economics. what is economics? –t–the study of how we manage our resources in the production and...
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ECONOMICS
• What is economics? – The study of how we manage our resources in
the production and distribution of goods and services
• What is an economy?– The way a region uses its resources to
provide goods and services to satisfy people’s wants and needs
Economic Systems• System for
producing, distributing, & consuming goods & services
• All countries ask:– What will be
produced?– How will it be
produced?– For whom will it be
produced?
Economic Systems
• Barter: – People trade a good for a good– Example: Farmer A grows corn, and Farmer B
has a diary farm. Farmer A trades some corn to Farmer B for some milk.
Economic Systems
• Traditional System: – social roles & culture determine how
goods are made, sold, and bought – Based on customs that have been
handed down for generations– Children will often be doing the same
jobs as their parents– Very few still around
Economic Systems
• Command System: – government answers the 3 questions– Communism, socialism– No incentives for workers; equal pay– Production is low and quality of products
is poor
Economic Systems• Market System:
-- based on individual
choices & voluntary trade
– Businesses all owned by the people
– Role of government is very limited
– People determine what will & will not be produced by buying or not buying products
Economic Systems
• Mixed System: – has features of traditional, command, and
market systems– Uses the best part of every system
Economic Terms…• Exports:
– goods we sell to other countries (corn)
• Imports: – goods we buy from other countries (oil)
• Balance of trade: – Difference in value between exports & imports– Why is it important? Exporting (selling) more
goods than importing (buying) means you make a profit, which is good
Economic Terms…
• Trade barrier: – laws that governments use to limit trade
between countries– Most common are tariffs and embargoes
• Tariff: – taxes or fees on imports
• Embargo: – government restrictions on imports or exports
Economic Terms…
• Currency: – anything accepted as a medium of exchange
(money)
• Currency exchange: – the rate at which one currency can be
converted into another currency– Example: 1 US Dollar = .72 Euros
Economic Patterns of Nations
• Developing Nations: countries with few industries; very little technology; poor– Most people are subsistence farmers, raising
enough food only to feed their families– Face many challenges: hunger & starvation,
disease, unsafe water, poor education & medical services, unstable governments, war
– Examples: most nations of Africa, Asia, and Latin America
Economic Patterns of Nations
• Developed Nations:
• countries that have many industries and are technologically advanced– Commercial farms: owned by companies; use
modern technology– About ¼ of world’s pop. live in developed
nations– Examples: U.S., Britain, Canada, Australia
Factors of Production
• The elements needed for production of goods and services
• What are they?– Human capital (people to work, their
knowledge & skills)– Capital goods (money, machines, factories,
equipment)– Natural resources (raw materials)– Entrepreneurs (people who start the
businesses)
Economics• What is a good?
– Something that is made to be bought– Examples: cars, clothes, food
• What is a service?– Something someone is paid to do for
someone else– Examples: cutting hair, mowing grass, driving
a bus
Economics• What is a consumer?
– Someone who buys a good or service
• What is a producer?– Someone who makes a good or
performs a service
• What is distribution?– The process of moving products to their
market
Economics• What is competition?
– Rivalry between businesses to sell the most and make the biggest profit
• What is scarcity?– Lack of a particular resource (oil)
• What is abundance?– having more than enough of a particular
resource (wheat)
Economics• What is the law of supply & demand?
– States that the price of a good rises or falls depending on how many people want it (demand) and on how much of the good is available (supply)
– If demand is high (a lot of people want it), prices will be high because people will pay it
– If demand is low, prices will be lower and more of the product will be available
Economics• What is an entrepreneur?
– Someone who brings together resources to produce goods and services
– Example: someone who starts their own business
• What is profit?– Money that is left over after costs of producing
a product are paid
Economics• What is income?
– Money a person receives in exchange for work or from the use of property
• What is spending?– Using money to buy goods and services
• What is saving?– Putting money aside for later use– Where? Piggy banks, banks, jars, under the
mattress, etc.
Economics• What is investing?
– Using money to earn money– Examples: stock market, property, etc.
• What is interest?– Money paid to a lender in exchange for borrowing
money
• What is credit?– Borrowing money to buy something now and paying
for it at a later date– Examples: cars, houses, large purchases, etc.