Different Economic Systems
•Mixed Economy▫Elements of Traditional, Command, and
Market economies▫Most nations have mixed economies
▫Federal, state, and local governments make laws to regulate some areas of business.
▫Public and private sectors contribute to economy. Ex: Defense spending can boost economy.
▫Government intervenes from time to time.
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II. Supply and Demand
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Market Graph
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Demand
•The desire, willingness, and ability to buy a good or service.▫All three must be present.
•Law of Demand:▫Price and Quantity Demanded move in
opposite directions.▫As price increases, quantity demanded
decreases.
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Demand Curve
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Supply
•Quantities of a good or service that producers are willing to sell at all possible market prices.
•Law of Supply▫Price and quantity supplied move in the
same direction.▫As price increases, quantity supplied
increases.
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Supply Curve
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The Market
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III. What Makes the US earn Money?
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How is change introduced?
•Entrepreneurs▫Person who has possession of a new
enterprise, venture, or idea and assumes responsibility for its success or failure.
•Three Types▫Inventors▫Innovators▫Marketing
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Famous Entrepreneurs
•Sam Walton▫Walmart, Sam’s Club
•Steve Jobs▫Apple Computer
•Madame CJ Walker▫Beauty and Hair
Products•Beulah Louise Henry
▫Variety of Inventions
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IV. Banking & Financial Institutions
• Money▫Three Functions
Medium of Exchange Store of Value Measure of Value
• Types▫Salt, animal hides,
gems, tobacco▫Coins and currency
• Money has value because we have confidence in it.
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Financial Institutions•Banks
▫Safe place to deposit, save, and borrow money.
•Federal Deposit Insurance Corporation (FDIC)▫Insures money▫If a bank closes, you
still get your money
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Federal Reserve•The banker’s bank•Holds the U.S. Government’s money•When banks need to borrow money, they
borrow from “The Fed”.
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Budgeting• Blueprint of how to raise and spend money.
▫Done by individuals, groups, governments.▫Federal, State, and Local
• Questions to Consider▫Income▫Supplement▫Needs and costs▫Wants and costs
The President and Congress work together to create the federal budget each year.
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Government Income & Expenses•Taxes
▫Income tax▫Payroll tax (Social Security and Medicare)▫Excise tax (gas, tobacco, alcohol)▫Estate tax (when a wealthy person dies
their inheritance is taxed)•Expenditures
▫Social Security, Medicare, Medicaid▫National Defense▫Interest on Debt