Transcript Economics - slhistory
Economics What resources were used to produce this car? Resources used to produce car How would you classify these? Steel Rubber Glass Car designer Engineer Factory workers Supervisors Plastic Leather Thread Machines/industrial robots Electricity Factory building Land for factory Owner of company/CEO Other workers Wood for paneling Economic Resources Factors of Production Natural Resources Land, rain, forests, minerals, etc. Labor work Capital Capital goods (tools, machinery, and buildings) Entrepreneur Individuals who start a new business Economic Choices Economics The study of how we make decisions in a world where resources are limited. Need Things we need for survival. Want Things we would like to have Scarcity Fundamental economic problem. We don’t have enough resources The Economic Questions What to produce? How to produce? For whom to produce? Being an Economically Smart Citizen You must stay informed. Understanding your Incentives: rewards offered to try to persuade people to take certain economic actions. Examples??? role: Market Economy: Type of economy US has. It is participatory Capitalism: Citizens own most of the means of production. Free Enterprise: businesses compete for profit with a minimum of govt interference. Features of Capitalism Capitalism: an economic system in which private citizens own and use the factors of production to make a profit. Free Enterprise: an economy in which competition is allowed to flourish with a minimum of gov’t interference Consumer Sovereignty: the consumer is the ruler of the market Private Property Rights: free to own and use our own property Competition: struggle b/t buyers and sellers to get the best products at the lowest prices Profit: money left over after all costs of productions have been paid. Profit Motive: driving force behind free enterprise. Voluntary Exchange: the act of buyers and sellers freely and willingly engaging in market transactions. 4 factors of Productions Posters How does the entrepreneur make decisions about how much of a resource to use to make a product? Which factor in your poster is the most important & why? Which factors are the least important to production? Which factors have the cheapest cost toward your production? Why? The most expensive? Why? Circular Flow of Economic Activity Market: location that allows buyers and sellers to exchange Factor Markets: where productive resources are bought and sold Product Markets: where producers offer goods and services for sale. Circular Flow Model Basic Economic Decisions Which goods & services should be produced and in what amounts? How should goods & services be produced? Who will get the goods & services that are produced? Quantity: amount to be produced Ex: farmer’s land, seeds, crops, labor, machinery Technology revolutionized production process Activity! Partner up with someone near you. Ask each other the following questions and record your answers: Suppose you have just bought 100 acres of land, what is the first economic question you should ask yourself? Would you plant all or any of the acreage? One crop or more than one? Will you use organic methods or conventional fertilizers & pesticides? Will you do all the work yourself or hire help? Will you rely more on workers or machinery? Will you buy the farm machinery or rent Will you manage the farm yourself or hire a business manager? Trade-offs Trade-offs Exchanging one thing for the use of another Opportunity Cost What you cannot buy or do when you choose to do or buy one thing rather than another. Examples: Costs Fixed Costs: expenses that are the same no matter how much is produced. Example: Variable Costs: expense that change with the number produced. Example: Marginal Costs: extra cost of producing one additional unit. Marginal benefit: additional benefit associated with an action. Cost Benefit Analysis Economic model used to compare marginal costs and marginal benefits You want to choose an action when the benefits are greater than the cost. The Economy and You Consumer Rights and Responsibilities Consumerism: movement to educate buyers Laws that protect consumers Examples: Warranty: a promise made by a manufacturer or seller to repair or replace a product if it is faulty. Your Role as a Consumer Disposable Income: money after taxes Discretionary Income: money after paying bills. What are your goals??? Saving: money set aside for later use Interest: payment when you lend your money. Gross Domestic Product (GDP) GDP: measure of the size Standard of Living: of the economy. Total dollar value of all FINAL goods and services Does not count intermediate goods or used goods Expressed in terms of money Increase in GDP-economy is expanding Decrease in GDP-economy is declining Quality of life based on the possession of necessities and luxuries that make life easier. Does not measure society’s overall health of the economy. Productivity and Growth Productivity: the measure of the amount of output produced by a given amount of input. Specialization: Specialize in one good/service Division of Labor: dividing the tasks of making a product. Economic Interdependence: depending on others for the things we can’t provide ourselves.