Economics Unit 1 VOCAB Types of Economies

Goods – things that are tangible; are things that can be bought & owned. Services – work or other things that are done for consumers; people pay for services to be done

Wants – those things that consumers desire to have but don’t necessarily need Needs – those items that consumers must have; necessities

SCARCITY Is the inability to satisfy all wants at the same time. Faces all individuals and organizations. All resources & goods are limited. We have unlimited wants but limited resources. The goods and services we want exceed our ability to produce them. Forces consumers, producers and governments to make decisions This requires that choices be made.

RESOURCES Resources are things that are used in the production of goods & services. Type Natural Capital Human Entrepreneurship Defined Resource from nature needed to produce Includes all goods and machines to produce All people who help produce or distribute The people who run or manage the business Ex’s Lumber, Water, Iron ore Factories, Machines Delivery cars Factory workers, Delivery men Manager, Designer, Developer, Owner

CHOICE Choice is selection of an item or action from a set of possible alternatives. Individuals must choose or make decisions about desired goods & services because goods & services are limited. EX: You have only $20 & you want to buy a CD & a DVD that are both $18. Which do you choose?

OPPORTUNITY COST Opportunity cost is what is given up when a choice is made — i.e., people must consider the value of what is given up when making a choice. ****Think of opportunity cost as opportunity lost

OPPORTUNITY COST EX: You chose to buy an $18 CD over an $18 DVD. The opportunity cost of your choice is the ______. EX: You can play video games or shovel your neighbor’s driveway for $20. You choose to stay home & play games. The opportunity cost of your choice is _______. EX: You watch the Olympics or study for your test in order tom make honor roll. You choose to make the honor roll. The opportunity cost of your choice is to ____________

PRODUCTION VS. CONSUMPTION Production is the use of resources to make goods or provide services. Resources available & consumer preferences determine what is produced. ---------------------- Consumption is the using of good and services. Consumer preferences & price determine what is purchased & consumed.

PRODUCTION VS. CONSUMPTION EX: When consumers wanted big SUV’s, producers made big SUV’s (2000-2004). EX: When gas went up, people wanted smaller SUV’s, so producers made smaller SUV’s (2005+)

You do not need to use everything. Create a product You can ONLY use what is in your bag. You do not need to use everything.

Was there scarcity in this activity? Was every group even? How would have being given the chance to trade with another group helped you? Was there scarcity in this activity? When you first looked at your materials, was it obvious what your product would be?

Orange Juice has become the most popular drink. Milk Same Down Down Scenario ITEM AFFECTED (Egg, Milk or Meat) SUPPLY (up or down) DEMAND PRICE RESOURCES (less, more, same) SCARCITY (yes or no) Orange Juice has become the most popular drink. Milk  Same   Down Down             Same No Chickens laid 2x more eggs this year, people are still only buying them at the average rate Eggs up same down more no Customers can get cash prizes by turning in caps to gallon milk jugs.         milk Yes* The number of vegetarians has increased. meat A massive storm has destroyed thousands of acres affecting dairyfarmers. milk and meat less yes Scientists have created an egg without cholesterol Egg Mad-Cow Disease has hit all cows!! Milk and meat Up* Florida hosted a contest to see who could make the largest hamburger patty! Meat

What are the basic characteristics of the different world economies What are the basic characteristics of the different world economies? What are the basic economic questions all societies must answer?

The basic questions of economics: What will be produced? How will it be produced? Who will produce it? For whom will it be produced?

How do countries set up their economies? The key factor in determining a country’s economy is how much the government is involved. Economic systems are set up around a country’s limited productive resources USA – Crops, coal, technology services; Iran – Oil; China – Manufacturing, rice, people power; Brazil – Wood.

How do countries set up their economies? Each type of economy answers the basic questions differently based on its resources and abilities. No country relies exclusively on its own resources to deal with scarcity. Countries must trade to get what they need.

Characteristics of TRADITIONAL economy Traditional economy – An old-fashioned form of economy found in historical societies. Economic decisions are based on custom & historical precedent. People often perform the same type of work as their parents & grandparents, regardless of ability. What’s produced is only what was needed to survive; not for profit.

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Characteristics of : FREE MARKET ECONOMY Not seen because all governments are involved in their country’s economy. Minimal government involvement – the market determines who sinks or floats. Private ownership of property / resources – people own all resources; not government controlled. Profit motive – making money drives all decisions of business / people.

FREE MARKET Continued Competition – the struggle between consumers and producers to get the best products at the lowest price. Consumer sovereignty – the consumers decide what will be sold in the market place. Producers will only supply what the consumers demand. Individual choice – consumers choose what / from whom they buy based on the best deal. Associated with true capitalism.

Characteristics of : COMMAND Economy Command economy – Countries with strong government control (former Soviet Union, China). Central ownership (usually by government) of property / resources. Centrally-planned economy – what’s produced, who produces it, and what can be bought is controlled. Lack of consumer choice - government chooses what / from whom the consumer buys. Often associated with Communism / Socialism / Dictatorships

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Characteristics of MIXED ECONOMY 4. Mixed economy – Blends government control and free market. Individuals & Businesses - are owners & decision makers for the private sector. Limited government control – gov’t makes decisions for the public sector. Government’s role is greater than a free market economy & less than in a command economy. Most democratic countries today, including the United States, are mixed economies.

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*Summary: The type of economy is determined by the country’s government, and the extent of government involvement in economic decision making True Democracy /Capitalism = Total Private Control = Free Market Democracy / Republic / = Limited Government Control = Mixed Communism/Socialism/Dictatorship = Total Government Control = Command  

Jewelry Simulation Day

Make as much as we want ville Your country and economic system reflects values which center around rugged individualism. It is up to each person to make herself/himself more prosperous than other people. Your country produces whatever brings the highest price and produces it with the method that costs the least. Individual rewards and material incentives are used to encourage and stimulate continuous economic growth and production. Goals: To produce whatever your group decides will be most beneficial for it. You will also want to organize yourselves so you can make the most efficient use of time and resources. Maximized profit is the key.

Production Process: It is up to you to organize your group and choose jobs in whatever fashion you want. A ring must be made from a 6 inch piece of string with 4 beads. A bracelet must be made from a 12 inch piece of string with 8 beads. A necklace is made with a 20 inch piece of string and 10 beads.

We do what we are told ville You've accepted a government which is run by a very strict and strong central leadership group. You're highly organized and the people of your group are assigned specific tasks by the leader. Your country strives for efficient use of time and resources, which will increase economic growth and hopefully raise the standard of living. It is up to the central leaders to determine what is needed and how the resources will be used. Goals: To produce what the central leadership finds necessary for your society. Also, there must be an efficient use of time and resources so increased production and growth will occur. Situation: Your country needs 5 bracelets immediately, and then the central planners want necklaces to be produced by your group.

Production Process: The central planners emphasize specialization Production Process: The central planners emphasize specialization. The person sitting closest to the front of the room will be the string cutter, then going clockwise around the group, the next person will be the bead sorter, then the bead stringer, knot tier/knot trimmer. A bracelet must be made from a 12 inch piece of string with 8 beads on it, in this sequence: 2 red, 2 yellow, 2 blue, and 2 green. A necklace is made with a 20 inch piece of string and 10 beads in this sequence: 3 yellow, 3 blue, 2 green, and 2 red.

That’s the Way We’ve Always Done it Ville Your group is really concerned with the way things were done in the past. Position of authority, jobs, etc. are handed down according to tradition. You value the past and see no need for concern about increased economic growth in the future. Basically everything in your society is determined by beliefs and customs. Goals: To produce what your ancestors did and in the same way that they did. Following tradition is your basic underlying goal. Situation: Your country has always produced bracelets so everyone must produce bracelets.

Production Procedure: Each person must make the entire bracelet, no specialization of tasks. The person designated by the teacher will use the string, ruler, and scissors first and then pass it clockwise around the table. Each bracelet must be made with a 12 inch piece of string with 8 beads on it in this sequence: 3 red, 2 yellow, and 3 green. After each bracelet is finished it must be passed around the group clockwise and each member must tell the maker how beautiful it is. According to tradition each person can only make 1 bracelet every 5 minutes before starting the second one. So after you complete your first one, relax for 5 minutes before starting the second one.

What are the essential characteristics of the United States economy? 1. Mixed Market – Markets are generally allowed to operate with limited interference from the government (in the public sector). Prices are determined by supply & demand of producers & consumers.

What are the essential characteristics of the United States economy? 2. Private Property – Individuals and businesses have the right to own personal property as well as the means of production without undue interference from the government

What are the essential characteristics of the United States economy? 3. Profit – Profit consists of private earnings after all expenses have been paid, and drives all decisions.

What are the essential characteristics of the United States economy? 4. Competition – Rivalry between producers/sellers of a good or service results in better quality goods and services at a lower price.

What are the essential characteristics of the United States economy? 5. Consumer Sovereignty – Consumers determine what goods and services will be produced through purchases. Producers will only supply what the consumers demand.