Transcript Basics of Our Economy

Basics of Our
Economy
EQ: What is the driving motivation of
American consumers & producers?
Key Vocabulary
 Consumers: those who need/want goods and
services produced by producers.
 Producers: those who produce what
consumers need/want.
 Supply: the amount of a good/service
producers make available to consumers
 Demand: the amount of a good/service
consumers want.
Limited Resources
 How does Scarcity influence….
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Consumer Choices?
Prices of Goods?
Supply of Goods?
Demand of Goods?
Types of Costs
 Fixed Costs:
 The costs that remain basically constant no matter
amount of goods sold.
 Examples?
 Variable Costs:
 The costs that change regularly depending on amount
of goods sold.
 Examples?
 Total Costs: Fixed + Variable Costs
 Marginal Costs:
 The cost of producing one additional unit of a
good/service.
Types of Revenue
 Marginal Revenue (AKA Marginal Benefit):
 The revenue or benefit of producing one additional unit
of a good/service.
 How do producers make decisions?
 Cost-Benefit Analysis:
 Comparing the cost and benefit of a decision. (Benefit
should outweigh Cost)
 Diminishing Return (AKA Diminishing Marginal
Benefit)
 The revenue or benefit of each additional unit goes
down.
Diminishing Marginal
Benefit (Return)
# of Cars
Produced
200
Profit (Benefit)
Per car
$12,000
300
$10,000
500
$8,500
700
$5,500
 Textbook p.512-513 #1-12
 Textbook p. 519 #2-4
Thursday, Feb. 18
 EQ: How does everyone in our economy
depend on each other?
 Key Vocabulary
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Economic Interdependence
Factor Market
Product Market
Gross Domestic Product (GDP)
Standard of Living
How do we Measure our
Economy?
 GDP (Gross Domestic Product):
 Total Value of all finished goods and
services produced in a country.
 Standard of Living
 Quality of life based on necessities and
luxuries.
Circular Flow Model
Circular Flow Model
 How many sectors, or parts, does our economy
have? What are they?
 Why is it called the “Circular Flow” model?
 What is something important that flows from
Businesses to Households?
 …from Households to Businesses?
 …from Businesses & Households to the
Government?
 …from Government to Businesses &
Households?
Textbook
 Look at Circular Flow Model on page 522 and
answer the 2 questions.
 What takes place in the Factor Market?
 It’s where factors of production are bought and
sold.
 What takes place in the Product Market?
 It’s where goods and services are bought and
sold.
 Answer questions #2, 3, 4, 5 on p. 525