Bell Starter(Section 1)

Bell Starter(Section 1)

Key TermsKey Terms

GoodsServicesFactors of

productionNatural

resourcesLabor

GoodsServicesFactors of

productionNatural

resourcesLabor

Key TermsKey Terms

CapitalEntrepreneurGross Domestic

Product (GDP)Standard of

living

CapitalEntrepreneurGross Domestic

Product (GDP)Standard of

living

ECONOMIC RESOURCESECONOMIC RESOURCES

PRODUCTION OUTPUT OF U.S. AT BEGINNING OF 21ST

CENTURY AT 10 TRILLION (30%) OF WORLD’S OUTPUT

PRODUCTION OUTPUT OF U.S. AT BEGINNING OF 21ST

CENTURY AT 10 TRILLION (30%) OF WORLD’S OUTPUT

PRODUCTIONPRODUCTION

COMES IN THE FORM OF GOODS AND SERVICESGOOD:

BOOKS , CARS

SERVICES:HAIRCUTS, HOME REPAIRS, CONCERTS

TO MAKE GOODS AND SERVICES YOU MUST HAVE THE FOUR FACTORS OF PRODUCTION

COMES IN THE FORM OF GOODS AND SERVICESGOOD:

BOOKS , CARS

SERVICES:HAIRCUTS, HOME REPAIRS, CONCERTS

TO MAKE GOODS AND SERVICES YOU MUST HAVE THE FOUR FACTORS OF PRODUCTION

FOUR FACTORS OF PRODUCTION

FOUR FACTORS OF PRODUCTION

NATURAL RESOURCESCOMES FROM NATURE

FERTILE FIELDS, RAINFALL, FOREST, MINERAL DEPOSITS

SCHOOLS—BUILT ON/WITH NATURAL RESOUCES

HUMAN RESOURCES (LABOR)PHSYCIAL AND MENTAL WORK

CAPITAL RESOURCESCAPITAL GOODS:

UNIQUE BECAUSE THEY GO INTO MAKING ANOTHER PRODUCT AND ARE NOT COUNTED IN GDP

TOOLS, MACHINERY

ENTREPRENEURAL SKILLSNEW BUSINESSES, INTRODUCE NEW PRODUCTS

NATURAL RESOURCESCOMES FROM NATURE

FERTILE FIELDS, RAINFALL, FOREST, MINERAL DEPOSITS

SCHOOLS—BUILT ON/WITH NATURAL RESOUCES

HUMAN RESOURCES (LABOR)PHSYCIAL AND MENTAL WORK

CAPITAL RESOURCESCAPITAL GOODS:

UNIQUE BECAUSE THEY GO INTO MAKING ANOTHER PRODUCT AND ARE NOT COUNTED IN GDP

TOOLS, MACHINERY

ENTREPRENEURAL SKILLSNEW BUSINESSES, INTRODUCE NEW PRODUCTS

FACTORY OF PRODUCTIONACTIVITY

FACTORY OF PRODUCTIONACTIVITY

Natural Resources

Human Resources

Capital Goods Entrepreneur

Gift of Nature

Electricians

Machinery

New Model of Car

GDPGDPGROSS DOMESTIC PRODUCT

TOTAL DOLLAR VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED IN A COUNTRY EACH YEAR

Loaf of bread—sold to its userGoods that’s go into making-not countedSales of used goods—not counted

THIS IS HOW WE DETERMINE WHERE WE ARE IN THE BUSINESS CYCLE

2 QUARTERS OF GDP GOING DOWN2 QUARTERS OF GDP GOING UP

GROSS DOMESTIC PRODUCTTOTAL DOLLAR VALUE OF ALL FINAL

GOODS AND SERVICES PRODUCED IN A COUNTRY EACH YEAR

Loaf of bread—sold to its userGoods that’s go into making-not countedSales of used goods—not counted

THIS IS HOW WE DETERMINE WHERE WE ARE IN THE BUSINESS CYCLE

2 QUARTERS OF GDP GOING DOWN2 QUARTERS OF GDP GOING UP

CALCULATING THE GDPCALCULATING THE GDP

NUMBER OF ALL FINAL GOODS AND SERVICES PRODUCED IN USA IN ONE YEAR

NUMBER OF EACH THAT ARE PRODUCED

LIST OF PRICES FOR EACH GOOD AND SERVICE PRODUCED

NUMBER OF ALL FINAL GOODS AND SERVICES PRODUCED IN USA IN ONE YEAR

NUMBER OF EACH THAT ARE PRODUCED

LIST OF PRICES FOR EACH GOOD AND SERVICE PRODUCED

CALCULATING THE GDPCALCULATING THE GDP

GDP = QUANTITY X PRICE AVERAGE OF EACH ITEM THEN ADD ALL TOGETHER

5 CARS AT 25000 (5 X 25000) =4 BOATS AT 30000 (4 X 30000) =10 MOTORCYCYES AT 500

(10X500)=

GDP = QUANTITY X PRICE AVERAGE OF EACH ITEM THEN ADD ALL TOGETHER

5 CARS AT 25000 (5 X 25000) =4 BOATS AT 30000 (4 X 30000) =10 MOTORCYCYES AT 500

(10X500)=

COMPUTING GDPCOMPUTING GDPFinal Goods

And ServicesQuantity

(in thousands)

AveragePrice

Value(in millions)

Goods: Automobiles Books Computers----------------------- Zippers

6,00015,000

1,300________

1,000

$28,00025

1,700_________

2

$168,000375

2,210_________

2

Services: Advertising (minutes of) Babysitting (hours of) Car Washes (number of)__________ Zodiac Readings (number of)

1,050,00050,00015,000

_________400

$1,0005

10_______

10

$1,050,000250150

_________4

Gross Domestic Product: $10.2 trillion

Bell Starter(Section 2)

Bell Starter(Section 2)

Factor MarketProduct MarketProductivitySpecializationDivision of laborEconomic

interdependence

Factor MarketProduct MarketProductivitySpecializationDivision of laborEconomic

interdependence

Workers earn wages Factor or Product Market

Banks earn interest Factor or Product Market

Music stores sells CDs Factor or Product Market

Landowners receive rent Factor or Product Market

Workers earn wages Factor or Product Market

Banks earn interest Factor or Product Market

Music stores sells CDs Factor or Product Market

Landowners receive rent Factor or Product Market

ECONOMIC ACTIVITY & PRODUCTIVITY

ECONOMIC ACTIVITY & PRODUCTIVITY

CIRCULAR FLOW OF THE ECONOMY IS HOW PRODUCTS FLOW FROM ONE MARKET TO

ANOTHER

CIRCULAR FLOW OF THE ECONOMY IS HOW PRODUCTS FLOW FROM ONE MARKET TO

ANOTHER

CIRCULAR FLOW CIRCULAR FLOW

MARKET ALLOWS BUYERS AND SELLERS TO EXCHANGE ECONOMIC PRODUCTS

LOCAL, REGIONAL, NATIONAL, GOLBAL

MARKET ALLOWS BUYERS AND SELLERS TO EXCHANGE ECONOMIC PRODUCTS

LOCAL, REGIONAL, NATIONAL, GOLBAL

SECTOR ONE: THE CONSUMER

SECTOR ONE: THE CONSUMER

COSUMERS, BUSINESSES, GOVERNMENT AND FOREIGN SECTOR

EARN INCOME IN FACTOR MARKET (PLACE WHERE PRODUCTIVE RESOURCES ARE BOUGHT & SOLD

WORKERS: EARN WAGES, SALERIES, & BENEFITSLANDOWNERS: EARN RENTCAPITAL INVESTORS EARN INTEREST

COSUMERS, BUSINESSES, GOVERNMENT AND FOREIGN SECTOR

EARN INCOME IN FACTOR MARKET (PLACE WHERE PRODUCTIVE RESOURCES ARE BOUGHT & SOLD

WORKERS: EARN WAGES, SALERIES, & BENEFITSLANDOWNERS: EARN RENTCAPITAL INVESTORS EARN INTEREST

SECTOR TWO: THE BUSINESS

SECTOR TWO: THE BUSINESS

INDIVIDUALS RECEIVE THEIR INCOMES FROM THE FACTOR MARKET. THEY WILL SPEND $ (INCOMES) IN

THE PRODUCT MARKETS. (WHERE PRODUCERS OFFER GOODS & SERVICES FOR SALE

BUSINESS PURCHASE SOME OF ITS OWN OUTPUTS LIKE CAPITAL GOODS (COMPUTER)

INDIVIDUALS RECEIVE THEIR INCOMES FROM THE FACTOR MARKET. THEY WILL SPEND $ (INCOMES) IN

THE PRODUCT MARKETS. (WHERE PRODUCERS OFFER GOODS & SERVICES FOR SALE

BUSINESS PURCHASE SOME OF ITS OWN OUTPUTS LIKE CAPITAL GOODS (COMPUTER)

SECTOR THREE: GOVERNMENTSECTOR THREE: GOVERNMENT

ALL LEVELS (LOCAL, STATE, NATIONAL) PARTICIPATE IN MARKETS.SALES OF SERVICES ARE GOVERNMENT

REVENUES BUT THEY ALWAYS NEED MORE SO THEY DO OTHER THINGS

TAXATIONPUBLIC UNIVERSITIES: TUITIONCITY BUSES: FARES

ALL LEVELS (LOCAL, STATE, NATIONAL) PARTICIPATE IN MARKETS.SALES OF SERVICES ARE GOVERNMENT

REVENUES BUT THEY ALWAYS NEED MORE SO THEY DO OTHER THINGS

TAXATIONPUBLIC UNIVERSITIES: TUITIONCITY BUSES: FARES

GOVERNMENTGOVERNMENT

GOVERNMENT PURCHASES IN PRODUCT MARKET TO BUY THINGS LIKE:

PURCHASE OF BOOKS, BUSES, SHIPS, PLANES

GOVERNMENT PURCHASES IN FACTOR MARKET TO BUY THINGS LIKE:

RECEIVES REVENUE FROM THE SERVICES SOLDPUBLIC UNIVERSITIES CHARGE TUTIONPUBLIC HOSPITALS CHARGES FEES

GOVERNMENT PURCHASES IN PRODUCT MARKET TO BUY THINGS LIKE:

PURCHASE OF BOOKS, BUSES, SHIPS, PLANES

GOVERNMENT PURCHASES IN FACTOR MARKET TO BUY THINGS LIKE:

RECEIVES REVENUE FROM THE SERVICES SOLDPUBLIC UNIVERSITIES CHARGE TUTIONPUBLIC HOSPITALS CHARGES FEES

SECTOR FOUR: FOREIGN SECTOR

SECTOR FOUR: FOREIGN SECTOR

ALL OTHER COUNTRIES IN THIS WORLD

LINE WITH ARROW AT BOTH ENDS B/C WE SELL AND BUY PRODUCTS FROM OTHER COUNTRIES. OFFSETS EACH OTHER

ALL OTHER COUNTRIES IN THIS WORLD

LINE WITH ARROW AT BOTH ENDS B/C WE SELL AND BUY PRODUCTS FROM OTHER COUNTRIES. OFFSETS EACH OTHER

PRODUCTIVITY & ECONOMIC GROWTHPRODUCTIVITY & ECONOMIC GROWTH

PRODUCTIVITY MEASURE OF THE AMOUNT OF OUTPUT

PRODUCED BY A GIVEN AMOUNT OF INPUTS IN A SPECIFIC PERIOD OF TIMELABOR TERMS: BUT APPLIES TO ALL

FACTORS OF PRODUCTIONHELPS TO SPECIALIZE: WHICH LEAD TO

FOREIGN TRADE

PRODUCTIVITY MEASURE OF THE AMOUNT OF OUTPUT

PRODUCED BY A GIVEN AMOUNT OF INPUTS IN A SPECIFIC PERIOD OF TIMELABOR TERMS: BUT APPLIES TO ALL

FACTORS OF PRODUCTIONHELPS TO SPECIALIZE: WHICH LEAD TO

FOREIGN TRADE

WHY NATIONS TRADE?WHY NATIONS TRADE?

1. SPECIALIZATIONGOODS AND SERVICES YOU CAN

PRODUCE BETTER THAN ANYONE ELSE 2. COMPARATIVE ADVANTAGES

HIGHER WAGES, BETTER JOBS 3. TRADE CREATES JOBS AND MARKETS

DIVISION OF LABOR 4. ECONOMIC INTERDEPENDENCE

WE RELY ON EACH OTHER FOR GOODS AND SERVICE

1. SPECIALIZATIONGOODS AND SERVICES YOU CAN

PRODUCE BETTER THAN ANYONE ELSE 2. COMPARATIVE ADVANTAGES

HIGHER WAGES, BETTER JOBS 3. TRADE CREATES JOBS AND MARKETS

DIVISION OF LABOR 4. ECONOMIC INTERDEPENDENCE

WE RELY ON EACH OTHER FOR GOODS AND SERVICE

BELL STARTER(Section 3)

BELL STARTER(Section 3)

CAPITALISMFREE ENTERPRISECOMSUMER SOVEREIGNTYPRIVATE PROPERTY RIGHTSCOMPETITIONPROFITPROFIT MOTIVEVOLUNTARY EXCHANGE

CAPITALISMFREE ENTERPRISECOMSUMER SOVEREIGNTYPRIVATE PROPERTY RIGHTSCOMPETITIONPROFITPROFIT MOTIVEVOLUNTARY EXCHANGE

CAPITALISM & FREE ENTERPRISECAPITALISM & FREE ENTERPRISE

MARKET ECONOMY

MARKET ECONOMY

CAPITALISMCAPITALISM

ECONOMIC SYSTEM IN WHICH PRIVATE CITIZENS OWN AND USE FACTORS OF PRODUCTION FOR THEIR OWN PROFIT

ECONOMIC SYSTEM IN WHICH PRIVATE CITIZENS OWN AND USE FACTORS OF PRODUCTION FOR THEIR OWN PROFIT

FREE ENTERPRISEFREE ENTERPRISE

COMPETITION IS ALLOWED TO FLOURISH WITH A MINIMUM OF GOVERNMENT INTERFERENCE

COMPETITION IS ALLOWED TO FLOURISH WITH A MINIMUM OF GOVERNMENT INTERFERENCE

FEATURES OF CAPITALISMFEATURES OF CAPITALISM

MARKET IMPORTANT PART OF OUR ECONOMIC

SYSTEMLOCAL, STATE, NATIONAL, GLOBALCONNECT CONSUMERS & BUSINESS

IN FACTOR & PRODUCTCONSUMER MOST IMPORTANTCONSUMER SOVEREIGNTY

Consumers as king or ruler of the market

MARKET IMPORTANT PART OF OUR ECONOMIC

SYSTEMLOCAL, STATE, NATIONAL, GLOBALCONNECT CONSUMERS & BUSINESS

IN FACTOR & PRODUCTCONSUMER MOST IMPORTANTCONSUMER SOVEREIGNTY

Consumers as king or ruler of the market

FEATURES OF CAPITALISMFEATURES OF CAPITALISM

ECONOMIC FREEDOMCHOOSE TYPE OF JOB CHOOSE WHEN & WHERE WE WANT

TO WORK AND FOR HOW MUCHCHOOSE PRODUCTS WE BUYBUSINESS CHOOSE THE PRODUCTS

THEY PRODUCE OR SALE

ECONOMIC FREEDOMCHOOSE TYPE OF JOB CHOOSE WHEN & WHERE WE WANT

TO WORK AND FOR HOW MUCHCHOOSE PRODUCTS WE BUYBUSINESS CHOOSE THE PRODUCTS

THEY PRODUCE OR SALE

FEATURES OF CAPITALISMFEATURES OF CAPITALISM

PRIVATE PROPERTY RIGHTSTAKE BETTER CARE OF ITEMS YOU

OWN AS OPPOSE TO RENTINGFREEDOM TO DISPOSE OF ITINCENTIVE TO WORK, SAVE, AND

INVEST

PRIVATE PROPERTY RIGHTSTAKE BETTER CARE OF ITEMS YOU

OWN AS OPPOSE TO RENTINGFREEDOM TO DISPOSE OF ITINCENTIVE TO WORK, SAVE, AND

INVEST

FEATURES OF CAPITALISMFEATURES OF CAPITALISM

COMPETITIONCAPITALISM THRIVES ON THISINVISABLE HAND (ADAM SMITH)

DRIVES PRICES DOWNREWARDS MOST EFFICIENT

PRODUCERS & FORCES OTHERS OUT OF BUSINESS

COMPETITIONCAPITALISM THRIVES ON THISINVISABLE HAND (ADAM SMITH)

DRIVES PRICES DOWNREWARDS MOST EFFICIENT

PRODUCERS & FORCES OTHERS OUT OF BUSINESS

FEATURES OF CAPITALISMFEATURES OF CAPITALISM

THE PROFIT MOTIVEFREE TO RISK EVERYTHING IN

BUSINESS VENTUREGOES WELL-PROFIT GOES BADLY - BANKRUPT (REPO)PROFIT: AMOUNT LEFT OVER AFTER

ALL COST OF PRODUCTION HAVE BEEN PAID

THE PROFIT MOTIVEFREE TO RISK EVERYTHING IN

BUSINESS VENTUREGOES WELL-PROFIT GOES BADLY - BANKRUPT (REPO)PROFIT: AMOUNT LEFT OVER AFTER

ALL COST OF PRODUCTION HAVE BEEN PAID

FEATURES OF CAPITALISMFEATURES OF CAPITALISM

VOLUNTARY EXCHANGEYOU AND THE SELLER-GIVE AND TAKEBOTH PARTIES FEEL THAT THEY WILL

BENEFIT

VOLUNTARY EXCHANGEYOU AND THE SELLER-GIVE AND TAKEBOTH PARTIES FEEL THAT THEY WILL

BENEFIT

SPREAD OF CAPITALISMSPREAD OF CAPITALISM

NO ONE PERSON INVENTEDSPECIALIZATIONCOMPARATIVE ADVANTAGE

NO ONE PERSON INVENTEDSPECIALIZATIONCOMPARATIVE ADVANTAGE

ADAM SMITHADAM SMITH

WEALTH OF NATIONS 1776LAISSAZ-FAIRE ECONOMICS

HANDS OFF - NO GOVERMENT REGULATIONS OR INTERFERANCE

INDIVIDUALS SEEKING TO MAKE A PROFIT BENEFIT ALL OF SOCIETY

INVISABLE HANDCOMPETITION

WEALTH OF NATIONS 1776LAISSAZ-FAIRE ECONOMICS

HANDS OFF - NO GOVERMENT REGULATIONS OR INTERFERANCE

INDIVIDUALS SEEKING TO MAKE A PROFIT BENEFIT ALL OF SOCIETY

INVISABLE HANDCOMPETITION