Unit 1: What is Unit 1: What is economics all ABOUT?economics all ABOUT?

Chapters 1-6Chapters 1-6

Chapter 1: Making choicesChapter 1: Making choices

Personal EconomicsPersonal EconomicsWhat are good services?What are good services?

Two of the most important words in economics are Two of the most important words in economics are GOODS and SERVICESGOODS and SERVICES

GOODS -Things that can be seen or touched EX: GOODS -Things that can be seen or touched EX: sneakers or advertisements.sneakers or advertisements.

SERVICES – Are useful things that cannot be seen or SERVICES – Are useful things that cannot be seen or touched EX: Salesperson who rents or sells you a dvd is touched EX: Salesperson who rents or sells you a dvd is

performing a serviceperforming a service

What are economic resources?What are economic resources? Economic resources are things that go into the making of good Economic resources are things that go into the making of good

and services.and services. There are 3 kindsThere are 3 kinds Natural resources – Things provided by the world. Natural resources – Things provided by the world.

(EX: FOOD, AIR, WATER) Without natural resources (EX: FOOD, AIR, WATER) Without natural resources there wouldn’t be any goods.there wouldn’t be any goods.

Human resources – Are the individuals which put Human resources – Are the individuals which put everything together to make goods and services EX: everything together to make goods and services EX: when you go to the doctors office everything is done in when you go to the doctors office everything is done in a timely matter.a timely matter.

Capital resources – The machines, tools and buildings Capital resources – The machines, tools and buildings used in a production of goods and services.used in a production of goods and services.(more goods then services) EX: Trucks, Trains carry (more goods then services) EX: Trucks, Trains carry goods across the country.goods across the country.

Economic choicesEconomic choices

Economics is all about the decisions that we make as an Economics is all about the decisions that we make as an producer and consumer. Which brings us to scarcity.producer and consumer. Which brings us to scarcity.

Scarcity – Means that there isn’t enough of everything, Scarcity – Means that there isn’t enough of everything, there’s a limit to everythingthere’s a limit to everything

Macroeconomic – Is the study of the effects of changes Macroeconomic – Is the study of the effects of changes on the economy as a whole.on the economy as a whole.

Microeconomic – Is the study of the effects of decisions Microeconomic – Is the study of the effects of decisions by individuals and firms on various parts of the economyby individuals and firms on various parts of the economy

Chapter 2: Types of economic Chapter 2: Types of economic systemsystem

Economic system – Describes how a nation is organized for Economic system – Describes how a nation is organized for production.production.

Traditional Economic system – Its based on custom and Traditional Economic system – Its based on custom and tradition, also provides less of a demand on the resources tradition, also provides less of a demand on the resources of earth because goods are only produced if they will be of earth because goods are only produced if they will be consumed.consumed.

Market Economic system: One in which nations economy Market Economic system: One in which nations economy decisions are the result in individual decisions by buyers decisions are the result in individual decisions by buyers and sellers in the market place; Market system are also and sellers in the market place; Market system are also known as Free enterprise system known as Free enterprise system

Command Economic systemCommand Economic system

The what, how, and who question s are The what, how, and who question s are mainly decided by some central authority. mainly decided by some central authority. The mean of production are owned mostly The mean of production are owned mostly by the government.by the government.

The command system has been a failure.The command system has been a failure.

Chapter 3: The U.S. Free Chapter 3: The U.S. Free enterprise systementerprise system

How does the U.S. free enterprise system operates?How does the U.S. free enterprise system operates? It operates according to the six principles It operates according to the six principles Freedom to choose employment – You will decide what Freedom to choose employment – You will decide what

fees to charge and what hours to work. Also you must fees to charge and what hours to work. Also you must keep accurate financial records and pay taxes; keep accurate financial records and pay taxes; employment is basically your alone to makeemployment is basically your alone to make

Right to property – is a piece of land building, vehicle or Right to property – is a piece of land building, vehicle or other things owned by an individual, a family or a group.other things owned by an individual, a family or a group.

Profit motives – The amount of money left over after Profit motives – The amount of money left over after subtracting your business expenses from your business subtracting your business expenses from your business income known as your profit.income known as your profit.

Competition – The rivalry between the sellers in Competition – The rivalry between the sellers in the same field for consumers’ dollars.the same field for consumers’ dollars.

Consumer sovereignty – Consumers are said to Consumer sovereignty – Consumers are said to have the power or freedom to have final say.have the power or freedom to have final say.

Rule of Law – Our economic system work Rule of Law – Our economic system work because it operates within the framework of a because it operates within the framework of a government of laws, not individuals. No one is government of laws, not individuals. No one is above the law.above the law.

Chapter 5: Money and BanksChapter 5: Money and Banks What is money? – Money is anything that most people are willing to accept What is money? – Money is anything that most people are willing to accept

in payment for goods and services.in payment for goods and services. What does money do? – Money promotes trade, Also people can easily What does money do? – Money promotes trade, Also people can easily

trade goods and services with one another.trade goods and services with one another. Medium of Exchange – Money provides a way to calculate value also a Medium of Exchange – Money provides a way to calculate value also a

method of saving.method of saving.

Checks – Is a written order directing a bank to pay a specified sum from one Checks – Is a written order directing a bank to pay a specified sum from one person’s account to another person or a business.person’s account to another person or a business.

Business of banking – Helps people deposit and withdraw money from their Business of banking – Helps people deposit and withdraw money from their accounts with them also allows people to borrow money to start businesses, accounts with them also allows people to borrow money to start businesses, buy home, buy motor vehicles Ect. buy home, buy motor vehicles Ect.

Chapter 6: The value of money Chapter 6: The value of money might increase or decreasemight increase or decrease

What is Inflation – Is a rise in the prices of most goods and services. When that happens people What is Inflation – Is a rise in the prices of most goods and services. When that happens people

cant buy as much goods as the year beforecant buy as much goods as the year before Deflation – Is the opposite, which rarely happen this means that the value of the dollar went up.Deflation – Is the opposite, which rarely happen this means that the value of the dollar went up.Who does it effect?Who does it effect? Retired people that live off dependentsRetired people that live off dependents such as social security, private pensions, bonds. such as social security, private pensions, bonds. People with savingsPeople with savings that put all of their extra cash into savings, b/c of inflation their money that put all of their extra cash into savings, b/c of inflation their money

maybe worth less then what it originally was.maybe worth less then what it originally was. People who have low incomePeople who have low income b/c of inflation it would be harder on them b/c they have little to b/c of inflation it would be harder on them b/c they have little to

enough money to spend.enough money to spend.Who does it benefits? Who does it benefits? People who owe money because of the loansPeople who owe money because of the loans that were taken out can now be repaid with the that were taken out can now be repaid with the

dollar b/c it becomes worth less after inflation, in the long run their saving a lot of money.dollar b/c it becomes worth less after inflation, in the long run their saving a lot of money. People who own real estatePeople who own real estate because of the inflation, their value of the homes or property’s the because of the inflation, their value of the homes or property’s the

were purchased will increase EX: the home was 75,000 in 1990 now b/c of inflation in 2009 it’s were purchased will increase EX: the home was 75,000 in 1990 now b/c of inflation in 2009 it’s now worth 400,000.now worth 400,000.

What causes inflation?What causes inflation?---rising demand or increasing cost.---rising demand or increasing cost.

Chapter 4: DEMAND AND Chapter 4: DEMAND AND SUPPLY!!!!!!!!SUPPLY!!!!!!!!

What are the law of demand and supply?What are the law of demand and supply?

What is the market price?What is the market price?

How do changes in the demand for or supply of How do changes in the demand for or supply of a product AFFECT its price?a product AFFECT its price?

Why are prices important in a market economy?Why are prices important in a market economy?

What are the law of demand and What are the law of demand and supply?supply?

Demand Demand – Is the – Is the amount amount of of the item that the buyers are the item that the buyers are willing and able to purchase at willing and able to purchase at any and all prices.any and all prices.

Supply – Supply – Is the Is the quantity quantity of of a good or service that is a good or service that is offered for sale at all prices offered for sale at all prices this will increase revenue.this will increase revenue.

Market Price – Market Price – Is the price at which supply and Is the price at which supply and demand are equal. The market price will always remain demand are equal. The market price will always remain the unchanged as long as supply and demand remain the unchanged as long as supply and demand remain unchanged. If there is an increase in demand or a unchanged. If there is an increase in demand or a decrease on supply, the market price will increase. decrease on supply, the market price will increase. Because the more people want the product the more Because the more people want the product the more money the producer makes.money the producer makes.

Changes in demand – Change in demand also affects the Changes in demand – Change in demand also affects the prices which goods will be bought and sold. If the demand prices which goods will be bought and sold. If the demand for an item has increased , the prices at which it will be for an item has increased , the prices at which it will be sold at will also increase. And if the demand decreases sold at will also increase. And if the demand decreases the price will also decrease. Ex: On mothers the demand the price will also decrease. Ex: On mothers the demand for flowers is very high, so the price increases. On a for flowers is very high, so the price increases. On a regular day the demand for flower isn’t high so the price regular day the demand for flower isn’t high so the price decreases.decreases.

Change in supply – Change in supply – If the number of the items If the number of the items available for sale at a particular price available for sale at a particular price the supply the supply increases, the price will fall. But if the supply of items increases, the price will fall. But if the supply of items decreases, the price will rise. EX: If there is a new brand decreases, the price will rise. EX: If there is a new brand that makes the production of sneaker a lot cheaper, that makes the production of sneaker a lot cheaper, there will be an increase in the output of the sneakers. there will be an increase in the output of the sneakers. With more outputs in the market, the price of sneakers With more outputs in the market, the price of sneakers will likely fall, creating greater demand in the will likely fall, creating greater demand in the marketplace.marketplace.

Why are prices important in a market economy? – The Why are prices important in a market economy? – The key ingredients is to make things happen. If the buyer key ingredients is to make things happen. If the buyer wants to own something badly enough, they would be wants to own something badly enough, they would be willing to pay more. And when seller wants to sell an willing to pay more. And when seller wants to sell an items badly enough, they would be willing to lower to items badly enough, they would be willing to lower to prices.prices.

1.1. Act a Act a Signals Signals to buyers and sellersto buyers and sellers When prices are low enough, they send a “buy” signal When prices are low enough, they send a “buy” signal

to buyers. When prices are high enough it sends a to buyers. When prices are high enough it sends a “sell” signal to the sellers, who can earn a profit.“sell” signal to the sellers, who can earn a profit.

1.1. Encourage efficient productionEncourage efficient production The less the it cost to produce an item, the more likely The less the it cost to produce an item, the more likely

that it’s producer will make a profit.that it’s producer will make a profit. Producers Strive for efficiency as a way of increasing Producers Strive for efficiency as a way of increasing

their profits.their profits.