You Can’t Always Get What You Want But You Can Get What You Need

Production is knowing – What - How - For Who -

Factors of Production- Land- fixed Capital- items used in service Financial Capital- money Labor- skill Entrepreneurs- risk takers

To have Value- an object must be Scarce and Wanted But what gives an object its wealth?

Wealth- accumulation of products that are: Tangible Scarce Useful Transferable

Adam Smith Wealth of Nations Single job skill = production

“Nation’s wealth is defined by the sum of its labor-produced goods, not by who owned those goods.” “A true-free competitive market-operating with a minimum of government intervention would bring about the greatest good for society.” “Laissez-faire”- government’s role

Supply- volume for sale Law of Supply- more is offered at a higher price and less at a lower price When sales slow, maximum price reached

Demand- desire, ability and willingness to buy a product Law of Demand- quantity sets the price

When demand drops, price drops and less is produced

Pricing Theory- similar goods for similar price Competition keeps prices down Buyer competition keeps prices steady

Similar products sell within a narrow range Prices get customers to forget minor differences Competition

Monopoly- one seller of a product Natural monopoly- Costs minimized “Franchise” tag

Oligopoly- dominant few

Technological monopoly- patents Invention- covered for 20 years Design- covered for less time Copyright- lifetime plus 50 years

Macroeconomics- national economics employment, G.D.P., inflation, growth, distribution of income

Unskilled labor- least amount of human capital invested Semiskilled labor- work machines with minimum training

Skilled labor- use complex equipment without supervision Professional labor- knowledge based education and managerial skills

Theory of – Wage Determination- Supply and demand for a worker’s skill

Comparable worth- equal pay for equal work Part time workers- less than 35 hrs. weekly

Minimum Wage- Texas- $6.55 Lowest legal wage Does minimum wage lower the number of people who have a job?

Minimum Wage 3% of Texas workers 1.7 million or 2.2% of U.S. workers

Tipped employees $2.13 per hour If tips plus $2.13 do not equal $6.55, employer must make up the difference

Employees under 20 May be paid $4.25 per hour for the first 90 days on the job

Stimulates consumption- more money to low-income workers Increases the average living standard Creates incentive to work Pros of minimum wage-

More people enter the job market instead of pursuing further education Wage increase passed on to customers Prices unemployable out of the market Cons of minimum wage-

Evolution of Money

Barter economy- goods for services Money- a medium of exchange Medium of exchange- something accepted by all parties

“Salarium” – Roman salt payment for military service = “Salary”-

Characteristics of Money Portable Durable Divisible Limited in supply

Development of Banks

Colonial banks issued own money Gold or silver backing 1865 – 1,600 state banks 10,000 kinds of paper currency “Greenbacks” – federal currency “Legal tender” – guaranteed

“Gold Certificates” – backed by gold “Silver Certificates” – silver backed – 1878 “Treasury Coin Notes” – 1890 – both Gold Standard- 1900, currency backed by set price gold or certificates must declare Gold Reserve Act of 1934 exchange gold certificates

Abandoning the Gold Standard 1930s cashing in for gold “Inconvertible fiat money standard”- Neither gold nor silver monetary standard

Ones – 18 months Fives- 15 months Tens- 18 months Twenties- 2 years Fifties and Hundreds – 8 years Life Span of Money

Trade union- skilled workers, same job Industrial union- all workers, same industry Right to work law- Illegal to force union membership as term of employment

Closed shop- union workers only Union shop- membership required after employment