economics - the social science that deals with the production, distribution, and consumption of...
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Economics - The social science that deals with the production, distribution, and consumption of goods and services.
Economics - The social science that deals with the production, distribution, and consumption of goods and services.
Resources – Things needed to make or obtain goods and services. Resources – Things needed to make or obtain goods and services.
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Goods and ServicesGoods and Services
- These are things people want. - These are things people want.
Goods - are physical things you can see and touch.Goods - are physical things you can see and touch.
- Food- Clothing- Cars - Houses
- Food- Clothing- Cars - Houses
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Goods and ServicesGoods and Services
Services – are things people do for others. Services – are things people do for others.
- doctors- teachers- engineers- mechanics- lawyers
- doctors- teachers- engineers- mechanics- lawyers
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Goods and ServicesGoods and Services
Marketplace – A name for whenever people buy, sell, or trade goods and services.
Marketplace – A name for whenever people buy, sell, or trade goods and services.
- Limited resources create a Scarcity, or not enough goods and services.
- People will always want more of something they can’t get.
- Limited resources create a Scarcity, or not enough goods and services.
- People will always want more of something they can’t get.
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ProductionProduction
Produced – Every good or service must be made. This is why they call it production.Produced – Every good or service must be made. This is why they call it production.
- You can put all of the types of resources that need to be produced into four categories:
- You can put all of the types of resources that need to be produced into four categories:
- Land, Labor, Capital, & Entrepreneurship.- Land, Labor, Capital, & Entrepreneurship.
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ProductionProductionLand – (Natural Resources) things found in nature that are used in the production of goods.
Land – (Natural Resources) things found in nature that are used in the production of goods.
- minerals- water- plants- soil- animals- timber- oil
- minerals- water- plants- soil- animals- timber- oil
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ProductionProductionLabor – The physical and mental work of people do to make goods or provide services.
Labor – The physical and mental work of people do to make goods or provide services.
- All goods and services involve some human labor. Automated factories needs workers to design, build, and operate the machinery.
- All goods and services involve some human labor. Automated factories needs workers to design, build, and operate the machinery.
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ProductionProductionCapital – Money, buildings, machinery, and tools used to make goods and services.Capital – Money, buildings, machinery, and tools used to make goods and services.
- Machines- Tools- Railroads- Trucks- Planes
- Machines- Tools- Railroads- Trucks- Planes
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ProductionProductionEntrepreneurship – The skills to manage a business and the willingness to take risks in starting a business. Land, Labor, and Capital are all combined and organized.
Entrepreneurship – The skills to manage a business and the willingness to take risks in starting a business. Land, Labor, and Capital are all combined and organized.
- Sometimes is the owner of the business and invests money to make a profit.
- Sometimes hires a manager to help run the business.
- Sometimes is the owner of the business and invests money to make a profit.
- Sometimes hires a manager to help run the business.
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ProductionProduction- Resources for production are available in different amounts in different parts of the world.
- Resources for production are available in different amounts in different parts of the world.
- The United States, Europe, and other developed countries have a great amount of capital and entrepreneurship.
- Developing countries often have large, poorly educated populations that provide inexpensive labor.
- The United States, Europe, and other developed countries have a great amount of capital and entrepreneurship.
- Developing countries often have large, poorly educated populations that provide inexpensive labor.
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Supply and DemandSupply and Demand
Economy – How nations, businesses, and individuals make and buy things. It is also how they save and spend money.
Economy – How nations, businesses, and individuals make and buy things. It is also how they save and spend money.
Economists – People who study the economy. Economists – People who study the economy.
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Supply and DemandSupply and Demand
- All wants and needs cannot be satisfied for everybody, all the time. Society must make choices by asking:
- All wants and needs cannot be satisfied for everybody, all the time. Society must make choices by asking:
- What should be produced?- How should it be produced?- Who gets what is produced?
- What should be produced?- How should it be produced?- Who gets what is produced?
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Supply and DemandSupply and Demand
Opportunity Cost – The opportunity you give up to other things when you make a choice.
Opportunity Cost – The opportunity you give up to other things when you make a choice.
Example: You want to buy either an iPod or a book. You decide to buy the iPod. The opportunity cost is the book you could have bought.
Example: You want to buy either an iPod or a book. You decide to buy the iPod. The opportunity cost is the book you could have bought.
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Supply and DemandSupply and Demand
Scarcity – People have unlimited wants but there are limited resources. Otherwise people will want more of what they can’t get.
Scarcity – People have unlimited wants but there are limited resources. Otherwise people will want more of what they can’t get.
- There are not enough goods and services available to meet everyone’s needs at the same time.
- There are not enough goods and services available to meet everyone’s needs at the same time.
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Supply and DemandSupply and Demand
Consumers – People who buy goods and services to satisfy their needs and wants.Consumers – People who buy goods and services to satisfy their needs and wants.
- Typically when businesspeople and economists talk about consumers they are talking about people as individuals or households purchasing goods and/or services.
- Typically when businesspeople and economists talk about consumers they are talking about people as individuals or households purchasing goods and/or services.
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Supply and DemandSupply and Demand
Demand – How much of a good or service people are willing and able to buy at a particular price.
Demand – How much of a good or service people are willing and able to buy at a particular price.
Demand Curve – Line on a graph that shows the quantity of something consumers would be willing to buy at different prices.
Demand Curve – Line on a graph that shows the quantity of something consumers would be willing to buy at different prices.
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Supply and Demand (Graph)Supply and Demand (Graph)
Price of an iPod
Price of an iPod
Supply of an iPodSupply of an iPod
Supply
Demand
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Supply and DemandSupply and Demand
Supply – Goods or services that are available.Supply – Goods or services that are available.
Supply Curve – Line on a graph that shows the quantity of something that a producer is willing and able to sell at different prices.
Supply Curve – Line on a graph that shows the quantity of something that a producer is willing and able to sell at different prices.
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Supply and Demand (Graph)Supply and Demand (Graph)
Price of an iPod
Price of an iPod
Supply of an iPodSupply of an iPod
Supply
Demand
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Supply and DemandSupply and Demand
Market-Clearing Price – The price where consumers’ demand and producer’s supply are about the same.
Market-Clearing Price – The price where consumers’ demand and producer’s supply are about the same.
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Supply and Demand (Graph)Supply and Demand (Graph)
Price of an iPod
Price of an iPod
Supply of an iPodSupply of an iPod
Supply
Demand
Market-Clearing PriceMarket-Clearing Price
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Supply and DemandSupply and Demand
- If supply increases, but demand stays the same, the price will fall.- If supply increases, but demand stays the same, the price will fall.
- If supply decreases, but demand stays the same, the price will rise.- If supply decreases, but demand stays the same, the price will rise.
- If demand increases, but supply stays the same, the price will rise.- If demand increases, but supply stays the same, the price will rise.
- If demand decreases, but supply stays the same, the price will fall.- If demand decreases, but supply stays the same, the price will fall.
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Supply and DemandSupply and Demand
Price – The amount you pay for a good or service.Price – The amount you pay for a good or service.
- Price is determined by supply and demand.- Price is determined by supply and demand.
- The best price is where the demand curve crosses the supply curve.- The best price is where the demand curve crosses the supply curve.
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Supply and DemandSupply and Demand
Other things that affect Supply & Demand:Other things that affect Supply & Demand:- The amount of money we can spend.- The amount of money we can spend.
- Changes in people’s taste, preferences, and attitudes.- Changes in people’s taste, preferences, and attitudes.
- What we expect in the future.- What we expect in the future.
- The prices of goods and services.- The prices of goods and services.
- The cost of production.- The cost of production.
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CompetitionCompetition
Free Market Economy – Property, resources, and the control of business belong to the individual owners. The United States is a free market economy.
Free Market Economy – Property, resources, and the control of business belong to the individual owners. The United States is a free market economy.
- People are free to take the risk of their businesses succeeding or failing.- People are free to take the risk of their businesses succeeding or failing.
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CompetitionCompetition
Compete – In Economics, going against another business or businesses to get consumers to purchase their product.
Compete – In Economics, going against another business or businesses to get consumers to purchase their product.
- In the real world, competition is imperfect. There are many factors that can affect prices.
- In the real world, competition is imperfect. There are many factors that can affect prices.
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CompetitionCompetition
Discounted – Giving a lower price for buying a larger amount.Discounted – Giving a lower price for buying a larger amount.
Incentive – Encouragement for business to do something to keep prices low.
Incentive – Encouragement for business to do something to keep prices low.
- Most of the time, competition keeps prices low. Sometimes though, it causes a disadvantage.
- Most of the time, competition keeps prices low. Sometimes though, it causes a disadvantage.
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The World MarketThe World Market
Interdependence – Nations depend on other nations for many goods and services.
Interdependence – Nations depend on other nations for many goods and services.
Imports – Goods brought into the United States from other countries.Imports – Goods brought into the United States from other countries.
Exports – Goods sold to other countries from the United States.Exports – Goods sold to other countries from the United States.
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The World MarketThe World Market
International Trade – The buying and selling of goods among nations.International Trade – The buying and selling of goods among nations.
Absolute Advantage – One country does better than another country because of:
Absolute Advantage – One country does better than another country because of:
A. Locations
B. Climate
C. Natural Resources
A. Locations
B. Climate
C. Natural Resources
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The World MarketThe World MarketExample: Columbia’s soil and climate give it an absolute advantage over the U.S. for growing coffee beans.
Example: Columbia’s soil and climate give it an absolute advantage over the U.S. for growing coffee beans.
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The World MarketThe World Market
Comparative Advantage – What a country does better than other things the country can do.
Comparative Advantage – What a country does better than other things the country can do.
Example: Columbia is more efficient at growing coffee beans than growing wheat.Example: Columbia is more efficient at growing coffee beans than growing wheat.
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The World MarketThe World Market
- Nations export items in which they have an absolute or a comparative advantage.- Nations export items in which they have an absolute or a comparative advantage.
- Trade is determined by:
A. Geographical Location
B. Politics
C. Natural Resources
- Trade is determined by:
A. Geographical Location
B. Politics
C. Natural Resources
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The Role of GovernmentThe Role of Government
- Even though the United States is a free market system, the government still regulates markets by controlling the overall economy, making sure products are safe, and collecting taxes.
- Even though the United States is a free market system, the government still regulates markets by controlling the overall economy, making sure products are safe, and collecting taxes.
Regulate – Making rules and watching over to protect the consumers.Regulate – Making rules and watching over to protect the consumers.
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The Role of GovernmentThe Role of Government
Public Sector – Part of the marketplace where the government makes or purchases goods and services for the people.
Public Sector – Part of the marketplace where the government makes or purchases goods and services for the people.
Private Sector – Business and their customers trade privately-owned goods and services.
Private Sector – Business and their customers trade privately-owned goods and services.
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The Role of GovernmentThe Role of Government
Public Works – Making highways, bridges, and government buildings.Public Works – Making highways, bridges, and government buildings.
- The state and local government pay for schools, poor families to help pay for living expenses and food, and prisons.
- The state and local government pay for schools, poor families to help pay for living expenses and food, and prisons.
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Consumers’ ChoicesConsumers’ Choices
Trade-offs – Losing one item and in return gaining another item.Trade-offs – Losing one item and in return gaining another item.
- Consumers look at price, purpose, quality, brand name, and appearance when thinking about buying a certain product.
- Consumers look at price, purpose, quality, brand name, and appearance when thinking about buying a certain product.
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Producers’ ChoicesProducers’ Choices
Wholesale – When producers sell to businesses.Wholesale – When producers sell to businesses.
Retail – When businesses sell to consumers.Retail – When businesses sell to consumers.
- Producers look at demand, competition, resources, production, and distribution when considering what goods and services to offer.
- Producers look at demand, competition, resources, production, and distribution when considering what goods and services to offer.
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Producers’ ChoicesProducers’ Choices
Profit – Money left over when the cost of resources is subtracted from the money made selling the business’s product.
Profit – Money left over when the cost of resources is subtracted from the money made selling the business’s product.
- This is why businesses want to keep the opportunity cost low.- This is why businesses want to keep the opportunity cost low.
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Other kinds of EconomiesOther kinds of Economies
Command Economy – The government controls the prices, production, and labor. Command Economy – The government controls the prices, production, and labor.
- Some countries who have this type of economy:
- Cuba
- North Korea
- Some countries who have this type of economy:
- Cuba
- North Korea
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Other kinds of EconomiesOther kinds of Economies
Mixed Economy – The government has more control over production than in a market economy. However, private ownership and entrepreneurship still exist.
Mixed Economy – The government has more control over production than in a market economy. However, private ownership and entrepreneurship still exist.
- Some countries who have this type of economy:
- Norway, Sweden, & Canada
- Some countries who have this type of economy:
- Norway, Sweden, & Canada