Economics 9/8/14 http://mrmilewski.com OBJECTIVE: Examine the
types of Economic Systems. AP Micro-I.D Language objective: Discuss
economic systems. I. Journal#4 -Review Homework -Do now: Look at
the chart on p. 32 -notes on economic systems II. Video: John
Stossell III. Homework -Read p.33-34 & Answer questions 1-3
p.44
Slide 4
All societies face scarcity and must answer the 3 basic
questions: What to produce? How to produce? For whom to produce?
http://www.swan.ac.uk/engd/production%20line.JPG
http://en.wikipedia.org/wiki/Image:Bakweri_cocoyam_farmer_from_Cameroon.jpg
Slide 5
Types of Economic Systems
Slide 6
Discussion Questions on Video: Is America #1? What do you think
is the most important measure of success? Can wealth (jobs) be
protected by the government? How does the rule of law contribute to
wealth creation? Are freedom and democracy the same thing?
Economics 9/9/14 http://mrmilewski.com OBJECTIVE: Examine the
key points of a market economy. AP Micro/Macro-I.D Language
objective: SWBAT define the terms: private property, freedom of
enterprise, freedom of choice, self-interest, competition and
market. I. Journal#5 -Review Homework -Do now: Vocabulary words
pertaining to markets -notes on Specialization II. Homework -Read
p.34 - 38
Slide 9
Do Now: Vocabulary Define each of the following Private
property Freedom of Enterprise Freedom of Choice Self-Interest
Competition Market
Slide 10
Specialization Market economies rely on specialization to
create efficient markets. It enables the use of resources to
produce one or a few goods or services rather than a bunch of them.
Example: Many farmers sell their milk to the local dairy, but buy
their butter from the grocery store rather than making their own.
Society learned long ago that by specializing in what we produce,
we are much more efficient than being a jack-of-all-trades.
Slide 11
Advantages of Specialization Division of Labor (Human
specialization) Individuals have different abilities and skills
that can be taken advantage of. If two people have the same skill,
specialization still works. Since the person is devoting time to
just one task, their skills at doing it will improve.
Specialization saves time. By applying ones efforts to just one
task, loss of time from shifting from one job to another is
avoided. For these reasons, specialization increases output
Slide 12
Geographic Specialization- It is possible to grow oranges in
Nebraska, but since the land, rainfall and temperature are not
ideal for it, the costs would be much higher than growing them in
Florida. The conditions in Nebraska are ideal for wheat, so they
specialize in wheat. Both human and geographical specialization
increase the total output generated from limited resources.
Slide 13
Use of Money Money actually performs many functions, but first
and foremost it is a medium of exchange. Specialization requires
exchange. Throughout history, exchange has occurred by bartering.
This is swapping one good for another, like wheat for oranges.
Unfortunately, this system can be a problem if you are bartering
with someone who doesnt need your product. This is why money is a
better form of exchange. See Figure 2.1 on page 34
Slide 14
Homework Tonight Read p.34-38
Slide 15
Economics 9/10/14 http://mrmilewski.com OBJECTIVE: Examine the
Five Fundamental Questions of a market economy. AP Micro-I.D
Language objective: SWBAT answer and explain the Five Fundamental
Questions of a market economy through discussion and written
answers. I. Journal#6 -Do now: Question #4 on page 44 -notes on the
Five Fundamental Questions II. Homework Questions #5 thru #9 on
page 44 and read pages 38-41.
Slide 16
Five Fundamental Questions What goods and services will be
produced? How will the goods and services be produced? Who will get
the goods and services? How will the system accommodate change? How
will the system promote progress?
Slide 17
What will be produced? Goods and services that make a
continuing profit will be produced and those that generate a loss
will be discontinued. Profits occur when Total Revenues (TR) exceed
Total Costs (TC). When this happens, the industry expands. If TC
> TR, the industry contracts and firms either shrink in size or
go out of business. In a market system, consumers are in command
and they determine the types and quantities of goods produced. This
is known as consumer sovereignty or dollar votes.
Slide 18
How Will Goods and Services Be Produced? In combinations and
ways that minimize the cost per unit. Competition will further help
determine what will be produced. Consumers prefer quality products
at the lowest possible price. This means if a firm is using higher
costs they will eventually be forced out of the market by firms
producing the same product or good at lower costs. Basically:
Competition eliminates high cost producers. See Table 2.1 on page
36.
Slide 19
Who Will Get the Output? Consumers will get the output based on
their ability and willingness to pay. Their ability to pay is
determined by their income. Their willingness to pay is determined
by their desire for the good or service. Review Budget Line graph
on page 9, Figure 1.1.
Slide 20
How Will the System Accommodate Change? Market economies are
dynamic: Consumer preferences, technology and supplies of resources
are always changing. What is selling now might not be selling in
the near future. The market system is a huge communication system.
It is told what to do by the demands of the consumer, or by
consumer sovereignty. Discuss the fruit juice/milk example on page
37.
Slide 21
How Will the System Promote Progress? Technological Advance:
Technology provides the ability to produce goods and services at
lower costs which leads to lower prices for the consumer and
greater profits for the firm. Firms that are innovative and use new
technologies put pressure on their competition to keep up. If they
do not, they could go out of business. In some cases, the result of
this is known as creative destruction. Firms that do not change
with the times, and stick to their old ways of doing business, will
be left behind and most likely fail. For example, CDs replaced
vinyl albums and now digital technology is replacing CDs.
Economics 9/11/14 http://mrmilewski.com OBJECTIVE: Examine the
Five Fundamental Questions of a market economy. AP Micro-I.D
Language objective: Preview FRQs. I. Journal#7 -Do now: Problem #2
on page 45 -FRQ Example: 2013 Macro #22013 Macro #2 II. Homework:
Finish reading Ch#2
Slide 24
2013 FRQ question#2 Assume that the country of Fischerland
produces only consumer goods and capital goods. (a) The graph above
shows the production possibilities curve for Fischerland. The
production of which of the following exhibits increasing
opportunity costs: consumer goods only, capital goods only, both
goods, or neither good? (b) Redraw the graph given above. Show a
point that represents fully employed and efficiently used resources
on the redrawn graph and label it A. (c) Assume there is a
recession in Fischerland. On your graph in part (b), label as C a
point representing the recession. (d) Identify a fiscal policy
action that the Fischerland government can take to address the
recession. (e) Assume instead that no discretionary policy actions
are taken. Will short-run aggregate supply increase, decrease, or
remain the same in the long run? Explain.
Slide 25
Homework Tonight Finish reading Ch#2
Slide 26
Economics 9/12/14 OBJECTIVE: Examine the concepts of the
Invisible Hand and The Circular Flow Model. AP Macro-2.A Language
objective: SWBAT read and discuss the Circular Flow Model and write
the answers to questions and problems regarding Circular Flow. I.
Journal#8 -Review Homework -Do now: Question #10 on page 44 -notes
on the Invisible Hand and Circular Flow II. Video on the Invisible
Hand II. Homework Questions #11 and #12 on page 44 and problems #1,
3, and 4 on page 44 and 45.
Slide 27
The Invisible Hand In 1776, Adam Smith wrote the book The
Wealth of Nations. One observation that he made was the
relationship between private interests and social interests in the
market. He realized that firms build and improve products to
increase profits and that these enhanced products increase societys
well-being. At the same time, firms use only the scarce resources
in the most efficient way which frees up scarce resources to
produce other products that society desires.
Slide 28
Virtues of a Market System The Invisible Hand ensures that when
firms maximize profits and resource suppliers maximize profits,
then society maximizes their output and income. Efficiency- A
market system promotes efficiency in production and encourages more
and better ways to produce. Incentives- A market system encourages
hard work, innovation and the desire to improve resulting in higher
income. Freedom- A market system encourages personal freedom. Also,
freedom of enterprise and choice.
Slide 29
Circular Flow Model Illustrate on board and explain the
Circular Flow.
Slide 30
Sole Proprietorship Sole proprietorship a business owned and
run by one person.
Slide 31
Advantages/Disadvantages of Sole Proprietorships Advantages:
-easy to start -flexible -$ is all yours -own boss -easy to shut
down Disadvantages: -unlimited liability you are responsible for
everything -hard to borrow money -expensive inventory -limited
management experience -hard finding qualified employees -limited
life business dies when you die
Slide 32
Partnerships Partnerships business jointly owned by two or more
persons. There are two types of partnerships: *general partnership
all partners actively run the business *limited partnership at
least one partner is not active in daily operations (probably just
contributed $).
Slide 33
Advantages/Disadvantages of partnerships: Advantages: -easy to
start -easy to manage -share profits -can attract financial capital
-easier to attract qualified employees Disadvantages: -responsible
for other partners actions -when a partner dies, a new partnership
agreement has to be drawn up -conflict between partners
Slide 34
Corporations Corporation a form of business organization that
is recognized by the law as having all the legal rights of an
individual. They have the right to buy & sell property, enter
into legal contracts, and to sue & be sued.
Slide 35
Advantages of Corporations Easy to raise financial capital Hire
professional managers Limited liability shareholders only lose
money invested if something goes terribly wrong. Unlimited life the
firm doesnt die when a shareholder does.
Slide 36
Disadvantages of Corporations Difficult to start. Shareholders
have little say. Double taxation the firms profits are taxed and
then the profit that is distributed to shareholders is also taxed.
Government regulation.