Economic Components
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Transcript Economic Components
ECONOMIC SYSTEM
COMPONENTS
Private Ownership
Control of productive resources
• land
• labor
• capital
• that are used to produce goods
and services
Supply and Demand
Consumers are the demand
Producers are the supply
• When demand is high prices go up
• When production is higher than
demand prices go down
Profit Motive
Desire to make money for goods
and services consumers want.
Most powerful force that drives
our economy
Competition
Have to offer the best product
or service for the lowest price.
Requires efficient management
of productive resources
Free Economic Choice
Individuals & businesses have
the right to make choices about
•
•
•
•
•
spending
earning
saving
investing
producing
Government
Involvement
Regulates taxes, spending and
monetary policies
Gross Domestic Product
The most frequently used
method for measuring economic
performance
Current value of all goods and
services produced in a country
in a year
GDP
Consumer Price Index
A common method for
measuring inflation
Measures monthly changes in
the price of about 400 goods
and services that people buy
regularly
LAW OF SCARCITY
All economic
systems are
based on the
fact that
resources are
limited while
needs and
wants are
unlimited !
Applies to:
Individuals
Businesses
Government
ANTI-TRUST LAWS
Prevents
• monopolies
• restraints of
trade
MONOPOLY
A single
company
controls the
entire supply of
a product or
service
PROGRESSIVE TAX
100
80
60
East
40
West
20
North
0
1st
Qtr
3rd
Qtr
Income Tax is
an example
People with the
higher incomes
pay the higher
tax