Agenda  Go over last night’s HW  Market Economy Notes Homework  Tomorrow we will start our project for this 6 weeks.  Identify 2 complimentary goods.  Identify 2 substitute goods.  Two trade-offs and identify the opportunity cost of each. WEDNESDAY MARCH 25, 2015

CIVICS AND ECONOMICS DAY 127

TraditionalCommandMixedMarket Large Businesse s Small Business G= Government I = Individuals B= BothV=Village.

TraditionalCommandMixedMarket Large Business es GBI Small Business VGII G= Government I = Individuals B= BothV=Village.

SPECTRUM Government Control Free Economy Put in Order from most Government control to least (Market, Mixed, Command)

SPECTRUM Government Control Free Economy Put in Order from most Government control to least (Market, Mixed, Command) Command Mixed Market

MARKET ECONOMY NOTES

 Three things control everything in the market:  Profit  Competition  Price MARKET ECONOMY

 The amount of money you make from selling a good or service  The desire to make money is called profit motive! PROFIT

 Competition acts as a regulator  That means that it controls the price and quality of an item!  Gas Station 1  Gas Station 2 ROLE OF COMPETITION

 Price helps you make decisions!  Bow Tie 1=$20  Bow Tie 2 =$38 ROLE OF PRICE

WHAT AFFECTS PRICE?: SUPPLY AND DEMAND

 Definition: Willingness of consumers to buy goods and services.  Law of Demand consumers are more willing to buy more goods at lower prices than at higher prices. DEMAND

Your Tastes Income Complimentary Goods Substitute Goods WHAT AFFECTS DEMAND?

Supplementary/Complimentary Goods Substitute COMPLIMENTARY V. SUPPLEMENTARY GOODS

WHAT IS ANOTHER EXAMPLE OF EACH?

 Supply- a business’ willingness to sell products  Law of supply- businesses will supply more goods at higher prices than they will at lower prices. SUPPLY

 Cost of production  Changes in taxes and government policy  Technology WHAT AFFECTS SUPPLY?

 Fixed Costs- the same no matter how many units of a good are made. (Rent)  Variable Costs- costs that change with the number of products produced (Electricity)  Total Costs- = Fixed + Variable. COSTS

Surplus  When a business makes too much of a product Shortage Insufficient amount of materials SURPLUS V. SHORTAGE

 Marginal benefit- additional or extra benefit associated with an action  Marginal Costs- extra or additional costs of producing one more unit  Example:  Happiness from Eating Krispy Kreme Donuts. Each donut makes you fuller and sicker  Example:  Buying a factory to make one pair of shoes is expensive. It is less expensive with each pair made. MARGINAL BENEFIT

 Trade-off- choosing one thing for another  Opportunity Cost- the value of the thing you gave up when making a trade-off HOW DO WE MAKE THESE CHOICES?

 Identify 2 complimentary goods.  Identify 2 substitute goods.  Two trade-offs and identify the opportunity cost of each. HOMEWORK