October 3, 2016 Agenda • Test Scores • Econ Vocab (2) Warm-up • What is a natural resource? Homework: review today’s material

raw material from nature that is used to produce things Natural Resources raw material from nature that is used to produce things

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economics the study of how people or countries manage (choose to use) their limited resources by producing, exchanging, and using goods and services

When we study Economics we answer: 1.What to produce? 2.How to produce it? 3.For whom to produce it?

Types of Resources •Human Capital(Human Resources) –Labor that is done by people in order to produce products •Capital Goods(Capital Resources) –the machines, tools, factories, land, and technology that are needed to make other products •Natural Resources –raw material from nature that is used to produce things

What resources were used to make this?

What resources were used to make this?

What resources were used to make this?

Resources used to make burger Natural Human Capital

What resources were used to make this?

Resources used to make iPhone Human Capital Natural

specialization when a country focuses on creating a few specific products

Define it When a country focuses resources on creating fewer specific products and services than they consume. Make one thing well and trade for everything else. Draw a picture Benefits •Greater variety of products with trade •Produce more in less time •Better quality •More free time for workers Drawbacks Dependent on others for important items SPECIALIZATION

2 societies REMRAF SLATEM resources resources •farmland •metals / iron •variety of crops •spices •fruit •cotton •weavers •farmers •wood •metals / iron •livestock / animals •gold •hunters •tool makers 1.Each society is missing key resources needed for survival. 2.Trade becomes essential for survival and prosperity.

trade voluntary exchange of products and services

Remember: Trade is good! •Countries that have do a lot of trade become more wealthy. •Countries that don’t trade much remain poor. •Stopping or restricting trade is almost always bad.

Sometimes a government may choose to stop or limit trade Sometimes a government may choose to stop or limit trade. When they do this, its called a trade barrier. It’s like building a wall to stop trade. trade barriers governmental policies that restrict the entry of products into a country

types of trade barriers tariff–tax on imports quota–limiting the amount of products that can come into a country Tariffs and quotas are usually used to help out a company inside the country by making foreign goods more expensive or harder to buy. This is good for those companies, but usually bad for consumers, who are forced to pay more. embargo–cutting off trade to a certain country because of political reasons

Trade Barriers Type of Barrier Definition Barrier in Action Why it matters Illustration TARIFF A tax on imports The United States adds a 30% tax on all steel entering the country. This helps protect U.S. steel companies from foreign competition. They also raise the price of imported goods, encouraging people to buy items made in their own country. (getting nailed with a tax) QUOTA A limit on the number of products that can come into a country. In the 1980s, the U.S. allowed only a certain number of Japanese cars into the country. Quotas help to encourage the people of a country to buy products made in their country and not foreign goods. (used to measure how many products to let into the country) EMBARGO Cutting off trade to a certain country because of political reasons. Because of Saddam Hussein’s actions in 1990, the United States put an embargo on Iraqi products. Embargoes hurt the exporting country because we don’t buy their products. It also makes a political statement. (cutting off trade)

4 economic systems Traditional economy- economic system in which social roles and culture decide what will be produced, how it will be produced and how it will be distributed Command economy–economic system in which the government decides what will be produced, how it will be produced and how it will be distributed Market economy–economic system in which the people decides what will be produced, how it will be produced and how it will be distributed

Mixed economy-economic system in which the government and people share the role in deciding what will be produced, how it will be produced and how it will be distributed (combination of market and command)

•Currency–money •Exchange rate–the rate at which one unit of the currency of a country can be traded for a unit of the currency of another country •GDP–Gross domestic product; the amount of products and services produced in one country in one year

•Trade–voluntary exchange of products and services •Import–a product brought into a country through trade or sale •Export–a product leaving a country through trade or sale •Entrepreneurship–bringing together natural, capital, and human resources together and take risks to develop businesses