Chapter 1

What is the difference

between a good and a

service?

Good: tangible

Service: intangible

What are some

consumer

goods/services?

What are some

business

goods/services?

Largest producer of goods and services in the world? United States

Impact of consumer spending: More jobs

More money flow

Increased standard of living (What does this mean?)

Impact of increased consumption: Pollution

Conservation

Managing waste

**US produces more garbage per person per year than the residents of any other country

Economic Resources: resources utilized to

create goods and services

AKA: Factors of Production

Three types:

Natural

Human

Capital

Natural: raw materials

supplied by nature

Human: people who

produce goods and

services

AKA: Labor

Ex: Entrepreneur: take

risk of using resources to

start new product

Capital: products and money used to create

goods and services

Money = Capital

Resources: limited or unlimited?

Limited

Scarcity: unlimited

wants, limited

resources

AKA: Basic

Economic Problem

Everyone is affected

Scarcity requires

us all to make

difficult decisions

Example…

Economic Decision-Making: choosing which

wants, among several, are to be satisfied

What occurs when you must make a decision:

Trade-Off:

Giving up one thing in order to have another

Example…

Opportunity Cost:

Weighing the options and looking at what is being

given up when a decision is made

Example…

Steps to DMP:

Define the problem

Identify choices

Evaluate choices

Choose

Act

Review

Economic Questions: What goods and services will be produced?

How will the goods and services be produced?

What needs and wants will be satisfied with the goods and services produced?

**For whom will the goods and services be produced?

What goods and services will be produced?

Resources readily available

Resources that are limited

Climate

Focus of country

Find balance in needs and wants of country

How will the goods and services be produced?

Best use of resources

Change in trends (ex: agriculture to industry)

Labor needs

What needs and wants will be satisfied?

Also answers the “For Whom?” question

Must determine what is most critical

Developed budget

Economic System: the method by which a country answers the previous questions

Types of Systems: Command

Market

Traditional

Mixed

Command:

AKA: directed,

planned

Resources: owned

and controlled by

government

Government makes

all decisions

Personal economic

choices are limited

Market: AKA: capitalistic

Resources: owned and controlled by the people

Questions answered through consumer activity

Marketplace: where goods and services exchange hands

Dollar votes: when you build demand for a product by making a purchase

Traditional: AKA: Custom-based

Goods and services are created based on what has always been done

Questions are answered based on skills and available resources

Found in less-developed questions

Looking to meet basic needs of the people

Mixed:

Contains

characteristics of all

other systems

No pure systems exist

More economies are

moving from

command to market

Former Soviet Union

China

US Economic System

Capitalism: private ownership of resources

Economic freedoms:

Free/private enterprise: freedom to open business

Private property: buy/dispose of personal items

Freedom of choice: spend money when/where you want

Voluntary exchange: giving something of value (usually money) in order to receive something of value

Profit: money left after bills are paid

Profit motive: working hard to make more money

Competition: two people/groups going after same goal

Consumers:

Person who buys

and uses goods and

services

Can be:

Individual

Business

Government

Create demand

Producers:

People/organizations

that determine what

goods and services

will be available

Make decisions based

on demand

Demand:

Quantity of goods and

services consumers

are willing and able

to purchase at a

particular price

Direct impact on

prices

Demand curve: shows

the relationship

between price and

quantity demanded

Supply:

Quantity of goods and

services businesses

are willing and able

to provide at a

particular price

Direct impact on price

Supply curve:

relationship between

price and quantity

supplied

Demand impact on price: Increase in demand = higher prices

Decrease in demand = lower prices

Supply impact on price: Increase in supply = lower prices

Decrease in supply = higher prices

Other factors to influence price: Competition

Quality of materials used

Unexpected events

Market price: point where supply and demand equal (AKA: equilibrium point)