Final exam review F15

Unit 1 INTRO

• ECO DEFINITION

What is Economics?

A.The study of how people seek to satisfy their needs and wants by making choices

• BASIC PROBLEMS IN ECO

1. What goods and services should be produced? (P)

2. How should they be distributed? (D)

3. Who should use them (consumption)? (C)

• PHILOSOPHERS

Put it all togetherDEVELOPMENT INDEX

CULTURAL SYSTEMS

ECONOMIC SYSTEMS

POLITICAL SYSTEMS

Less Developed

More DevelopedNIC

Traditional/Divergent

Modern/Convergent

DemocracyTheocracyTotalitarian/Dictatorship

Command/Planned Eco Socialist Eco

Market/Free Enterprise

Eco

Const. Monarchy

Government Involvement Spectrum

___________________________________________________

Karl Marx John Maynard Keynes Friedrich Hayek Adam Smith

Government Control

Free Market

Video : https://www.youtube.com/watch?v=GTQnarzmTOc

DATE BOOKTHEORY SUMMARY

Karl Marx

●Wrote “Communist Manifesto” and “Das Kapital” 1848

●Encouraged a ‘classless society’●Declared ‘surplus value (profits)’ should

belong to the workers

• BASIC ECO QUESTIONS

Economic Questions●The basic economic questions that every

economy must answer are:○ What to produce?○ For whom to produce?○ How to produce?○ Who should produce?

What does the study of economics entail?

• SCARCITY V SHORTAGE

The BasicsC. Scarcity• Permanent

problem we must face with ALL FACTORS OF PRODUCTION

D. Shortage• Temporary

situation we can find new /recover FACTORS OF PRODUCTION

Arable Land

Scarce

Drought

Shortage

Housing

Shortage

Potable Water

Scarce

What is Economics?

A. The study of how people seek to satisfy their needs and wants by making choices

• FOP

Factors of Production

E.Land- materials found in nature

Factors of Production

F. Labor- effort a person devotes to a task AND is paid

G. Capital: human made resources used to produce other goods or services• Human Capital: special training that

makes you “special” economically• Physical Capital: a good that helps you

produce other goods OR services• Technology: advances in the process

to make a good or service

Why is this beneficial?

Factors of Production

Doctor

HUMAN CAPITAL

Farming Equipment

Physical Capital

Factors of ProductionH. Entrepreneur(ship):

people who take the risk to combine land, labor, and capital to create NEW goods and services

• PURPOSE OF ECO SYSTEMS

Economic systems are categorized by how each society decides to answer the basic economic questions and distribute resources.

●USA’s #1 Goal = Economic Freedom; USA has a Market economy.

●Cuba’s #1 Goal = Economic Equity; Cuba has a Command economy.

Traditional

●Relies on habits, customs or rituals●Roles are passed from generation to

generation

Strengths: highly motivated citizens because your work directly provides for your family

Weaknesses: no “down time” to create, invent, etc

Traditional

●Property Rights – equally owned by family/tribe

●Incentives – provide basic needs for family●Economic Freedom – none, no time for

creativity/relaxation; won’t survive if each person doesn’t do their part

●Competition – none●Role of Gov – (chief, tribal leader) - survival

P- Based on traditions, available resources, & family/village size. D- Individuals, families, or the village.C- Trade within the village

Bedouins (Arabia) Nomadic herders (Sahara Desert)

Command

●central government alone decides●government owns land & capital

Strengths: guaranteed jobs & income

Weaknesses: no individual freedoms; works in theory – not practice; allows for corruption

Command

●Property Rights – government owns property●Incentives – none (why would you work hard

if you can’t advance/get raise, etc) ●Economic Freedom – low●Competition – discouraged by government●Role of Gov – dictates what is produced, who

produces, how materials are distributed

North Korea Cuba China Former USSR

Free Market

●Individuals decideStrengths: individual choices, businesses

can keep profitsWeaknesses: difficult/impossible to

achieve equality, some are very rich/poor

Free Market

●Property Rights – individuals own property●Incentives – individuals want best price &

product; businesses want profit ●Economic Freedom – high●Competition – encouraged by government●Role of Gov – support competition and protect

individuals

Mixed

●Blends a market economy with government intervention and involvement

Mixed: Free Market/US Free Enterprise

●Individuals own and operate the FOP and answer the basic economic questions. Some government regulation mostly for safety of consumer.○ Examples: Canada, US, Mexico

Mixed: Authoritarian Socialism

●Government owns and controls nearly all FOP

●Government officials develop long range plans.○ Examples: Cuba, China

Mixed: Democratic Socialism

●Government owns some FOP (key industries)

●Individuals influence economic planning through elections.○ Examples: Sweden, Poland, France

France Sweden Peru

• ECO GROWTH

Economic Growth

• Economic growth > Steady (long term) increase in the quantity and quality of goods and services an economy can produce

• Affects standards of living• Determinants

• Availability of FoP• Technology• Productivity

• Expressed as a change in real GDP• + change = growth• - change = recession

Six Basic Economic Goals

1. Economic Efficiency- maximize resources ●Ex. No idle machines or fertile land not being

harvested (knowing the best way to produce products

2. Economic Freedom- ability to choose profession, what to buy, etc.

●Ex. blue collar or white collar, Target or Wal-Mart, etc.

Six Basic Economic Goals

3. Economic Security (Predictability)- knowing goods and services will be available (reasonably priced) and protection from economic disaster

●Ex. Social Security, FDIC

4. Economic Equity- fair distribution of wealth●Ex. Equal pay for equal work, but not all jobs

are valued the same

Six Basic Economic Goals

5. Economic Growth- improve levels of prosperity, increase GDP(number of goods/services sold); innovation and technology

6. Full Employment- provide jobs for everyone that wants to work

●Ex. Want a job, got a job; only 4-6% of the population out of work

• OPP COSTS

Opportunity Cost

J.the BEST or MOST valued alternative that is GIVEN UP when a choice is made

• PPF CURVE/MAX/OVER/UNDER

Analyzing PPF

• Any point above the PPF (H) = currently unattainable, however it is a FURTURE goal

• We always want our economy to be growing• To reach point H, increase the following:

• technology• debt• investment

G

H

Future – never realized

Economies are all somewhere in here:

Supply/Demand

NON PRICE DETERMINANTS OF S/D

S-T-O-N-E-R

• Non-price determinants for Supply• S=Subsidy & Taxes

• T=Technology• O=Other Related products• N=Number of Sellers• E=Expectations of Sellers• R = Resource Price

DEMAND DETERMINANTS TASTES & PREFERENCES (tickle me elmo, furbies)• Key words: like, love, fashionable, preferred, voted

• Students at CyFalls High School vote to have Chik-fil-A for lunch instead of What-a-Burger. What will happen to the demand for Chik-fil-A?

INCOME • Key words: Bonus, gift card, salary, wages• The stores in the mall decide to give their employees a raise. What will happen to the demand for

clothes?

MARKET SIZE • Key words: immigration, more students, more housing, population movement• A new sub division opens up north of 290. What happens to the demand for groceries?

EXPECTATIONS OF CONSUMERS • Key words: Future outcomes, sales, ticket purchases, time stamps• After Thanksgiving TV’s go on sale. What happens to the demand for TV’s on black Friday?

RELATED GOODS:SUBSTITUTES (lobster instead of steak)

• The news reports that cows in the United States are infected with Mad Cow disease. What happens to the demand of chicken?

COMPLIMENTS (peanut butter and jelly)• A drought causes this years peanut crop to decrease drastically. What happens to the demand for grape jelly?

RULES for shifting BOTH Supply and Demand

(circle price, underline products)#1 > If Price + 1 Product = 1 line = ∆ QD =

Price

#2 > If Price + 2 Products = 2 lines = ∆ D = TIMER

#3 > If no Price at all = 2 lines = ∆ D = TIMER

THEORY OF DEMAND

I. DEMAND: The desire and the ability to purchase a good or own something. WILLING AND ABLE!!!!

II.LAWS OF DEMAND!

• As PRICE

the QD (quantity demanded)

• As PRICE

the QD (quantity demanded)

THEORY OF SUPPLY

• The amount of goods and services available for consumers

*Supply

• *LAW OF SUPPLY: As price quantity supplied

As price quantity supplied

ROLE OF GOVERNMENT

Government Intervention

• The government regulations DO NOT change equilibrium, but keeps the market from achieving it.

• Price floors and price ceilings occur on different products.

SUPPLY SHIFTS

RULES for shifting Supply. Write this with Demand rules OR at the bottom of the page.

(circle price, underline products)#1 > If Price + 1 Product = 1 line = ∆ QS =

Price

#2 > If Price + 2 Products = 2 lines = ∆ S = STONER

#3 > If no Price at all = 2 lines = ∆ S = STONER

S-T-O-N-E-R• Non-price determinants for Supply• S=Subsidy & Taxes

• T=Technology• O=Other Related products• N=Number of Sellers• E=Expectations of Sellers• R = Resource Price

CHANGES IN QS/QD

COMPLEMENTS

EQUILIBRIUM

Equilibrium

•Equilibrium: point of balance between price and quantity. The point where supply and demand come together at the same price.

GDP EXAMPLES

Gross Domestic Product

• YES• Gross Domestic Product

(GDP) is the• Total market ($) value of

all FINAL goods and services produced WITHIN a country’s borders During a given amount of time (Usually measured by year.)

• NO• GDP does not include

• Work within homes• Second hand items• Criminal activity• Underground/informal

economy

BUSINESS CYCLE

MAIN ECO INDICATORS

• Leading: stock market prices, interest rates, orders of capital goods

• Coincident: change with the business cycle; personal income, sales

• Lagging: change after downturn or upturn; use of installment credit (cars, homes)

Indicators

Inflation• General rise in prices• Consumer Price Index- measures a group of

goods that a typical consumer would buy. • The HIGHER the CPI number the more unstable

prices are• Numbers over 5% could create/indicate problems to

come• If your basic needs cost more, what happens to your

secondary expenses?• How can this effect the economy?

INFLUENCES ON BUS CYCLE

BUSINESS CYCLE

• period of MACRO(big)-economic expansion followed by a period of contraction• shows the fluctuation in economic

activity• measured from one peak of prosperity

to another

Definition of Buss. Cycle:

Tracking the Business Cycle

TIME/INCREMENTS

DEPRESSION

• Contraction:( going down hill)• Deflation (lower prices) can occur• falling output• low levels of investment• Two types:

• Recession: real GDP falls for 2 consecutive quarters, lasts 6-18 months and

• Depression: high unemployment and low factory output

• Trough:• lowest point of economic activity• economy has “bottom-out”

The Phases of the Business Cycle

UNEMPLOYMENT RATE

• The unemployment rate does not include those who are out of work and have stopped looking for work.

• unemployment is difficult to measure• lack of manpower• people working “off the books”, but receiving

unemployment• black market:

• tax evaders• gamblers• drug traffickers

Measuring Unemployment

BUSINESS CYCLE DEF

• period of MACRO(big)-economic expansion followed by a period of contraction• shows the fluctuation in economic

activity• measured from one peak of prosperity

to another

Definition of Buss. Cycle:

SOL MEASURES

• The unemployment rate is the percent of the civilian labor force that is without jobs, but ACTIVELY looking for work

• high rate is a sign that something is wrong in the economy

• Can reduce the standard of living• Full employment occurs at a rate of 4-6%

Measuring Unemployment

RECESSION INDICATORS

• Contraction:( going down hill)• Deflation (lower prices) can occur• falling output• low levels of investment• Two types:

• Recession: real GDP falls for 2 consecutive quarters, lasts 6-18 months and

• Depression: high unemployment and low factory output

• Trough:• lowest point of economic activity• economy has “bottom-out”

The Phases of the Business Cycle

CURRENCY

Did you know….

• That the Secretary of Treasury signs the money printed in the US?

• new signature

• What is Money?• money explained

• How is money made?• reading rainbow

TAX TYPES

• Almost everyone is concerned about how much we pay in taxes. The best way to determine how much tax you pay is to state your tax as an effective tax rate. An effective tax rate is the percentage of your income you pay in taxes. This differs from a nominal tax rate or legal tax rate. For example, a sales tax rate may be five percent (the nominal rate), but this does not mean that all people pay out five percent of their income in sales taxes. Outlays for rent, insurance, medical bills, among other things, are not subject to sales taxes. Neither, of course, are savings.

• Taxes may have three kinds of effective tax rates. • If a tax is progressive the effective tax rate increases as a person’s income

goes up. For example, a person who makes $10,000 a year may have an effective tax rate of 10%, while a person who makes $15,000 a year may have an effective rate of 18%.

• If a tax is proportional, the effective tax rate stays the same regardless of income. In this case, a person making $10,000 a year and a person making $15,000 a year both would be taxed at an effective rate of 10%. Of course, the person making $15,000 a year would pay more total dollars in taxes. A proportional tax is sometimes called a flat tax.

• If a tax is regressive, the effective tax rate decreases as income goes up. For example, a person making $10,000 a year might pay an effective tax rate of 10%, while a person who makes $15,000 a year might pay an effective tax rate of 8%.

PARTS OF BUSINESS CYCLE

Tracking the Business Cycle

TIME/INCREMENTS

• Expansion:($ are flowing)• period of economic growth• plentiful jobs and falling unemployment• businesses invest in NEW plants, equipment,

salaries ect…..• Inflation (higher prices) can occur.

• Peak:• real GDP stops rising• high production, high employment and stable

prices.• height of expansion

The Phases of the Business Cycle

• Contraction:( going down hill)• Deflation (lower prices) can occur• falling output• low levels of investment• Two types:

• Recession: real GDP falls for 2 consecutive quarters, lasts 6-18 months and

• Depression: high unemployment and low factory output

• Trough:• lowest point of economic activity• economy has “bottom-out”

The Phases of the Business Cycle

MONETARY V FISCAL POLICY

MONETARY POLICY

1. Reserve Requirement- the amount or % of deposits banks are required to keep and not loan out (least used tool)

2. Discount Rate-% rate the FED charges banks on loans, will influence the % rate on all other loans

3. Open Market Operations (government bonds, bills, etc.)- the buying and selling of government securities ( most used tool)

D. Monetary PolicyD. 3 Tools of Monetary Policy

• 1.Easy Money Policy - increases the money supply• economy is experiencing contraction & government wants

to stimulate the economy

• So We…• buy government securities• lower the discount rate

• Creates lower interest rates• lower reserve requirement

D. 2 Types of Monetary Policy

Keep the $$ FLOWING!

• 2.Tight Money policy - reduces the money supply• economy is experiencing a rapid expansion that may cause

high inflation and government wants to take money out of circulation

• So we…• increase reserve requirement• increase discount rate

• Creates higher interest rates• sell government securities

D. 2 Types of Monetary Policy

Keep the $$ AWAY!

FISCAL POLICY

• DEFINITION of 'Fiscal Policy'• Government spending policies that influence

macroeconomic conditions. Through fiscal policy, regulators attempt to improve unemployment rates, control inflation, stabilize business cycles and influence interest rates in an effort to control the economy. Fiscal policy is largely based on the ideas of British economist John Maynard Keynes (1883–1946), who believed governments could change economic performance by adjusting tax rates and government spending.

•

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Page 5 > Fiscal Policy• The use of the Government budget (SPENDING)

and revenue (TAXATION) to influence the US economy

• The policy is set by Congress

• The policy will be used for the fiscal year

• Government spends money to provide goods and services

• Government pays for those expenditures through taxation and borrowing

• Where does the $$ come from?• Individuals• Corporations• Financial Institutions• Foreign entities or foreign governments

Page 5> Government’s role in Circular Flow….

• Type 1: Contractionary Policy -used to slow the economy DOWN and fight inflation during an Expansion

• The Government Does 2 things to fix this:

1. Raise taxes- take money OUT of the economy

2. Reduce Government Spending- cutback on funding social programs and business contracts

We then operate at a Budget Surplus• raise taxes and cut spending (spend less than you take in

with Taxes)• Revenue > Expenditures

Page 5> Two Types of Fiscal (gov’t) Policy

• Type 2: Expansionary Policy: used to “jump start” the economy out of a recession. Also fights unemployment & deflation.

• The Government does 2 things to fix this:1. Cut Taxes -gives consumers more $ to spend, save, or

invest2. Increase Spending -government spends more $ (On

what ?)

• We then operate with a Budget Deficit• government spends more $ than it collects in taxes• Revenue < Expenditures

Page 5: Two Types of Fiscal Policy

TAX POLICY

SURPLUS

• DEFINITION of 'Surplus'• Surplus is the amount of an asset or resource that exceeds the

portion that is utilized. A surplus is used to describe many excess assets including income, profits, capital and goods. A surplus often occurs in a budget, when expenses are less than the income taken in or in inventory when fewer supplies are used than were retained. Economic surplus is related to supply and demand.

•

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THE FED

• The Federal Reserve System (the Fed) is the Central Bank of the United States.

• Founded by Congress in 1913 in response to the nation’s recurring banking panics

A. The US central bank is called the Fed.

MP AND INFLATION

• DEFINITION of 'Inflation'• Inflation is the rate at which the general level of prices for

goods and services is rising and, consequently, the purchasing power of currency is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.

•

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INTEREST RATES

• The main interest rate is set by the FED. If the FED is worried that inflation is likely to increase, then they may decide to increase interest rates to reduce demand and reduce the rate of economic growth.

GOVT TAXES

Tax Structures

• Collected on • Incomes• Property• Goods and Services

TRADE AND LABOR

ABSOLUTE ADVANTAGE

15 Absolute Advantage• Using the same amount of resources, one nation can

produce a product at a lower cost and more efficiently than a second nation

• Oil Middle East Diamonds South Africa

15 Comparative AdvantageThe ability to produce the same product at a lower

opportunity cost

FREE TRADE

13 Free Trade –  The unrestricted purchase and sale of goods and services between countries without the constraints of tariffs, duties and quotas.

• Comparative Advantage• “When you restrict foreign competition, you remove any

incentive for American Industries to improve”• Specialization

• “each nation has its own area of expertise and should concentrate on that”

• International peace• “If there are no restrictions on world trade, everyone benefits” • “When you limit imports you hurt exports”

MDC AND LDC CHARACTERISTICS

10. More Developed Countries (MDC) vs Less Developed Countries (LDC)

Developed Countries• Higher GDP• Higher energy

consumption• Skilled labor force• High literacy• High life expectancy• Low infant mortality

Less Developed Countries (LDC)

• Unskilled labor• Lower standard of living• Less industry• Farming• Low level of infrastructure

(roads, schools, hospitals, safe water)

STANDARD OF LIVING

PROTECTIONISM

14 Protectionism• Reasons to be Protectionist-ish• Protecting jobs

• “No wonder there is high unemployment”

• Protecting infant (young) industries• “We need tariffs to help new businesses get a start”

• National Security issues• “What if we broke out into war and couldn’t get the

parts for our missile defense?”

TRADE PROP

COMPARATIVE ADVANTAGE

15 Absolute Advantage• Using the same amount of resources, one nation can

produce a product at a lower cost and more efficiently than a second nation

• Oil Middle East Diamonds South Africa

15 Comparative AdvantageThe ability to produce the same product at a lower

opportunity cost

HOST COUNTRY

12. Multi-National Firms in LDC

• Benefits both Firm and LDC

• Avoids fees and tariffs• Cheaper labor• Jobs to that country• Tax revenue to that

country

• Concerns• Exploitation• Political power access

TRADE DEFICIT

MARKET STRUCTURE

Pure Competition

• Many buyers and sellers• Ideal situation because it ensures equilibrium• Easy entry into the market• Example: Flea Market, Farmer’s Market

(Agriculture)

Monopolistic Competition• Same characteristics as pure competition, but there

are differentiated products • More consumer choice• Advertising techniques• Example: Airlines, Computers, Athletic ShoesPRODUCT DIFFERENTIATION: Emphasizing the

Differences (color, taste, ect.)

Oligopoly• 3-4 sellers control the market price and production• Difficult to enter the market• Stable and predictable price• Price leadership

• Example: Cereal, Cell Service Companies

Monopoly

• One seller• No variety of goods• No close substitutes• Government regulations to protect consumers• Example: Sirius XM Radio – This company is the

only satellite radio provider in the United States.

NON PROFITS

Non-Profit• Description-businesses that do not operate for a profit.• Capital Resources-donations• Advantages-benefit society, exempt from taxes• Disadvantages-hard to get donations and volunteers• Examples-Museums, Red Cross, Churches, YMCA, Blood

Bank, Synagogue.

DEREGULATION AND ANTITRUST

MERGERS

Mergers• When firms merge, one gives up its legal identity • When a business buys stock in another business to

combine assests and make a bigger company (can be hostile)

Why Merge?

1 – Desire to become bigger and grow faster2 – To become more efficient 3 – To acquire new product lines4 – To eliminate a rival5 – To lose its corporate identity

Types of Mergers

1 – Horizontal Merger: when firms that produce the same kind of goods join forces / consolidate

ex: 2 banks, Sirus Radio and XM Radio, Sprint & Nextel, United Airline and Continental Airline.

2 – Vertical Merger: when firms involved in different steps of the production process join together

ex: cotton farm, mill, clothing company, & trucking company

3 – Conglomerate: a firm that has many businesses, each making unrelated products

ex: Phillip Morris – Kraft food, Jello, Maxwell House Coffee, Miller brewery, cigarettes

COOPERATIVES

COLLECTIVE BARGAINING

LABORLABOR’S GOALS •JOB SECURITY•WAGES•COLA•BENEFITS•WORKING CONDITIONS•GRIEVANCE PROCEDURES

CONFLICT MANAGEMENT’S GOALS•LOW COSTS•COMPETITIVE•MARKET SHARE•PROFITABLE

COLLECTIVE BARGAININGPROCESS OF NEGOTIATING CONDITIONS OF

EMPLOYMENT

A BUSINESS CONTRACT

CONTRACT NEGOTIATIONS FOR LABOR DISPUTES

TYPES OF BUSINESSES

Sole Proprietorship

•Description-business owned and managed by a single individual. Most popular business in the U.S.

•Capital Resources-personal cash and loans

Sole Proprietorship

Advantages-simple to establish, full control, receive full profits, few regulations, personal pride, no separate business taxDisadvantages-Unlimited liability, demanding, hard to expand

Sole Proprietorship

Examples-local bakery, hair salon, repair shop, food truck, restaurant

Partnership

•Description-business owned by two or more persons who agree on a specified division of responsibilities and profits.

•Capital Resources-each partner’s assets and valuables

Partnership

•Advantages-easy start up, few regulations, large pool of capital, no separate business tax

•Disadvantages-unlimited liability, conflict with partners

Partnership

• Examples-Doctors, lawyers, construction companies

• Linscomb and Williams (Investment Firm), Smith and Hassler, Baker Huges (oil/construction)

Corporation

•Description-large entity or being owned by individual stockholders; treated like an individual

•Capital Resources-stocks and bonds

Corporation

•Advantages-limited liability, unlimited life, legal identity separate from owners, more growth potential, owner flexibility

•Disadvantages-difficult to start, owners and business pays taxes, regulated by SEC

Corporation• Houston’s Corporations (some of the companies or

subsidiaries headquartered here) Houston has the second highest number of Fortune 500 companies after New York City.

Stock Revenue

• EPD, Enterprise Pipelines• Stock sells at $ 32.00 per share• To reward “shareholders” it pays a dividend of 2.54

every year or $ .63 per share every three months (For me that is $ 1968.50 every quarter or $ 7,874.00 every year)

Franchise

•Description-semi-independent business that pays a fee to a parent company (franchisor).

•Capital Resources-personal income, loans, investors

Franchise• Advantages-built in reputation, management and training

support, national advertising, centralized bulk buying.• Disadvantages-high fees, royalties, strict operating

standards, limited product line.• Examples:-Wendy’s, Burger King, Smoothie King, Menchie’s

Franchise-How it works

McDonalds Franchise Regulations:• First pay a “Franchise Fee” of $ 45,000• Initial Investment of $ 1.5 to 2.0 million to build

everything and receive training• Must pay a 12.5% royalty fee for 20 years to

McDonalds• Must follow all corporate policies, you can not

change “McDonalds Products or Policies”

Top Ten FranchisesCompany Start-Up Costs1-Anytime Fitness $56.29k-353.89k2-Hampton Hotels $3.7M-13.52M3-Subway $85.69K-262.85K4-Supercuts $108.75K-203.6k5-Jimmy John’s Sandwiches $300.5K-489.5K6-7-Eleven Inc. $30.79k-1.63M7-Servpro $134.8K-183.44K8-Denny’s Inc. $1.17M-2.4M9-Pizza Hut Inc. $297K-2.1M10-Dunkin’ Donuts $294K-1.51M

Cooperative

•Description-business organization owned and operated by a group of individuals for a shared benefit.

•Capital Resources-member resources

Cooperative

• Advantages-lower prices and fees for membersDisadvantages-start up costs, membership feesExamples-Credit unions, fan clubs, consumer cooperatives.

Non-Profit• Description-businesses that do not operate for a profit.• Capital Resources-donations• Advantages-benefit society, exempt from taxes• Disadvantages-hard to get donations and volunteers• Examples-Museums, Red Cross, Churches, YMCA, Blood

Bank, Synagogue.

Multinational• Description-corporations that operate in more than 1

country at a time.• Capital Resources-Stocks and Bonds• Advantages-benefit customers, spread technology, host

country improves standard of living.• Disadvantages-influence culture and politics of host, poor

working conditions/wages, obey the laws of each country, pay taxes in all countries.

• Examples-

NON PRICE COMPETITION

PRODUCT DIFFERENTIATION

MULTINATIONALS

PERSONAL FINANCE LITERACY

CREDIT

• Credit- the amount of financial trust extended to a person or business by a lender. Credit is a Loan

• Can be a great building block to establishing good credit

• ***if you are smart!****• IT CAN ALSO LEAD TO FINANCIAL RUIN!

• What is credit?• http://www.youtube.com/watch?v=cjrG1QznxLY

What is credit?

MEDICARE

SALES TAX

CO SIGNING

CREDIT CARDS

•Don’t over borrow or overspend•Make sure you pay your bills promptly

•Protect your credit cards from loss or theft

Maintain Good Credit

INSURANCE PREMIUMS

Insurance

• A form of coverage in case of an emergency. It covers the cost of that emergency (Life, Home, Auto, & Medical)

• In simple terms, it is a bet between you and the Insurance company. You are betting that an emergency will happen and they are betting that it does not.

• http://www.youtube.com/watch?v=4iz0gPW0i1E

Health Insurance

• Covers medical expenses like doctors visits, hospitalizations and emergency care.

• Co-pay is the amount paid each time you visit a doctor.

• Deductible is what must be paid before insurance will begin paying.

• Families spend an average of $10,728/yr.

http://healthinsurance.about.com/od/faqs/f/avgpremium.htm