Transcript Economics and the Consumer

Personal Economic
Analysis
 The
study of the roles
people play in an
economic system.
 Worker
 Citizen
 Consumer
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Free Enterprise System
Consumer Roles
In the US & Global
Economy
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Who Wants to Buy?
 Write
down several things
that you have to buy this
week
 Write
down some things you
would like to buy this month
 What
is the difference?
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Economics Today
Economics
Definition
study
of the process that
involves choice making
as people try to satisfy
needs and wants
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Economics Today
 Unintended
Effects
 Things
don’t always go as
planned
 Do
they matter? YES!!
 Think:
Effects both intended
and unintended
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Economics Today
 Costs
& Benefits
 Everything
has a cost
 Opportunity
(choices!)
costs
 Examples??
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Opportunity Cost
 What
is given up to do
something different.
Save my money
or go on
Vacation?
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Economics Today
 What
is Scarcity?
 (Needs)
Wants --> utility
 Tangible
(goods) vs
Intangible (services)
 Unlimited
resources
wants - Limited
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Economics Today
 Scarcity
 Cannot
--->>> Choices
have both choices
 Leads
to ---------------------------->>>
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Economics Today
The Link Between
SCARCITY, CHOICES, and OPPORTUNITY COSTS
Scarcity
Choices
Opportunity
Costs
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Economics Today
 LAND
 LABOR
 CAPITAL
 ENTREPRENEURSHIP
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Economics Today
 $$$$
(cost) for these
resources
 Land
--> Rent
 Labor
--> Wages, Salaries
 Capital
 Entre
--> Interest
--> Profits
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Hmm…
 Imports
 Exports
 Outsourcing
 Tariffs
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Global Effects
 Does
what’s happening in the
rest of world effect the US?
 You
Bet!!
 But
How?
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Global Economy
 Why
is this international
trade so important?
 Think
about those things we
would not have
 Think
about what other
countries wouldn’t have
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Global Economy
 Have
computers changed the
way business is done?
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Global Economy
 Which
countries are the
most economically stable?
 Why?
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How Do We Measure
Economic Growth?
 Personal
Income
 Consumer
 Gross
Price Index
Domestic Product
 Inflation
 Unemployment
Rate
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Gross Domestic Product
Consumer Spending + Government
Spending + Business Investment
+Foreign Trade =GDP
•Total value of
all final goods
and services in
an economy
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GDP-Where do we count it?
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What is Inflation?
When
Prices Increase
A
dollar cannot buy as
much
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Inflation
 What
causes an increase in
prices?
 Change
in interest rates
 Surging
economy
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Inflation Effects
Who is Helped by Inflation?
Who is Hurt by Inflation?
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A retired person who
lives on fixed interest
from bank certificates of
deposit (CDs)
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A family that bought a
house and has a fixed
interest rate mortgage
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A retired teacher
whose income comes
from a fixed income
pension?
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A two income family.
The wife is a medical
doctor, and the
husband is a financial
analyst?
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Government & the
Economy
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A NATION AT WORK
HOW WELL ARE WE
DOING?
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EMPLOYMENT
 Labor
Force
 Unemployment
 Underemployment
 Supply,
Demand,
Employment
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Our Free Enterprise
System
 The
Business Cycle
Recurrent swings (up and down)
in real GDP
 Prosperity/Peak
 Recession/Contraction
 Recovery/Expansion
 Depression/Trough
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Our Free Enterprise System

The
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40
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30
25
20
15
10
5
0
Business Cycle
prosperity
prosperity
recession
recovery
depression
1
2
3
years ---->>
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5
6
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Long-term GDP trend
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Our Free Enterprise System
 What
conditions would exist
in an economy if there was:
Prosperity/Peak
prosperity
Recession/Contraction
Recovery/Expansion
Depression/Trough
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Economic Policies
Supply & Demand
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Supply & Demand
Candy Auction!
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Quantity Demanded
The
number of
products a consumer
is WILLING & ABLE
to buy at a specific
price.
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Law of Demand
Amount
consumers are
willing & able to buy
at all prices
As
P
D
As
P
D
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What changes Demand?
The
# of Buyers
Real
Price
Income
of Related Goods
Price
of Substitutes
Fads
& Fashion
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Quantity Supplied
The
number of
products a business
is WILLING & ABLE
to sell at a specific
price.
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Law of Supply
Amount
businesses are
willing & able to
produce at all prices
As
P
S
As
P
S
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What changes Supply?
#
of Sellers (competition)
 Price
of Factors of Production
 Price
of Related Goods
 Price
of Substitutes
 Government
 Natural
Policy
Disaster
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So What’s the Point?!
 We
want the perfect situation
 Equilibrium--the
number
demanded of a product
equals the number of sold
of a product.
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Equilibrium
P
S
D
Q
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What if it’s Not Perfect?
 Surplus
 When
supply exceeds demand
 Shortage
 When
demand exceeds supply
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Surplus
P
S
D
Q
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Shortage
P
S
D
Q
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Price Elasticity of Demand
 Measure
of the change in
Demand as a result in
the change of prices
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Elastic
vs. Inelastic
 Large
change in demand
w/ a change in price
•Luxuries
•Many substitutes
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Elastic vs.
Inelastic
 Little
or no change in
demand w/ a change in price
•Necessities
•not many substitutes
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Economic System
 What
type of economic system
do we have here in the US?
 What
other types of systems
exist in the world?
 Market
 Command
 Traditional
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Capitalistic Economy
Element
 Profit
of Market Economy
Motive
 Standard
of Living
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Devilonia
7 Economic Goals
 Freedom
 Opportunity
 Efficiency
 Stability
 Growth
 Equity
 Security
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Freedom
 consumers
have a choice in
the products and services
they use.
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Efficiency
 what
is the best use for the
available resources?
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Growth
 where
do we want to be
economically years from
now?
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Security
 should
our citizens be
financially self reliant or
should the government
provide for them?
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Opportunity
 Should
our citizens make
decisions based on their own
experiences and they will
find pleasure in?
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Stability
 Is
the value of our currency
a concern of ours?
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Equity
 Who
should have the
authority and how do we
distribute power throughout
our citizens?
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Review Game Directions
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Reader (Can also challenge)
1
Answer Sheet Holder
1
Question Picker
1
Challenger
 Each
position rotates every
question!! (Rotate clockwise)
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Test Wednesday!!
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 Study
a pencil
your notes/handouts
 Bring
something to do after
the test
 Good
Luck!!!
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