Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economics Economics is the study of how wealth (anything of value) is created and distributed. Microeconomics The study of the decisions made by individuals and businesses Macroeconomics The study of the national and global economies © KK-ARTWORKS/SHUTTERSTOCK © MANGOSTOCK/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Four Economic Questions WHAT goods and services will be produced? HOW will they be produced? FOR WHOM will they be produced? WHO owns and controls the major factors of production?

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Factors of Production  Land and natural resources  Labor  Capital  Entrepreneurship WHO owns and controls the major factors of production? ***Resources used to provide goods and services ***The answer to this question will tell you what type of Political System that country has.

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Factors of Production Land Labor Capital Entre- preneurship Elements in their natural state that can be used in production Ex: minerals, water, land, forests, even air Human resources such as managers and employees Ex: employee knowledge and skills Equipment used to produce other goods Ex: money, buildings, tools, machines Ownership of a business Ex: starting a business (planning, managing, risk)

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Economic Systems  Market economy Individual an businesses determine what, how, and for whom goods and services will be produced. Price is based on the market (capitalism)  Command economy Government controls most of the factors of production and determines what, how, and for whom goods and services will be produced (socialism and communism)  Mixed economy Aspects of a market and a command economy are used to make these decisions (capitalism and socialism) ****The United States has a mixed economy****

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Political Systems  Capitalism Private citizens are free to go into business for themselves Produce whatever they choose, and distribute what they produce  Socialism Government decides what will be produced, how it will be produced, and who owns and controls the factors of production.  Communism (extreme socialism) Government owns and controls all factors of production. Plans production to meet the needs of the state. Dictates occupations, wages, and prices.

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Adam Smith’s Capitalism Laissez-faire = “let them do”

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Measuring Economic Performance  Productivity: The average level of output per worker  Gross Domestic Product (GDP): all goods and services produced within the boundaries of a country  Real Domestic Product (RDP): the total value of a nation's goods or services that have been adjusted for inflation  Consumer Price Index (CPI): monthly index that tracks the prices paid by consumers © JELICA VIDENOVIC/SHUTTERSTOCK © TRIBALIUM/SHUTTERSTOCK

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Inflation: The general increase in the price of products. Deflation: The general decrease in the price of products. Inflation/Deflation © TIBALIUM/SHUTTERSTOCK

Supply and Demand Supply  The quantity of goods and services that producers are willing and able to provide  When Supply > Demand, the Price goes DOWN Demand  The willingness and ability of consumers to buy goods and services  When Demand > Supply, the Price goes UP Slide 10

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. The Business Cycle 1 11 Peak Recession Trough Recovery Time Output (GDP)

When economy is…..Growing/Recovery..  People buy goods and services  Jobs are created  Businesses are hiring..Slowing/Recession..  People buy fewer goods and services  Fewer people are hired; there are layoffs  Businesses are not growing Slide 12

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. National Debt National DEBT as of Oct 2013 $16,738,158,460,000 The National Debt is the total amount the federal government owes.

Copyright ©2015 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. Competition Perfect Competition  Many buyers and sellers offering the same product (ex: corn, wheat, peanuts) Monopolistic Competition  Many sellers offering similar but not identical products  Gain a competitive edge through product differentiation – unique features, attention-getting brand name, unique packaging, special services (ex: clothing, shoes) Oligopoly Competition  A few large sellers (ex: automobiles, cereals) Monopoly  One seller that sets its price based on demand (ex: public utilities)