Transcript Economics PowerPoint

Consumer Roles
in the US &
Global Economy
Free Enterprise System
1
Consumer Roles in Economy
Personal Economic Analysis The study of the roles people
play in an economic system.
 Citizen
 Worker/Employee
 Consumer
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Economics Today
Economics
The study of the process that
involves making choices as
people try to satisfy their
needs and wants
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Needs and Wants
Write down at least 10 things
you would like to buy within
the next month.
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Economics Today
Wants and needs are met by
obtaining goods and services
Goods – are tangible, can be
seen/touched
Services – are intangible,
cannot be seen/touched
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Economics Today
 Scarcity
– the lack of
something that satisfies a want
or need (unlimited wants and
needs in a world with limited
resources)
 Because
of scarcity we must
make choices, which lead to
opportunity costs
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Economics Today
 Unintended
Effects - Things
don’t always go as planned
 Opportunity
Costs - The cost
of an alternative that must be
forgone in order to pursue
something else
 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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Economic Growth
Economic Growth is measured by:
 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
•The total value
of all final goods
and services in an
economy
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Inflation
Inflation - When Prices
Increase
A
dollar cannot buy as
much as it used to
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Inflation
What can cause an
increase in prices?
 Change
in interest rates
 Surging
economy
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Inflation
Who is Helped by Inflation?
Who is Hurt by Inflation?
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Helped or Hurt?
A retired person who
lives on fixed interest
from bank certificates of
deposit (CDs)
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Helped or Hurt?
A family that bought a
house and has a fixed
interest rate mortgage
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Helped or Hurt?
A retired teacher
whose income comes
from a fixed pension?
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Helped or Hurt?
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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Employment
Labor Force – over 16, willing and
able to work
Underemployment - Job requires
less skills than you have; working
part-time instead of full-time
Unemployment – over 16, not
working, but actively seeking
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Unemployment
 How
well are we doing?
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The Business Cycle
 Prosperity/Peak
– The high point
of a business cycle
 Recession/Contraction
– Economy
is in a period of decline
 Depression/Trough
– The lowest
point of a business cycle
 Recovery/Expansion
– A rise in
business activity after a recession
or depression
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Our Free Enterprise System

The
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40
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30
25
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15
10
5
0
Business Cycle
prosperity
prosperity
recession
recovery
depression
1
2
3
years ---->>
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6
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Our Free Enterprise System
What conditions would exist
in an economy if there was:
prosperity
Prosperity/Peak
•High employment
•High demand for goods and
services
•Businesses producing as many
goods and services as they can 24
Our Free Enterprise System
What conditions would exist
in an economy if there was:
prosperity
Recession/Contraction
•Spending falls
•Fewer goods and services
demanded
•Unemployment rises
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Our Free Enterprise System
What conditions would exist
in an economy if there was:
prosperity
Depression/Trough
•High unemployment
•Low productivity
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Our Free Enterprise System
What conditions would exist
in an economy if there was:
prosperity
Recovery/Expansion
•Production starts to
increase
•Unemployment decreases
•GDP grows
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Four Factors of
Production
LAND
LABOR
CAPITAL
ENTREPRENEURSHIP
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Four Factors of Production
Land – all natural resources,
minerals, and other raw
materials (land, water,
vegetation, animal life,
atmosphere)
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Four Factors of Production
Labor – the effort that a
person devotes to a task
for which they are paid
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Four Factors of Production
Capital
 Physical
 Human
 Liquid
capital
capital
capital
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Four Factors of Production
Physical capital – humanmade resources used to
produce other goods and
services (equipment, tools,
machinery, technology,
buildings, factories)
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Four Factors of Production
Human capital – knowledge
and skills a worker gains
through education and
experience (college degree,
training, on-the-job
experiences)
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Four Factors of Production
Liquid capital – Cash or money
that can be used to purchase
needed factors of production
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Four Factors of Production
Entrepreneurship – The people
who organize land, labor, and
capital to make goods and
services; and assumes risk for
the business
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Global Economy

Imports – goods coming in from
another country

Exports – goods going out to
another country

Outsourcing – building/making
something overseas

Tariffs – tax on imported/exported
goods
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Global Economy

Does what’s happening in the rest
of world effect the US?

What if we didn’t export or import?

Why is this international trade so
important?

Which countries are the most
economically stable?
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Global Economy
 Have
computers changed the
way business is done?
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The Economic Policy of
Supply & Demand
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Quantity Supplied
Supply - 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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Quantity Demanded
Demand - 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
Income
Price
of Related Goods
Price
of Substitutes
Fads
& Fashion
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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
Elastic – A large change in
demand when there is a
change in price
•Luxuries
•Many substitutes
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Elastic vs. Inelastic
Inelastic - Little or no change
in demand when there is a
change in price
•Necessities
•Not many substitutes
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Supply and Demand
 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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If there is not an equilibrium…
 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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Economic Systems
 Traditional
Economy
 Command
Economy
 Market
Economy
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Economic Systems
 Traditional
 Closed
 Self
Economy
society
sufficient/reliant
 Creates
everything for
themselves
 No
imports/exports/trade
 Not
worried about advancements
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Economic Systems
 Command
 Complete
Economy
government control
 Government
 Prices
 Jobs
owns all resources
dictated
dictated
 Manipulates
supply and demand
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Economic Systems
 Market
 Free
Economy
trade
 Entrepreneurship
 Government
provides the little
control that does exist
 Competition
 Supply
market
and demand dictates
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Elements of Market Economy
 Profit
Motive
and
 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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