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General information for basic understanding of the Economic System.
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1
HEAVENS HARVEST
MINISTRIES – FINANCE NIGHT
Economics 101
Presented by: Jennoa R. Graham, Ph.D.
Friday, April 4, 2014
2
KEY TERMINOLOGY Economics – A social science that
focuses on the process of producing and exchanging goods/services
Microeconomics – Focus on a single/small portion of the whole economy; one company or one city
Macroeconomics – Focus on the whole economy; entire country or entire world
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KEY TERMINOLOGY (CONT.) Tangible – Product that you can touch
ClothingCarFood
Intangible – Services that you cannot touchElectricity Indoor PlumbingKnowledge/Skills
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KEY TERMINOLOGY (CONT.) The Economic System – Macroeconomic
decisions of Products
What should be produced? How much should be produced? How/Where the products will be distributed?
Services What services are needed? How will these services be performed? Where will these services be available?
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KEY TERMINOLOGY (CONT.) Supply – Quantity of goods/services
available for sale
Demand – Quantity of buyers wanting to purchase goods/services available for sale
The Market – manipulation of supply and demand to meet micro and macro needs of the Economic System; must be managed 24/7 and impacts the world economy
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OVERVIEW Supply and Demand Graph
The Economic System
The Competitive Market System
The Financial Market System
Other Economies
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SUPPLY & DEMAND GRAPH
P = Price; Q = Quantity; D = Demand; S = Supply
As Demand goes down; quantity available for sale stays high (fewer sales).
D Shift left = decreaseD Shift right = increaseS Shift none = constant
As Supply goes up; quantity available for sale stays high (inventory on hand).
Best Price
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THE ECONOMIC SYSTEM Traditional
Based on Family and Community Interaction
Heavy dependence on customs and rituals
Market (Pure) Based on the
selection AND consumption of goods and services from Individual Consumers
Command (Planned) The government
decides ALL aspects of Consumer selection and consumption
Mixed The government
decides SOME aspects of Consumer selection and consumption
http://www.slideshare.net/Geckos/the-four-types-of-economic-systems-presentation
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THE COMPETITIVE MARKET SYSTEM
Form when many Producers/Manufacturers compete with one another to offer products to a large group of Consumers for PROFIT
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THE FINANCIAL MARKET SYSTEM
Primary Starting line for
financial products Origination Details Contracts Drawn
Securities issued
1st Buyer gets 1st Dibs
Secondary Buyers and Sellers
resell financial products to 3rd Party
Stock Exchange
3rd Party assumes all contract risk/liability
“Financial products, including the supply of credit, mortgages, company shares and insurance, are bought and sold in primary and secondary financial markets.” (Economics Online)
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THE FINANCIAL MARKET SYSTEM (CONT.) Money Markets
Purchase and sale of short term debt (<1yr) Loans Treasury bills
Purchases are made to help other banks short on cash
Sales are made to increase available cash on hand
Capital Markets Purchase and sale of
long term debt (>1yr) Stocks (stock exchange) Bonds Company shares
Purchases are made in hopes to sell at a profit
Sales are made to make a profit or avoid large losses
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THE FINANCIAL MARKET SYSTEM (CONT.) Mortgage Markets
Making long term loans for buying property and earning interest profits
Sales are made to increase available cash on hand
Or avoid large losses on high risk loans
Insurance Markets Transferring risk
from one party to another
Transfer is made in hopes that premium income is greater than claims paid – profit earned
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OTHER ECONOMIES Contemporary – A comparative analysis of the
changes in the global economy over 50 years
Capitalism – Private owners control the Market Economy (see slide # 8)
Participatory – Production and distribution of goods are provided by the public
Gift – Goods and services are distributed with out expectation of return or profit
Barter – Goods and services are exchange for other goods and services with no monetary/currencyhttp://en.wikipedia.org/wiki/
Economic_system
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SUMMARY Economics is social science that focuses on
the process of producing and exchanging goods/services on two levels Micro = Small Macro = Large
Supply and Demand determines price of goods and services for Consumers
Stock Exchange is a finance product that is part of the Secondary Financial Market
There are many different type of ecomonies
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REFERENCES The American Heritage® Dictionary of
the English Language (2009), Fourth Edition, Houghton Mifflin Company. Retrieved September 9, 2013, from http://www.thefreedictionary.com
The Four Types of Economic Systems (2008), by Brian Coil, High School Teacher at Armstrong School District. Retrieved March 27, 2014, from http://www. slideshare.net
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REFERENCES (CONT.) Alison: A New World of Free Certified
Learning (2014). Retrieved March 26, 2014, from http://www.alison.com
Economics Online (Unknown). Retrieved March 27, 2014, from http://www.economicsonline.co.uk
Wikipedia: Economic System (2014). Retrieved March 27, 2014, from http://www.wikipedia.org