BASIC ECONOMICS Arctic Survival – (Round 1) Economics = Decision Making Economic Systems US Economic System Adam Smith Circular Flow Model

ARCTIC SURVIVAL (BASIC ECONOMICS) Arctic Survival (Day 1) What problems did you encounter in Round 1? A lack of tools & time Could not satisfy the needs for survival An abundance of needs & wants and a limited means to satisfy them. (scarcity) What did you need in order to survive? Paper, pencils, rulers, etc… (economic resources) Types of Resources – Factors of Production natural/land, human/labor, capital, entrepreneurship Organized system of production was needed (economic system) The study of how people use their scarce resources to satisfy their wants and needs (economics)

ARCTIC SURVIVAL (BASIC ECONOMICS) Arctic Survival (Day 2) What basic problem did you try to solve in Round 2? How to produce food, clothing, & shelter with limited resources 3 Basic Economic Questions 1. What to produce? 2. How to produce? 3. For Whom to produce it? How did you organize in Round 2 to increase production? A worker, or group of workers, concentrates on one task to increase productivity (division of labor) The ability to produce a greater quantity of goods in better and faster ways (productivity) The relationship among people that makes the actions of one necessary for the well-being of others (interdependence) How did you decide what groups to form and what work individuals would do? Who took control?

Economics = Decision Making Why study economics? Helps analyze the impact of decisions and strengthen decision making. How does scarcity impact an individual? Forces individuals to make decisions. Raises awareness of the need to conserve. Trade-Off – deciding to do one thing instead of another. ex… government – decides to spend more on education, must cut money from another program, or increase taxes. Opportunity Cost – the sacrifice that is made, or what you give up to do or have something else. ex… government – in above decision, the opportunity cost is the money which must be taken from another program, or increased taxes that must be collected from citizens.

Economic Systems How do societies decide what to produce? need – something a person must have to survive (food, clothing, shelter) want – something not necessary for survival, but desire to have. good – something that is tangible, having been produced service – something intangible, done to help Economic Systems capitalism/market economy – a system in which there is little to no government involvement. (private individuals control) command economy – a system in which the government controls the factors of production, and makes all economic decisions mixed economy – a system in which there is a combination of two or more economic systems (ex… US mixed market) traditional economy – a system in which economic decisions are based mostly on customs.

US ECONOMIC SYSTEM Goals & Characteristics Goals of the US Economy Provide jobs Efficient use of resources Continued economic growth Equal access to jobs and education Characteristics of the US Economy Private property Profit incentive Competition Freedom of choice Freedom of enterprise Limited government involvement

(supply, demand, and competition) ADAM SMITH The Wealth of Nations Wealth of Nations – written by Adam Smith, book provided a basic outline of the economic theories embedded in a market economy. (Invisible Hand) – A free market while appearing chaotic and unrestrained is actually guided to produce the right amount and variety of goods. (supply, demand, and competition) (Laissez-Faire) – the idea that the government should not interfere with the economy. The Invisible Hand will regulate the economy, government influence will decrease productivity.

CIRCULAR FLOW MODEL