Transcript chapter 1 - Algonac Community Schools

Bell Work:
 What do you think the United States would be like if there
was no government? (explain why!)
-Make Sure you fill this in the Wednesday section of your bell
work sheet.
- Please fill in the date.
Government and the State:
Chapter 1.1
What is Government?
 Government: Is an institution in which a society makes and
enforces its public policies.
 Public Policies: Are the things a government decides to do.
Raise taxes, fund education, and environmental policies.
 In order for governments to make and carry out public
policies, governments must have power.
Government Power:
 Every government has and exercises three basic kind of
power.
1. Legislative- make laws, form public policies.
2. Executive- execute and enforce laws and policies.
3. Judicial- power to interpret laws, determine their
meaning, and settle disputes.
 Powers of a government are outlined in a country’s
constitution.
What is a Constitution?:
 A constitution is the body of laws that set out the principles,
structures, and processes of a government.
Ex:
- election process
- death of a President
Dictatorship vs. Democracy:
 Dictatorship- executive, legislative, and judicial power is
held by a single person or small group.
- People have very little power and/ or say in how the
government is run.
 Democracy- supreme authority over the government rest with
the people.
- Majority rules, and people vote to have their voices heard.
The State:
 State = nation or country
4 Characteristics of the State:
1. Population- a state must have people living within its
borders.
2. Territory- must have land with recognized borders.
3. Sovereignty- has supreme and absolute power within its
territories.
4. Government- every state has a government
Theories on how the state came about:
 The Force Theory: one person or a small group claimed
control over an area and forced all within it to submit to that
person’s or groups rule.
 Evolutionary Theory: Developed naturally over time.
 Divine Right Theory: God created the state, gave those of
royal birth a “divine right” to rule.
 Social Contract Theory: state arose out of a voluntary act
of free people.
Bell Work
 What is government?
 What 3 basic powers do all governments have? (List and
explain)
Forms of Government:
1.2
Classifying Governments:
 Governments may be classified in 3 ways.
1. Who can participate.
2. Geographic distribution of power.
3. Relationship between legislative and executive
branches.
Who Can Participate:
 Democracy- supreme authority rest with the people
-Direct (pure)-will of the people is directly translated into laws
by the people themselves. (Only works in small communities).
-Indirect (representative)-elected officials who are chosen by the
people.
 Dictatorship-ruler holds absolute authority over the
people.
-Autocracy- one person holds unlimited power.
-Oligarchy- small elite group holds the power to rule.
Geographic Distribution of Power:
 Unitary- a single central agency holds all
government powers.
 Federal Government- government power is shared
between the central government, state
governments, and city governments. (U.S. Gov’t)
 Confederation- an alliance of independent states.
Government has very little power and handles only
the problems the member states assign to it.
- (U.S. during revolutionary war, U.S. during civil
war)
Relationship Between Legislative and
Executive Branches:
 Presidential Government- divides power between the 3
branches of government. (legislative, judicial, and executive)
 Parliamentary Government- focuses power in the
legislative branch, executive branch is chosen by and subject
to the legislative branch.
Bell Work: 9/7/12
 What is the difference between a direct and
indirect democracy?
 What is the difference between an autocracy, and
an oligarchy?
5 Basic Concepts of Democracy:
1.3
Worth of the Individual
 Each individual, no matter who they are, is a
separate and distinct being.
Equality of All Persons:
 This concept insist that all are entitled to:
1. Equality of opportunity
2. Equality before the law
Majority Rule, Minority Rights:
 What the majority wants, will be public
policy. However, this cannot infringe on
peoples rights.
Necessity of Compromise:
 Both side giving up something they want, in order to reach
an agreement.
- Our country was built on compromise
Individual Freedom:
 All individuals have freedom. However, no
individual enjoys complete freedom.
Bell Work:
 In which form of government are all political powers held at
the central level?
 Explain how power is shared in a federal government.
What is Economics?
“Scarcity and Factors of
Production”
1.4
Choices and Decision Making:
 The study of economic begins with the idea that people
cannot have everything the need and want.
 Need: Anything that is necessary for survival.
(food, shelter…etc.)
 Want: Something we desire, but is not essential to our
survival.
(xbox, ipod,…etc.)
What is Economics?
 Economics: The study of how people satisfy their wants and
needs by making choices.
 People must make choices due to scarcity.
 Scarcity: limited quantities of resources, and unlimited
wants. (think of oil)
-no matter what it is, sooner or later a limit is always
reached.
-scarcity always exist because our needs and wants are always
greater than our supply.
Scarcity vs. Shortage:
 Shortages: Shortages occur when producers will not, or
cannot offer goods and services at current prices.
 Shortages can be temporary or long-term (unlike scarcity,
which always exists.)
Goods and Services:
 Many Americans find it difficult to understand the idea of
scarcity, because when they look around they see goods and
services all around them.
 Good: a physical object. (shoes, shirt)
 Service: actions or activities that one person performs for
another. (haircut, tutoring)
Factors of Production:
 These are the resources that are used to produce goods and
services.
Land- all natural resources.
Labor-Task completed by a person who is paid.
Capital- any human made resource that is used to produce
other goods and services. There are 2 different types of
capital.
 Physical capital: human made objects used to create goods
and services. (Tools)
 Human capital: Knowledge and skills a worker gains
through education and experience. (lawyer = education,
McDonald’s worker = experience or job training)
Entrepreneurs:
 Entrepreneurs: These are the people who pull resources
together in order to create goods and services.
 Ambitious leaders, usually risk takers, who decide exactly
how to combine land, labor, and capital resources to create
new goods and services.
 Develop original ideas, start businesses, and create new
industries.
 Most importantly, entrepreneurs fuel economic
growth.
Entrepreneur Assignment:
Tell me what business you are going to start, and why you
decided on starting that business.
2. Need or Want?
3. Good or Service?
4. Human and Physical Capital?
1.
Bell Work:
 If you hadn’t come to school today, what would you be doing
instead?
Opportunity Cost:
1.5
Trade-Offs:
 Every decision we make in life involves choosing one thing,




while giving up another.
Trade-offs: Trade-offs are all of the alternatives we give up
when we choose one thing over another.
You may choose to sleep late in the morning.
By doing so, your trade-offs may be:
-eating breakfast , studying for a test, reading the newspaper
All decisions involve trade-offs because resources are limited.
Who Makes Trade-Offs?:
 Individuals- more time at work, less time for hobbies.
 Businesses- must make decisions on how to use land, labor,
and capital.
 Society (Countries)- if a country invest more money in one
thing, it has less money to spend on another. (guns or butter
decision)
Opportunity Cost:
 Opportunity Cost: The most desirable thing given up in a
decision.
 Sometimes making a decision is difficult because opportunity
cost may be unclear, or complicated. (Decision Making Grid)
Decision Making Grid
Alternatives:
Sleep Late
Benefits:
Decision:
•Enjoy more sleep
•Have more energy during
the day
Sleep Late
Wake Up Early to Study
•Better grade on test.
•Teacher and parental approval.
•Personal satisfaction
Wake up early to study for test,
Opportunity Cost:
•Extra study time.
•Extra sleep time.
Benefits Lost:
•Better grade on test
•Teacher/parental approval.
•Personal satisfaction
•Enjoy more sleep.
•Have more energy during the
day
Thinking at the Margin:
 Thinking at the Margin: When you decide how much
more or less to do, you are thinking at the margin.
(Decision: study 1, 2, or 3 hours extra for a test.)
Making a Decision at the Margin:
 Making a decision at the Margin:When you look at the
opportunity cost and the benefit of a decision, you are
making a decision at the margin. (Decision: Study 1, 2, or 3
hours extra for test.)
 Opportunity Cost: Less time to spend with friends.
 Benefit: Passing the test
Production Possibilities Graph:
 Economist often use graphs to analyze the choices and trade-
offs that people make
 Why? Because graphs help us see how one value relates to
another.
 Production possibility graph: Shows the alternative
ways to use an economy’s resources
30_
- Currently
Unachievable
20_
15_
- Underutilization
10_
30_
25_
Shoes
20_
15_
10_
5_
5_
Shirts
25_
10_
5_
Shoes
30_
25_
20_
15_
Shirts
30_
25_
20_
15_
10_
5_
What the Graph Shows:
 1. Efficiency- using resources in such a way as to maximize
the production or output of goods and services.
 2. Growth-Increases in technology will cause output to
increase.
 3. Cost-The opportunity cost of producing one good over
another.
Law of Increasing Cost:
 Law of increasing cost: As production switches from one
item to another, more and more resources are necessary to
increase production of the second item.
Shoes
Shirts
0
8
14
15
14
12
18
9
20
21
5
0
1
2
3
4
5
Bell Work:
 1. What does the “Guns and Butter Decision” refer to ?
 2. What is the difference between trade-offs and opportunity
cost?
 3. What is scarcity?
Types of Economic Systems:
1.6
Economic Systems:
 Different economic systems have evolved in response to the
problem of scarcity.
 Economic system: A method used by a society to produce
and distribute goods and services.
 Which economic system a society employs depends on that
society’s goals and values.
3 Basic Questions:
 When determining which type of economic system to
employ, a country must answer these three basic questions.
1. What goods and services should be produced?
2. How should these goods and services be produced?
(electricity produced by oil or water)
3.Who will consume these goods and services?
Traditional Economic System:
 Traditional economies: Relies on habit, custom, or rituals to
decide what to produce, how to produce it, and whom to
distribute it to.
 (ex: Australian bush tribes and Amish communities.)
Market Economic System:
 Market economies: economic decisions are made by
individuals and are based on exchange or trade.
(Also called free markets, or capitalism.)
 Market: voluntary exchange of goods and services between
buyers and sellers.
Command Economic System:
 Command economies: (centrally planned economy) The
central government alone decides how to answer all three
key economic questions.
 Ex: North Korea and China are considered command
economies.
Problems with Command System:
 Performance almost always falls short.
 Generally cannot meet consumer’s needs or wants.
 Since government controls all factors of production, workers
lack incentive to work hard.
 Fears change.
Mixed Economic System:
 Mixed Economies: a combination of traditional, market, and
centrally planned economies.
 Most modern economies are considered mixed economies.
Bell Work:
 In what economic system does the central government
answer the 3 basic economic questions?
 Equality of all persons only refers to what 2 things.
(1.3 graphic organizer)
1.
2.
Bell Work:
 What is economics?
Understanding Demand:
1.7
Understanding Demand:
 Demand: The desire to own something, and the ability to
pay for it.
 Law of Demand: The law of demand states that when a
goods price is lower, consumers will buy more of it. (the
opposite is also true).
$
QD
Substitution Effect:
 The law of demand is the result of 2 separate behavior
patterns.
1. Substitution effect: If the price for a good increases,
people may purchase less of that good, or find an adequate
substitute good
Real Income Effect:
2. Real income effect: If price for a good goes up, your
limited budget won’t buy as much as it used to. If price goes
down you feel richer, and will purchase more goods.
Utility:
 Utility: The power that a good or service has to satisfy a
want.
 Marginal utility: additional amount of satisfaction each
time you purchase a good.
 Law of diminishing marginal Utility: Rule that states
each additional unit of a good you purchase, the less
satisfaction you’ll receive.
Elasticity of Demand:
 There are always some goods that you will always find money
to buy, even if the price were to rise drastically.
 There are also some goods that you would cut back on or
stop buying altogether if the price were to rise just slightly.
 Economists describe the way that consumers respond to
prices changes as elasticity of demand.
Elastic vs. Inelastic Demand:
 Elastic Demand: when you buy less of a good even after a
small price increase. (ex: sporting event tickets)
 inelastic Demand: demand for a good that you will keep
buying despite price changes. (ex: gasoline)
Demand Schedule:
 Demand Schedule: A table that lists the quantity of a good
that people will purchase at each price in the market.
Law of Demand
Price Per Slice of Pizza:
{
Quantity Demanded:
$5.00
10
$4.00
20
$3.00
30
$2.00
40
$1.00
50
Demand Curve:
 Demand Curve: is a graphic representation of a demand
schedule
 Shows the relationship between the price of a certain good,
and the quantity a person will purchase.
 Demand curve slopes downward, showing that as price
decreases, quantity consumed increases.
Demand Curve:
432-
Quantity Demanded
50-
40-
30-
20-
1-
10-
$ Per Slice of Pizza
5-
Shifts in the Demand Curve:
Population
Income
Preference Change
Availability of Substitutes
4-
Complimentary Goods
32-
Quantity Demanded
50-
40-
30-
20-
1-
10-
$ per slice of pizza
5-
Bell Work: 9/18
Explain the difference between
elastic and inelastic demand.
What does the law of demand state?
Bell Work:
 List the 5 things that cause the demand
curve to shift.
 What does a shift to the right show? Left?
Understanding Supply
1.8
Law of Supply:
 Supply: Amount of a good or service that
businesses are willing and able to sell at various
prices.
 Law of Supply: As the price for a good
increases, the quantity supplied also increases.
$
QS
Profit Incentive:
 The reason a company will produce more when
prices are high, is the hope of greater profits.
Supply Schedule:
 Supply Schedule: Shows the relationship
between price and the quantity supplied for a
specific good. (similar to demand schedule)
Price Per Slice of Pizza:
Quantity Supplied:
$1.00
10
$2.00
20
$3.00
30
$4.00
40
$5.00
50
5432-
Quantity Supplied
50-
40-
30-
20-
1-
10-
$ Per Slice of Pizza
Supply Curve:
Shifts of the Supply Curve:
 4 things that cause the supply curve to shift:
- Cost of inputs (materials to make goods)
- Number of firms (competition faced)
- Taxes (may increase, or decreased production)
-Technology (technology can speed up
production)
* Remember: shifts to the right show an increase
in supply, to left shows a decrease in supply.
Law of Diminishing Returns:
Law of diminishing returns: level of
production decreases as more workers are hired.
 Why does this happen??
-Workers are working with limited capital.
-(Ex: there are only so many machines in a
factory.)
Bell Work: 9-20-12
 Explain the law of supply.
 What are the 4 things that can cause the
supply curve to shift?
 Explain the law of diminishing returns.
Combining Supply and Demand:
1.9
Equilibrium Price:
 Equilibrium price: the point at which demand and supply
come together.
 It is at this point, where there is balance between price and
quantity demanded/ supplied
 This is where businesses want to be.
S
543-
-- Equilibrium price
21-
Quantity Demand
50-
40-
30-
20-
D
10-
$ Per Slice of Pizza
Graphing Supply and Demand:
Disequilibrium:
 Disequilibrium: If the market price or quantity demanded
is anywhere except the equilibrium, the market is in a state
of disequilibrium.
 Disequilibrium can produce 1 of 2 outcomes.
1.Excess demand- quantity demanded is greater than
quantity supplied. (when price is below equilibrium)
2.Excess supply- quantity supplied is greater than quantity
demanded. (when price is above the equilibrium point)
Increase in Demand
5-
S
4-
- New Equilibrium
3-
-E
21-
50-
40-
30-
20-
D
10-
$ Per Slice of Pizza
Shifts in Equilibrium Price:
Quantity Demanded
S
543-
-E
2-
-New
Equilibrium
1-
50-
40-
30-
20-
D
10-
$ Per Slice of Pizza
Increase in Supply
Quantity Demanded
Government
Intervention:
-Sometimes, the government must step in to control prices.
1. Price Ceiling- maximum price that can be legally charged for a
good. (ex: rent Control)
2. Price Floor-Minimum price for a good or service.
(ex: minimum wage)
3. Rationing- Limiting items that are in short supply. (can lead to a
black market)
Role of Prices:
 Price as an Incentive:
-High prices signal to firms that they can earn more profits by
supplying more goods.
-High prices will also attract new firms to enter the market.
Role of Prices:
 Price as a signal:
Think of prices as a traffic light…
-High prices=green light that tells firms to produce more
goods.
-Low prices=red light that tells firms that a good is being over
produced.
Role of Prices:
 Flexibility:
-Prices adjust to solve problems such as excess demand, and
excess supply.
-Supply Shock- sudden shortage of a good, which causes excess
demand.
(ex:) Wheat is experiencing a supply shock. Since it would
take a long time to plant, grow, and harvest wheat, what
would be the quickest way to decrease the demand for
wheat?
Bell Work:
 What is movement along the demand curve caused by?
Bell Work:
You have about 15 minutes to:
1. Finish your study guide.
2. If finished, organize your binder.
3. Study for the review game!