Transcript ECONOMIC FORCES IN EUROPE

ECONOMY FORCES IN
EUROPE
Standards SS6E1, SS6E2, SS6E3, SS6E5,
SS6E6, SS6E7
Economy vs. Economics
Economy: the production,
consumption, and distribution of goods
and services
Economics: the study of production,
distribution, and consumption of goods
and services
Private vs. Public Businesses
Private means it is owned by citizens
Public means it is owned by the
government
What is Scarcity?
The limited supply of something
A good, service, or productive resource is scarce if
there is not enough to satisfy all that people want
Because resources are limited, you can’t have every
thing you want; because of scarcity, people must
make choices
Every country must deal with scarcity
As a result, every country develops an economic
system
How many types of economic
systems are there?
Three types of economic systems
Traditional
Command
Market
Mixed? (maybe)
Traditional Economy
An economy where people use the same work
methods and tools generation after generation.
Customs and habits of the past are used to decide
what and how goods will be produced, distributed,
and consumed
People are depended upon to fulfill traditional role
Citizens do not have enough goods to have a surplus
(more than they need), so they cannot earn extra
money to buy better equipment.
Without better equipment, they continue to work in
the same way, never changing their methods.
No examples of traditional in Europe
Command Economy
An economy where the government owns the
country’s resources and businesses.
The government decides what goods should
be produced and what services will be
available.
Seriously limits citizen’s choices of jobs,
goods, and services.
Former Soviet Union is example; present day
China
Market Economy
An economy where private citizens or groups of
citizens own businesses.
Citizens are free to develop many different types of
businesses, so people have a wide variety of jobs,
goods, and services
Because people in a market economy are free to
choose how to make and spend their money
Decisions are guided by changes in prices
Other names: free enterprise, capitalism, laissez-faire
Most of Europe operate in a market economy
United Kingdom/United State are examples
Pure Market; Pure Command
No pure command or pure market
All economies have characteristics of both
systems
pure market: no government involvements at
all, no rules
Pure command: total government control;
citizens have no involvement
Mixed Economy
Not a type of economy
Lies somewhere in the middle
(command and market)
A mixture of all economies
All modern economies have
characteristics of both systems
SS6E6 A/B; SS6E7 A/B/C/D
Trade Barrier
Trade: a voluntary exchange of goods and services
Barrier=wall
Something that prevents trade
Countries try to limit trade with other countries by
creating trade barriers
Examples:
Tariff
Quota
Embargo
Geography (geography that prevents easy trade,
like mountains, oceans, etc.)
Tariff
a tax that the government puts on
imported or exported goods.
Quota
The amount of something that is
allowed or admitted
Examples:
A restriction on the quantity (number) of a good that
can be imported during a specific time period would be
called an “import quota”.
If the United States government only allows 50 tons of
corn to be imported into the US each year, this would
also be called an “import quota”.
If your teacher has given you 20 minutes to work on
an assignment, your “time quota” is 20 minutes.
More QUOTA examples
Money Quota: Your parents give you $20 a week to
spend. Once you spend all $20, you have met your
“money quota”. You will not receive any more
money until next week.
Gas Quota: If you drive a company car and your
work gives you one tank of gas for a week, then once
you use all the gas in the car, you have met your
“gas quota”. You will not receive any more gas until
next week.
Paper Quota: Your job only allows you to use 1,000
sheets of paper per year. If you use all 1,000
sheets, then you have met your “paper quota”. You
will not receive any more paper until next year.
Embargo
A government order prohibiting the
movement of merchant ships into or out
of its ports.
A government restriction on trade with
a foreign nation.
International Trade
The sale of goods or services across
country borders
Trade between different countries
Voluntary Trade
When two countries both benefit from
trade and they voluntarily decide to
trade with one another
Currency
A unit of exchange for goods or services
The money in circulation in any country
Gross Domestic Product (GDP)
The total value of all the goods and services
produced within the borders of a nation
during a specific time period (usually a year).
Often an indicator of Standard of Living (just
like the literacy rate) how rich or poor a
country is
To increase GDP, countries must invest in
human capital and capital goods
Human Capital
The education, training, skills, and health of the
workers in a business or country
The skills that humans have to build things or
perform services.
Examples:
A worker in a factory
A hair stylist
An actor
Waiter/waitress
A person who mows lawns
Capital Good
The “stuff” used to make other goods
The factories, machines, technologies, and buildings
needed by businesses to operate
Examples:
Machines
• Ice machine
• Coin press
Factories
• A car manufacturing plant
Technology
• Computers
• Software
Natural Resource
Any product that comes from nature
Examples:
Oil, coal, natural gas
Vegetables and fruits
Cotton
Sheep and cows
Gold and silver
Entrepreneur/Entrepreneurship
When a person organizes and manages
a business.
Are willing to risk everything for the
possibility of gaining a profit
Top 5 highest GDPs in the world
YEAR 2007
United States - $13,840,000
Japan - $4,384,000
Germany - $3,322,000
China - $3,251,000
United Kingdom - $2,773,000
Bottom 5 lowest GDPs in the world
YEAR 2007
Palau- $145
Marshall Islands- $144
São Tomé and Príncipe- $144
Kiribati- $67
Tuvalu- $15