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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)