basic principles of economics it is study of how individuals, families and businesses use limited...
TRANSCRIPT
Basic Principles of EconomicsIt is study of how individuals,
families and businesses use limited resources to fulfill their unlimited wants
Wants v. NeedsWhat are they?
Choices-Scarcity-we can’t have it allFactors of Production-Land,
Labor, Capital and Entrepreneurship
Trade-Offs
Exchanging one thing for another
Opportunity Cost: the value of the next best alternative that has to be given up for the one chosen
Guns and Butter ExampleProduction Possibilities Curve
Shows the maximum combinations of goods and services that can be produced from a fixed amount of resources in a given period of time.
Production Possibilities Curve
Economic SystemsThe Three Basic Questions
to determine an economic systemWhat Should Be Produced?How Should It Be Produced?For Whom Should It Be
Produced?
Traditional
Answers questions according to traditions
Command
Government leaders answer the questions
Market
Individuals in the Market answer the questions
Types of Economic Systems
Mixed Economy-uses both of these
Mixed Economic SystemCombines a little of Command and
MarketMost Economies are this one!They are characterized by a basic
market system with government regulation---the more government regulation the more command it is
Making Comparisons Work with a partner and come up
with slogans that one might use for each economy-
Characteristics of American EconomyLimited Role of Government
Laissez-faire-”let the people do as they choose”
Adam Smith-”the invisible hand of the economy” is all of the FE factors working together keeping the economy healthy
Freedom of Enterprise -free to control the factors of production
Freedom of ChoiceProfit Incentive
The desire to make a profit-this motivates people to start businesses and be successful
More Characteristics
Private PropertyYou can own your own home
CompetitionRivalry among producers and
consumers
Goals of the US EconomyEconomic Freedom
Individuals can make their own decisions about jobs, private property, the market
Economic EffeciencyUsing resource wiselyCosts of economic actions do
not exceed the benefits
Economic EquityFair and justEqual pay for genders
Economic SecurityProtection against risk in the
economy-losing your jobAccidents, business failures
Economic StabilityAvoid extreme ups and downs
of the standard of livingEconomic Growth
Producing more and expanding the economy
Trade-Offs among goalsSecurity and Growth may go
against efficiency