Transcript The French and Indian War

What is Economics?
Lesson 1
Essential Questions:
•Why and how do people make economic choices?
•How do economic systems influence societies?
It Matters Because:
• As someone who uses goods and services and will someday
be a worker, you are part of the American economic system.
Guiding Question
What is scarcity, and how does it affect economic choices?
Our Wants and Resources
 Wants- desires individuals
and nations have that can
be met by getting a good or
service
 Wants fall into 2 groups
 Goods- includes things
that we can touch or hold
 Services- work that is done
for us
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Healthcare, lawyer services,
accounting services
Economics
 Limited Resources-
unlimited wants and limited
resources forces us to make
choices
 Economics- the study of how
individuals and nations make
choices about ways to use
scarce resources to fulfill their
needs and wants
 Resources – a thing that can
be used in making products
and services people want
3 Types of Resources
 Natural Resources- nation’s
land, soil, trees, oil, iron and
more
 Labor- includes workers and
their abilities (knowledge and
skills)
 The more workers you have the
more you can produce
 Capital- Buildings, tools,
factories, computers, trucks,
trains and more
The Basic Economic Problem
 Scarcity- occurs when we
do not have enough
resources to produce all
the things we want to have
 Economics looks at how
we go about dealing with
this basic economic
problem
Societies and Economic Choices
 Guiding Question – What
determines how societies make
economic choices?
 Scarcity is an economic
problem in every nation

Nations have to make choices
also
 Three Basic Economic
Questions
 What goods and services will
be produced?
 How will they be produced?
 Who will they be produces for
Economic Systems
 Economic System- a nation’s way of producing
things its people want and need
 Each country has its own economic system
Traditional Economy
 Traditional Economy-
decisions of what, how,
and for whom to produce
is based on custom or
habit
 Follow family traditions
of production
 Not very productive
 Does not adopt new and
better ways to produce
Market Economy
 Market Economy-
individuals and
businesses own all
resources and make
economic decisions on
the basis of price.
 It answers the three
economic questions
based on profit and price.
Command Economy
 Command Economy-
economic system in which
the government makes
the major economic
decisions.
 Government decides
what, how, and for whom
to produce
 Individuals and
businesses don’t have
much say
The American Economy
 The United States economy is based on a market
economy

Businesses compete for profit with little interference from the
government
 Elements of a command economy
 Government makes rules on how workers are treated
 Provides services such as education, defense, and disaster relief
 Elements of traditional Economy
 Many people decide to work in the same traditional jobs
 The United states is a mixed market economy Our economy has elements of traditional, market, and
command economies
Economic Decisions
Lesson 2
Essential Questions:
•Why and how do people make economic choices?
•How do economic systems influence societies?
It Matters Because:
• You make economic decisions everyday, and you will do so
for the rest of your life
Guiding Question
Why are trade offs important in making economic decisions?
Trade Off
 Trade off- the alternative you face
when you decide to do one thing
rather than another
 People make trade offs all the
time
 Businesses also make tradeoffs

Invest in research for new products
or spend money on advertising to
increase sales of old products
 Governments also face trade-
offs

Spend money to build new schools
or build new roads
Opportunity Cost
 Opportunity Cost- the cost of the next-best use of
your money or time when you choose to do one thing
rather than another
 Only the next-most-attractive alternative
Measuring Costs and Revenues
 Guiding Questions – How do
costs and revenues influence
economic decision making?
 Assessing Costs- “Joe’s
Seafood Depot”
 Joe’s Seafood Depot has been
making and selling seafood for
10 years. Joe wonders if his
business would be better off if
it were open longer every day.
Different Types of Costs
 Fixed costs- an expense that does not change no matter how
much a business produces
 Rent, insurance
 Variable costs- an expense that changes depending on how
much a business produces
 Total cost- the combination of all fixed and variable costs
 Marginal cost- the additional or extra opportunity cost
associated with each increase of one unit of sales
 Marginal cost means that variable costs increased
Different Types of Revenues
 Revenue- the money a
business receives from selling
its goods and services
 The sum of money Joe
receives from his customers
 Marginal Revenue- the
additional income received
from each increase of one unit
of sales
Marginal Analysis
 Marginal analysis- compares the additional benefit of
doing something with the additional cost of doing it
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If benefit is greater than additional cost, the rule is to do it
If the cost is greater than the benefit, the rule is don’t do it
Do it until marginal cost is equal to marginal revenue
 Benefit-Cost Analysis- economic model that compares
the marginal costs and marginal benefits of a decision


Helps businesses choose among two, three, or more projects
Benefit/cost ratio= Revenue
Cost
Demand and Supply in a Market
Economy
Lesson 3
Essential Questions:
•Why and how do people make economic choices?
•How do economic systems influence societies?
It Matters Because:
• Demand and supply work together to set the prices of the
goods and services you buy and use.
Guiding Question
How do demand and supply affect prices?
Demand and Supply Make Markets
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Where do prices come from?
What do they tell us?
Why do they change?
Are prices important?
 Command economy- government
set the prices
 Market economy- prices are set by
the interaction between demand and
supply
 Demand and supply- are a result of
two groups
 Consumer- a person who buys
goods and services
 Producers- a person or business that
provides goods and service
Demand and Supply
 Demand- the amount of a good
or service that consumers are
willing and able to buy over a
range of prices
 Supply- the amount of a good or
service that producers are
willing and able to sell over a
range of prices
 When prices go up producers
increase supply
 When prices go down producers
decrease supply
Markets and Competition
 Representing information on a
schedule as a line on a graph.
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 Demand curve- shows the
amount demanded at a particular
price
 Slopes down to the right
 Supply curve- shows the quantity
supplied at a particular price
 Slopes up to the right
Demand and Supply curve together
show a Market
 Market- a location or an
arrangement that allows
buyers and sellers to get
together and buy or sell a
certain product
 Competition- efforts by
different businesses to sell the
same good or service
 To be efficient markets must
have many competing buyers
and sellers
How Prices Are Set
 Market Economy
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People buy and sell what they want, its
like a democratic vote for a product or
service
Markets help prevent too much or too
little production of goods and services
 Equilibrium price

The price set for a good or service in the
market place, where demand and
supply are perfectly balanced
 Surplus

amount of a good or service supplied by
producers is greater than the amount
demanded by consumers
 Shortages

the supply of the good or service
available is less than the demand for it
Forces applied by surpluses
and shortages, keep a price
at its equilibrium level
Factors Affecting Demand
 Number of Consumers
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If more consumers enter the market the demand curve shifts to the
right
If more consumers leave the market the demand curve shifts to the
left
 Change in Customer Income
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If consumers earn more, they tend to buy more, the demand curve
shifts to the right
Less income, consumers buy less, the demand curve shift to the left
 Change in Customer Preference
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Change in like or dislike of a product will shift the demand curve left
or right
Finding out a product is harmful will make people want to buy less
of it
Factors Affecting Supply
 Number of suppliers increases
 As the number of suppliers increases, the availability of a
good or service increases
 More is produced, the supply curve moves to right
 Suppliers leave the market
 Supply curve moves to the left
 Fewer suppliers, prices go up
 Fewer choices, producers charge more
 Cost of production
 As cost of production goes down, producers increase supply
 As cost of production goes up producers decrease supply
The Economic Role of Prices
 Prices and the Economic Questions
 What to produce?
 How to produce?
 For whom to produce?
 Prices as Measures of Value
 Consumers and producers use the prices to value goods
and services
 Prices as Signals
 If consumers think an item is priced too high, they will
not buy it.
 Lack of demand sends a signal to the producer that the
price is too high.
 The reverse is also true for consumers