Three Basic Economic Questions

Chapter 2 Section 1 pgs. 23-27Define economic system.List and describe the Three Key Economic Questions.List and describe the four types of economic systems.Using the Chart Below, describe each of the Economic Goals and Societal Values. Then provide a real-life example of each.

Economic Goal and Societal ValuesSummaryExampleEconomic EfficiencyEconomic FreedomEconomic Security and PredictabilityEconomic EquityEconomic Growth and InnovationAdditional Goals

Economic System method used by society to produce goods and services

Economic System

What and how much should be produced?Who should produce it?How should it be produced?Who should share in its use?

Four Economic Questions

Traditional economy relies on habit, custom, or ritual to decided the 3 economic questionsMarket economy economic decisions are made by individuals and are based on exchange, or trade.Command Economies in a centrally planned economy, the central government alone decides how to answer the three economic questions. Mixed Economies market-based economic systems in which government plays a limited role.

Four Economic Systems

Economic Goals and Societal Values - pgs. 23-27Economic Goal and Societal ValuesSummaryExampleEconomic Efficiency

Economic Freedom

Economic Security and Predictability

Economic Equity

Economic Growth and Innovation

Additional GoalsMaking the most of scarce resourcesManufacturer knowing the best way to use resources wisley (Assembly Line)Freedom from government intervention in the production and distribution of goods/servicesWorking where you want, spending money the way that you want, owning a business, etc. Knowing that goods and services will be available, payments made on time, government will provide a safety net in times of economic downturnsSecurity Unemployment Checks, Social SecurityPredictability gas at gas pumps, food at storeFairness, being paid according to your skill level, not being discriminated againstLawyers earn more than nurses, computer programmers more than truck driversEconomic growth refers to improving standard of living and GDP. Innovation, improving existing technology.Agricultural age to industrial age to information age. Innovations in computers, communication.Future goal for society.Environmental protection, full employment, universal medical care.Review Economic GoalsStatementsEconomic GoalLast week I willingly enrolled in college courses at Coastal. I am so happy that I make my decisions about my future.My uncle lost his job, but thankfully he is able to receive unemployment checks.Wal-Mart recently upgraded all of their registers to touch screen monitors.General Motors replaced all of their human workers with robots in order to increase productivity.As a result of the internet and technology, our economy has experienced significant expansion over the past 30 years.I can always expect Publix to have the food I like!Hopefully in the future we will have full employment.With every degree/skill I earn, I improve my ability to make money. 1. Economic Freedom2. Economic Security3. Economic Innovation (Efficiency)4. Economic Efficiency (Innovation)5. Economic Growth (Innovation)6. Economic Predictability7. Additional (Future) Goals (Equity)8. Economic Equity (Growth)

Economic Efficiency

Description: Using the factors of production in the most productive way possible, as to maximize profit

Picture Summary: This picture represents assembly line production at an automobile manufacturing plant. This shows how the division of labor and specialization can increase efficiency.

Economic Goals and Societal Values Poster Project pgs. 26-27Poster Requirements:Title - Economic Goals and Societal ValuesSummary Statement The Economic Goals and Societal Values provide a basic framework for each society and their attempts to provide for their people. 8 pictures to represent each of the economic and social goals.Label, describe and summarize each picture Economic EfficiencyEconomic FreedomEconomic Security Economic PredictabilityEconomic EquityEconomic GrowthEconomic InnovationAdditional Goals

Economic Goals and Societal ValuesSummary Statement:The Economic Goals and Societal Values provide a basicframework for each society andtheir attempts to provide fortheir people.

Economic EfficiencyDefinition: societies try to maximize the factors of productionPicture:This picture represents an efficient use of resources through assembly line production

Economic Security

Economic GrowthEconomic Equity

Economics Goals and Societal Values Poster Project pg. 23 - 27Economic Freedom

Additional Goals

Economic Innovation

Economic Predictability

Poster Requirements:Title - Economic Goals and Societal ValuesSummary Statement Purpose of economic and Societal ValuesAt least 8 pictures to represent each of the Economic Goals and Social ValuesLabel, definition and picture description for each of the 8 Economic Goals and Societal ValuesDaily Assignment Chapter 2 Section 1 pgs. 23-27Bead Game SimulationHow does a traditional economy answer the three economic questions?Describe traditional economies and their communities.What is a disadvantage to a traditional economy?How are the three economic questions answered in a market economy?What are other names for market economies?How are the three economic questions answered in a command economy?Why are they referred to as command economies?Why are most modern economies referred to as mixed economies?

Chapter 2 Section 1 Daily Assignment Questions pgs. 26 -27

Chapter 2 Section 2Imagine that you are walking into Walmart. List 3 items that you could purchase and the departments that you would find them in.

Market buyers and sellers meet to exchange goods and servicesMarket Economy economic decisions(what to produce, how to produce, for whom to produce) are made by consumers and businesses based on exchange of goods and servicesCapitalism (free market) Individuals and businesses own the factors of production and can profit on themVoluntary Exchange - is the act of buyers and sellers freely and willingly engaging in market transactionsChapter 2 Section 2 The Free Market

Specialization

Specialization the separation of tasks within a system; people focus on a specific purpose/task Division of Labor Workers perform fewer tasks in order to operate more efficiently

Household Person or group of people living in a residenceConsumers - use the goods and services (outputs) to satisfy wants and needsFirm business, organization that uses resources to produce a product, which it then sellsSuppliers transform inputs (F.O.P.) into outputs (products)

Households and Firms

Product Markets Houses and firms interact; producers sell their goods and services to consumersHouseholds are buyers of goods and servicesFirms are sellers of goods and services (outputs)

Product Markets

Factor Markets the markets where productive resources (F.O.P)/Inputs are bought and soldLabor - Firms (businesses) hire workers and pay them salariesLand - Purchased/rented landCapital - Use money from households, purchase capital goods

Factor Markets

Circular Flow Model of Economic Activity shows the flow of money and goods/services from and to businesses and householdsHouseholds

Firms

Factor Market

Product Market

Consumer Spending

Consumer Goods and Services

Final Goods and Services Sold

Business Income/Revenue

Land, Labor, Capital - provided by household

Inputs for Production (F.O.P.)

Payment for F.O.P. Rent (Land) Wages (Labor), Interest (Capital), Profit (Entrepreneurs)

Income to Households/Individuals

Households Buy and ConsumeGoods and ServicesOwn and sell the F.O.P

Firms(Business) Produce and sellGoods and ServicesHire and use F.O.P.

Product MarketMarket for Goods and ServicesFirms sellHouseholds BuyFactor MarketMarket for F.O.PHouseholds sellFirms buy

Application QuestionsIn the factor market, what do businesses provide households?The flow of goods and services in the product market is represented by which firm and products on the model below?When you apply for a job at the local Starbucks which market are you in?Which color arrows represent the flow of money; what color arrows represent the flow of inputs and outputs.

Income/payment the F.O.PStarbucks/CoffeeFactorBlue/TanCircular Flow Model of Economic ActivityHouseholds

Firms

Factor Market

Product Market

Consumer Spending/Investing

Goods and Services Purchased: Caramel Frappuccino

Goods and Services Sold

Business Income/Revenue

Land, Labor, Capital, Entrepreneurs

Inputs for Production (F.O.P.)

Payment for F.O.P. Wages, rent, capital goods

Income to Households/Individuals

Daily Assignment - Circular Flow Model of Economic Activity

Household________________________

FirmFirm 1. _____________________________

Firm 2. _____________________________

Factor Market

Product Market

Consumer Spending

1. _________________________

Goods Purchased

1. ______________________________

2. _______________________________

Goods Offered1. ___________________________

2. ___________________________

Business Income

_________________________

Factor of Production Offered

1. ___________________________

Input for Production

1. ___________________________

Payments for F.O.P

1. _________________

Weekly Income

1. __________________

"Winning is not a sometime thing; it's an all the time thing. You don't win once in a while; you don't do things right once in a while; you do them right all the time. Winning is a habit. Unfortunately, so is losing. There is no room for second place. There is only one place in my game, and that's first place. I have finished second twice in my time at Green Bay, and I don't ever want to finish second again. There is a second place bowl game, but it is a game for losers played by losers. It is and always has been an American zeal to be first in anything we do, and to win, and to win, and to win. Every time a football player goes to play his trade he's got to play from the ground up-from the soles of his feet right up to his head. Every inch of him has to play. Some guys play with their heads. That's O.K. You've got to be smart to be number one in any business. But more importantly, you've got to play with your heart, with every fiber of your body. If you're lucky enough to find a guy with a lot of head and a lot of heart, he's never going to come off the field second. Vince Lombardi What it Takes To Be Number 1

Running a football team is no different than running any other kind of organization-an army, a political party or a business. The principles are the same. The object is to win-to beat the other guy. Maybe that sounds hard or cruel. I don't think it is. It is a reality of life that men are competitive and the most competitive games draw the most competitive men. That's why they are there-to compete. To know the rules and objectives when they get in the game. The object is to win fairly, squarely, by the rules-but to win. And in truth, I've never known a man worth his salt who in the long run, deep down in his heart, didn't appreciate the grind, the discipline. There is something in good men that really yearns for discipline and the harsh reality of head to head combat. I don't say these things because I believe in the "brute" nature of man or that men must be brutalized to be combative. I believe in God, and I believe in human decency. But I firmly believe that any man's finest hour, the greatest fulfillment of all that he holds dear, is that moment when he has worked his heart out in a good cause and lies exhausted on the field of battle - victorious."...Vince Lombardi

Vince Lombardi What it Takes To Be Number 1

Do you agree with Vincent Lombardis assertion that people are born with the desire to compete why or why not?What areas do you see competition in the economy of the United States ?How is competition beneficial to our economy/society?How is it harmful to our economy/society?Competition Article

CompetitionCompetition efforts among sellers/producers to attract consumers at various pricesAt the heart of market economic philosophyIncentive an expectation that encourages people to behave in a certain way (positive and negative)Businesses respond to profits Consumers respond to price change (high/low)

What was Adam Smiths ethnic and professional background?What was the name of the book that he published; when was it published?What did Smith identify in the book?What did he assert about specialization and division of labor?What did he believe about the role of government in the economy?Define the French term Laissez Faire; why did Smith believe in Laissez-Faire economics?What is meant by his metaphor of the Invisible Hand?How do both consumers and businesses benefit from this philosophy?

Chapter 2 Section 2 Daily Assignment Economic Profile Adam Smith pgs. 33

Command central authority owns and operates the Factors of ProductionCentrally Planned Economy central government answers the three economic questions; WHAT to produce, HOW to produce, and FOR WHOM to produceOppose private property, free market pricing, economic freedomChapter 2 Section 3 Centrally Planned Economies

Karl Marx German social philosopher that studied economic systems in Europe Communist Manifesto written by Marx and Frederick Engels became basis for modern-day command economiesThought capitalism would fail because it put to much wealth in the hands of few and left everyone else poorBelieved in a no-class system, where all share in wealth/powerSocialism distribution of wealth and F.O.P. equally amongst society Communism political and economic system with centralized economic decision-makingAuthoritarian Government exact strict obedience from their citizens; do not allow individual freedom

Socialism and Communism

How did the Soviet Union arise?Where did Soviet planners allocate the factors of production?How did the Soviet Union control agriculture?What three industries did Soviet Planners favor?How did the Soviet Union view entrepreneurial endeavors?What was the quote used by Soviet consumers as a joke?Why were Soviet Consumers left unsatisfied? Page 39 Russia in CrisisHow did many Russians initially respond to the Communist collapse?What happened over the next decade?How did Russia deal with corruption?What were some characteristics of Russias financial problems?What evidence can be seen that success is in sight?

Chapter 2 Section 3 Daily Assignment Questions The Former Soviet Union pgs. 36-38

Do Now Ch 2 Section 3Scenario 1You have two cows.You trade one to your neighbour for a bull.You only produce what you need to survive.Scenario 2You have two cows.The State takes both and gives you just enough milk to liveScenario 3You have two cows.You sell one and buy a bull.Your herd multiplies, and your wealth grows.You sell your herd and retire on the income.

What economic system matches each scenario?Which scenario do you think is the most ideal and why?Which scenario do you think sounds the most like the United States? Why?What countries do you know of that could fall into scenario 2.

Free Enterprise competition in the marketplace is allowed to flourish with no interference from governmentModified Free Enterprise (mixed economy) businesses are free to compete with some government regulation/intervention

Chapter 2 Section 4 Modern EconomiesNorth KoreaCubaIran China Mexico France

South Africa

Poland Japan United Kingdom Hong Kong

Canada Singapore

United States Centrally PlannedFree Market

Laissez Faire no government intervention in the economySome government intervention is necessary in the economy; some needs are difficult to answer in the marketplaceNational defense, roads and highways, education, etcGovernment acts a protector, regulator and overseer of economy

Laissez Faire in a Modern Economy

Taxes from both households and businessesIncome, state, social security, Medicare/Medicaid, unemployment insurance, etc.

Government Money

Government purchases land, labor, and capital from households United States govt pays 2.8 million employees $9.7 billion for labor

Government in the Factor Market

Government purchases goods and services from firms (businesses)Buildings, office supplies, telephones, computers, etc.

Government in the Product Market

Daily Assignment Economic GoalsEconomic GoalsMarket Command Tradition Economic EfficiencyYes - High levels of economic freedomNo - Many aspects of economic activity are tightly controlled and state-dominatedNo - Extremely limited, a persons role in society is based on custom, heritage and traditionEconomic FreedomEconomic SecurityEconomic PredictabilityEconomic EquityEconomic GrowthEconomic InnovationDaily Assignment Economic GoalsUsing the Chart Below, identify how each of the economic goals are addressed.Economic GoalsMarket Economy Command Economy Traditional Economy Economic Freedom

Yes - High levels of economic freedomNo - Many aspects of economic activity are tightly controlled and state-dominatedNo - Extremely limited, a persons role in society is based on custom, heritage and traditionEconomic EfficiencyEconomic SecurityEconomic PredictabilityEconomic EquityEconomic GrowthEconomic InnovationDaily Assignment Economic GoalsUsing the Chart Below, identify how each of the economic goals are addressed.Economic GoalsMarket Command Tradition Economic EfficiencyHighly stressed because of scarcity and competitionLack of profit motive can lead to a lack of efficiencySlow to adapt to new ideas/technology. Inefficient by standards of modern societiesEconomic FreedomHigh levels of economic freedomMany aspects of economic activity are tightly controlled and state-dominatedExtremely limited, a persons role in society is based on custom, heritage and traditionEconomic SecurityEconomic PredictabilityEconomic EquityEconomic GrowthEconomic InnovationDaily Assignment Economic GoalsUsing the Chart Below, identify how each of the economic goals are addressed.Economic GoalsMarket Command Tradition Economic EfficiencyHighly stressed because of scarcity and competitionLack of profit motive can lead to a lack of efficiencySlow to adapt to new ideas/technology. Inefficient by standards of modern societiesEconomic FreedomHigh levels of economic freedomMany aspects of economic activity are tightly controlled and state-dominatedExtremely limited, a persons role in society is based on custom, heritage and traditionEconomic SecuritySafeguards In society, but general employment is not assuredEconomic security is assured based on full employment and government sponsored programsEconomic security is assured based on traditional means of production

Economic PredictabilityEconomic EquityEconomic GrowthEconomic InnovationDaily Assignment Economic GoalsUsing the Chart Below, identify how each of the economic goals are addressed.Economic GoalsMarket Command Tradition Economic EfficiencyHighly stressed because of scarcity and competitionLack of profit motive can lead to a lack of efficiencySlow to adapt to new ideas/technology. Inefficient by standards of modern societiesEconomic FreedomHigh levels of economic freedomMany aspects of economic activity are tightly controlled and state-dominatedExtremely limited, a persons role in society is based on custom, heritage and traditionEconomic SecuritySafeguards In society, but general employment is not assuredEconomic security is assured based on full employment and government sponsored programsEconomic security is assured based on traditional means of production

Economic PredictabilityHigh predictabilityLack predictability because government controls F.O.P.Predictable in most cases. Can be unpredictable, because F.O.P. are controlled through traditional meansEconomic EquityEconomic GrowthEconomic InnovationDaily Assignment Economic GoalsUsing the Chart Below, identify how each of the economic goals are addressed.Economic GoalsMarket Command Tradition Economic EfficiencyHighly stressed because of scarcity and competitionLack of profit motive can lead to a lack of efficiencySlow to adapt to new ideas/technology. Inefficient by standards of modern societiesEconomic FreedomHigh levels of economic freedomMany aspects of economic activity are tightly controlled and state-dominatedExtremely limited, a persons role in society is based on custom, heritage and traditionEconomic SecuritySafeguards In society, but general employment is not assuredEconomic security is assured based on full employment and government sponsored programsEconomic security is assured based on traditional means of production

Economic PredictabilityHigh predictabilityLack predictability because government controls F.O.P.Predictable in most cases. Can be unpredictable, because F.O.P. are controlled through traditional meansEconomic EquityFairness (hiring and payment) is a primary goal of a market economyLack of equitable payments based on the production of goods and servicesEquity is based on customary means of production, women have assigned roles, men have assigned rolesEconomic GrowthEconomic InnovationDaily Assignment Economic GoalsUsing the Chart Below, identify how each of the economic goals are addressed.Economic GoalsMarket Command Tradition Economic EfficiencyHighly stressed because of scarcity and competitionLack of profit motive can lead to a lack of efficiencySlow to adapt to new ideas/technology. Inefficient by standards of modern societiesEconomic FreedomHigh levels of economic freedomMany aspects of economic activity are tightly controlled and state-dominatedExtremely limited, a persons role in society is based on custom, heritage and traditionEconomic SecuritySafeguards In society, but general employment is not assuredEconomic security is assured based on full employment and government sponsored programsEconomic security is assured based on traditional means of production

Economic PredictabilityHigh predictabilityLack predictability because government controls F.O.P.Predictable in most cases. Can be unpredictable, because F.O.P. are controlled through traditional meansEconomic EquityFairness (hiring and payment) is a primary goal of a market economyLack of equitable payments based on the production of goods and servicesEquity is based on customary means of production, women have assigned roles, men have assigned rolesEconomic GrowthGrow at a fast rate due to competition and profit motiveLack of growth because of a lack of efficiency and profit motive Lack of growth due to a lack of productivity and innovationEconomic InnovationDaily Assignment Economic GoalsUsing the Chart Below, identify how each of the economic goals are addressed.Economic GoalsMarket Command Tradition Economic EfficiencyHighly stressed because of scarcity and competitionLack of profit motive can lead to a lack of efficiencySlow to adapt to new ideas/technology. Inefficient by standards of modern societiesEconomic FreedomHigh levels of economic freedomMany aspects of economic activity are tightly controlled and state-dominatedExtremely limited, a persons role in society is based on custom, heritage and traditionEconomic SecuritySafeguards In society, but general employment is not assuredEconomic security is assured based on full employment and government sponsored programsEconomic security is assured based on traditional means of production

Economic PredictabilityHigh predictabilityLack predictability because government controls F.O.P.Predictable in most cases. Can be unpredictable, because F.O.P. are controlled through traditional meansEconomic EquityFairness (hiring and payment) is a primary goal of a market economyLack of equitable payments based on the production of goods and servicesEquity is based on customary means of production, women have assigned roles, men have assigned rolesEconomic GrowthGrow at a fast rate due to competition and profit motiveLack of growth because of a lack of efficiency and profit motive Lack of growth due to a lack of productivity and innovationEconomic InnovationInnovation is at a high rate due to changes in the marketplace and competitionLess incentive to innovate because profits and credit go to the stateInnovation is non-existent by modern standardsDaily Assignment Comparing Economic SystemsTradition

Command Market 1.

2.

3.1.

2.

3.

1.2. 3.4. 5. 6.7.8.9.1.

2.

1.

2.

1.2. 3.4. 5. 6.

1.

2.

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5.1.

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AdvantagesDisadvantagesExamplesTraditional EconomyCommand EconomyMarket EconomyMarketFree MarketSpecializationDivision of LaborHouseholdConsumerFirmSupplierProduct MarketFactor MarketCentrally Planned Economy15. Socialism16. Communism17. Authoritarian18. Laissez-FaireChapter 2 VIS Terms

Junk!!!

Due Wednesday 9 - 8DAQ's pg. 26-27, Ch. 2 Sec. 1 Video Questions - North Korea Comparing Economic Systems, Advantages + Disadvantages Economic Systems + Reflection Questions D.A. Circular Flow Model Circular Flow (Elisa and Marcella) Online Assignment - Scarcity Ch. 2 Sec. 2 D.A. Adam Smith Ch. 2 Sec. 3 D.A. "The Former Soviet Union" Economic Goals and Am. Free Enterprise Flow Chart Chapter 2/3 Study Guide Ch. 2 CW Puzzle Ch. 3 CW Puzzle Ch. 2 Notes Daily Tens (12)Vocab Terms

Junk!!!Circular Flow Model of a Mixed EconomyHouseholds

Firms

Factor Market

Product Market

Consumer Spending/Investing

Goods and Services Purchased:

Goods and Services Sold

Business Income/Revenue

Land, Labor, Capital, Entrepreneur

Inputs for Production (F.O.P.)

Payment for F.O.P. Wages, rent, capital goods

Income to Households/Individuals

Taxes

TaxesExpendituresExpendituresTaxesTaxesDaily Assignment Group PresentationsUsing the Chart Below, identify each groups Economic Goals andSocietal Values and the picture they used to represent each goal.Group NumberEconomic GoalPicture

Study Guide Chapter 2/3Economic SystemWhat to produce, Who to produce them for, How to produce themEconomic: efficiency, freedom, security, predictability, equity, growth, innovation, additional goalsTradition, custom, ritual, habitCentral planners dictate the what, how, for whomHouseholds and firms through production and consumptionMarket Market economyCapitalismHouseholds and FirmsInput is something used to produce and output, which is a final good or serviceProduct FactorAdam Smith, Wealth of Nations

Study Guide Chapter 2/3Be limited in its role in the economy, Let them do as they please.Invisible HandSee Circular Flowa) Productwhen it changed hands from the household to the firmFactor, laborGrills, hostesses, cashiersFactorKarl Marx, Communist ManifestoThat it would fail because it put too much money in the hands of the rich and not in the hands of the poorCommunism, SocialismAuthoritarianEconomic FreedomProperty RightsProfit MotiveVoluntary ExchangeCompetition

Study Guide Chapter 2/3Their purchases signal to producers what to produce (consumer sovereignty)Overseer, protector, regulator, informerTechnologyPublic GoodPublicPrivateFree RiderMarket FailureExternality

Give an example of specialization/division of labor, and explain why it is beneficial.Give an example of a positive and negative externality not mentioned on the test.Explain why the United States is not a true pure market/free enterprise system.

Extra Credit