Bell Starter (Section 1) Key Terms  Goods  Services  Factors of production  Natural resources  Labor Key Terms  Capital  Entrepreneur  Gross Domestic Product (GDP)  Standard of living

ECONOMIC RESOURCES PRODUCTION OUTPUT OF U.S. AT BEGINNING OF 21ST CENTURY AT 10 TRILLION (30%) OF WORLD’S OUTPUT

PRODUCTION  COMES IN THE FORM OF GOODS AND SERVICES  GOOD:  BOOKS, CARS  SERVICES:  HAIRCUTS, HOME REPAIRS, CONCERTS  TO MAKE GOODS AND SERVICES YOU MUST HAVE THE FOUR FACTORS OF PRODUCTION  COMES IN THE FORM OF GOODS AND SERVICES  GOOD:  BOOKS, CARS  SERVICES:  HAIRCUTS, HOME REPAIRS, CONCERTS  TO MAKE GOODS AND SERVICES YOU MUST HAVE THE FOUR FACTORS OF PRODUCTION

FOUR FACTORS OF PRODUCTION  NATURAL RESOURCES  COMES FROM NATURE  FERTILE FIELDS, RAINFALL, FOREST, MINERAL DEPOSITS  SCHOOLS—BUILT ON/WITH NATURAL RESOUCES  HUMAN RESOURCES (LABOR)  PHSYCIAL AND MENTAL WORK  CAPITAL RESOURCES  CAPITAL GOODS:  UNIQUE BECAUSE THEY GO INTO MAKING ANOTHER PRODUCT AND ARE NOT COUNTED IN GDP  TOOLS, MACHINERY  ENTREPRENEURAL SKILLS  NEW BUSINESSES, INTRODUCE NEW PRODUCTS  NATURAL RESOURCES  COMES FROM NATURE  FERTILE FIELDS, RAINFALL, FOREST, MINERAL DEPOSITS  SCHOOLS—BUILT ON/WITH NATURAL RESOUCES  HUMAN RESOURCES (LABOR)  PHSYCIAL AND MENTAL WORK  CAPITAL RESOURCES  CAPITAL GOODS:  UNIQUE BECAUSE THEY GO INTO MAKING ANOTHER PRODUCT AND ARE NOT COUNTED IN GDP  TOOLS, MACHINERY  ENTREPRENEURAL SKILLS  NEW BUSINESSES, INTRODUCE NEW PRODUCTS

FACTORY OF PRODUCTION ACTIVITY Natural Resources Human Resources Capital GoodsEntrepreneur Gift of Nature Electricians Machinery New Model of Car

GDP  GROSS DOMESTIC PRODUCT  TOTAL DOLLAR VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED IN A COUNTRY EACH YEAR  Loaf of bread—sold to its user  Goods that’s go into making-not counted  Sales of used goods—not counted  THIS IS HOW WE DETERMINE WHERE WE ARE IN THE BUSINESS CYCLE  2 QUARTERS OF GDP GOING DOWN  2 QUARTERS OF GDP GOING UP  GROSS DOMESTIC PRODUCT  TOTAL DOLLAR VALUE OF ALL FINAL GOODS AND SERVICES PRODUCED IN A COUNTRY EACH YEAR  Loaf of bread—sold to its user  Goods that’s go into making-not counted  Sales of used goods—not counted  THIS IS HOW WE DETERMINE WHERE WE ARE IN THE BUSINESS CYCLE  2 QUARTERS OF GDP GOING DOWN  2 QUARTERS OF GDP GOING UP

CALCULATING THE GDP  NUMBER OF ALL FINAL GOODS AND SERVICES PRODUCED IN USA IN ONE YEAR  NUMBER OF EACH THAT ARE PRODUCED  LIST OF PRICES FOR EACH GOOD AND SERVICE PRODUCED  NUMBER OF ALL FINAL GOODS AND SERVICES PRODUCED IN USA IN ONE YEAR  NUMBER OF EACH THAT ARE PRODUCED  LIST OF PRICES FOR EACH GOOD AND SERVICE PRODUCED

CALCULATING THE GDP  GDP = QUANTITY X PRICE AVERAGE OF EACH ITEM THEN ADD ALL TOGETHER  5 CARS AT (5 X 25000) =  4 BOATS AT (4 X 30000) =  10 MOTORCYCYES AT 500 (10X500)=  GDP = QUANTITY X PRICE AVERAGE OF EACH ITEM THEN ADD ALL TOGETHER  5 CARS AT (5 X 25000) =  4 BOATS AT (4 X 30000) =  10 MOTORCYCYES AT 500 (10X500)=

COMPUTING GDP Final Goods And Services Quantity (in thousands) Average Price Value (in millions) Goods: Automobiles Books Computers Zippers 6,000 15,000 1,300 ________ 1,000 $28, ,700 _________ 2 $168, ,210 _________ 2 Services: Advertising (minutes of) Babysitting (hours of) Car Washes (number of) __________ Zodiac Readings (number of) 1,050,000 50,000 15,000 _________ 400 $1, _______ 10 $1,050, _________ 4 Gross Domestic Product:$10.2 trillion

Bell Starter (Section 2)  Factor Market  Product Market  Productivity  Specialization  Division of labor  Economic interdependence  Factor Market  Product Market  Productivity  Specialization  Division of labor  Economic interdependence  Workers earn wages  Factor or Product Market  Banks earn interest  Factor or Product Market  Music stores sells CDs  Factor or Product Market  Landowners receive rent  Factor or Product Market

ECONOMIC ACTIVITY & PRODUCTIVITY CIRCULAR FLOW OF THE ECONOMY IS HOW PRODUCTS FLOW FROM ONE MARKET TO ANOTHER

CIRCULAR FLOW  MARKET ALLOWS BUYERS AND SELLERS TO EXCHANGE ECONOMIC PRODUCTS  LOCAL, REGIONAL, NATIONAL, GOLBAL  MARKET ALLOWS BUYERS AND SELLERS TO EXCHANGE ECONOMIC PRODUCTS  LOCAL, REGIONAL, NATIONAL, GOLBAL

SECTOR ONE: THE CONSUMER  COSUMERS, BUSINESSES, GOVERNMENT AND FOREIGN SECTOR  EARN INCOME IN FACTOR MARKET (PLACE WHERE PRODUCTIVE RESOURCES ARE BOUGHT & SOLD  WORKERS: EARN WAGES, SALERIES, & BENEFITS  LANDOWNERS: EARN RENT  CAPITAL INVESTORS EARN INTEREST  COSUMERS, BUSINESSES, GOVERNMENT AND FOREIGN SECTOR  EARN INCOME IN FACTOR MARKET (PLACE WHERE PRODUCTIVE RESOURCES ARE BOUGHT & SOLD  WORKERS: EARN WAGES, SALERIES, & BENEFITS  LANDOWNERS: EARN RENT  CAPITAL INVESTORS EARN INTEREST

SECTOR TWO: THE BUSINESS  INDIVIDUALS RECEIVE THEIR INCOMES FROM THE FACTOR MARKET.  THEY WILL SPEND $ (INCOMES) IN THE PRODUCT MARKETS. (WHERE PRODUCERS OFFER GOODS & SERVICES FOR SALE  BUSINESS PURCHASE SOME OF ITS OWN OUTPUTS LIKE CAPITAL GOODS (COMPUTER)  INDIVIDUALS RECEIVE THEIR INCOMES FROM THE FACTOR MARKET.  THEY WILL SPEND $ (INCOMES) IN THE PRODUCT MARKETS. (WHERE PRODUCERS OFFER GOODS & SERVICES FOR SALE  BUSINESS PURCHASE SOME OF ITS OWN OUTPUTS LIKE CAPITAL GOODS (COMPUTER)

SECTOR THREE: GOVERNMENT  ALL LEVELS (LOCAL, STATE, NATIONAL) PARTICIPATE IN MARKETS.  SALES OF SERVICES ARE GOVERNMENT REVENUES BUT THEY ALWAYS NEED MORE SO THEY DO OTHER THINGS  TAXATION  PUBLIC UNIVERSITIES: TUITION  CITY BUSES: FARES  ALL LEVELS (LOCAL, STATE, NATIONAL) PARTICIPATE IN MARKETS.  SALES OF SERVICES ARE GOVERNMENT REVENUES BUT THEY ALWAYS NEED MORE SO THEY DO OTHER THINGS  TAXATION  PUBLIC UNIVERSITIES: TUITION  CITY BUSES: FARES

GOVERNMENT  GOVERNMENT PURCHASES IN PRODUCT MARKET TO BUY THINGS LIKE:  PURCHASE OF BOOKS, BUSES, SHIPS, PLANES  GOVERNMENT PURCHASES IN FACTOR MARKET TO BUY THINGS LIKE:  RECEIVES REVENUE FROM THE SERVICES SOLD  PUBLIC UNIVERSITIES CHARGE TUTION  PUBLIC HOSPITALS CHARGES FEES  GOVERNMENT PURCHASES IN PRODUCT MARKET TO BUY THINGS LIKE:  PURCHASE OF BOOKS, BUSES, SHIPS, PLANES  GOVERNMENT PURCHASES IN FACTOR MARKET TO BUY THINGS LIKE:  RECEIVES REVENUE FROM THE SERVICES SOLD  PUBLIC UNIVERSITIES CHARGE TUTION  PUBLIC HOSPITALS CHARGES FEES

SECTOR FOUR: FOREIGN SECTOR  ALL OTHER COUNTRIES IN THIS WORLD  LINE WITH ARROW AT BOTH ENDS B/C WE SELL AND BUY PRODUCTS FROM OTHER COUNTRIES. OFFSETS EACH OTHER  ALL OTHER COUNTRIES IN THIS WORLD  LINE WITH ARROW AT BOTH ENDS B/C WE SELL AND BUY PRODUCTS FROM OTHER COUNTRIES. OFFSETS EACH OTHER

PRODUCTIVITY & ECONOMIC GROWTH  PRODUCTIVITY  MEASURE OF THE AMOUNT OF OUTPUT PRODUCED BY A GIVEN AMOUNT OF INPUTS IN A SPECIFIC PERIOD OF TIME  LABOR TERMS: BUT APPLIES TO ALL FACTORS OF PRODUCTION  HELPS TO SPECIALIZE: WHICH LEAD TO FOREIGN TRADE  PRODUCTIVITY  MEASURE OF THE AMOUNT OF OUTPUT PRODUCED BY A GIVEN AMOUNT OF INPUTS IN A SPECIFIC PERIOD OF TIME  LABOR TERMS: BUT APPLIES TO ALL FACTORS OF PRODUCTION  HELPS TO SPECIALIZE: WHICH LEAD TO FOREIGN TRADE

WHY NATIONS TRADE?  1. SPECIALIZATION  GOODS AND SERVICES YOU CAN PRODUCE BETTER THAN ANYONE ELSE  2. COMPARATIVE ADVANTAGES  HIGHER WAGES, BETTER JOBS  3. TRADE CREATES JOBS AND MARKETS  DIVISION OF LABOR  4. ECONOMIC INTERDEPENDENCE  WE RELY ON EACH OTHER FOR GOODS AND SERVICE  1. SPECIALIZATION  GOODS AND SERVICES YOU CAN PRODUCE BETTER THAN ANYONE ELSE  2. COMPARATIVE ADVANTAGES  HIGHER WAGES, BETTER JOBS  3. TRADE CREATES JOBS AND MARKETS  DIVISION OF LABOR  4. ECONOMIC INTERDEPENDENCE  WE RELY ON EACH OTHER FOR GOODS AND SERVICE

BELL STARTER (Section 3)  CAPITALISM  FREE ENTERPRISE  COMSUMER SOVEREIGNTY  PRIVATE PROPERTY RIGHTS  COMPETITION  PROFIT  PROFIT MOTIVE  VOLUNTARY EXCHANGE  CAPITALISM  FREE ENTERPRISE  COMSUMER SOVEREIGNTY  PRIVATE PROPERTY RIGHTS  COMPETITION  PROFIT  PROFIT MOTIVE  VOLUNTARY EXCHANGE

CAPITALISM & FREE ENTERPRISE MARKET ECONOMY MARKET ECONOMY

CAPITALISM  ECONOMIC SYSTEM IN WHICH PRIVATE CITIZENS OWN AND USE FACTORS OF PRODUCTION FOR THEIR OWN PROFIT

FREE ENTERPRISE  COMPETITION IS ALLOWED TO FLOURISH WITH A MINIMUM OF GOVERNMENT INTERFERENCE

FEATURES OF CAPITALISM  MARKET  IMPORTANT PART OF OUR ECONOMIC SYSTEM  LOCAL, STATE, NATIONAL, GLOBAL  CONNECT CONSUMERS & BUSINESS IN FACTOR & PRODUCT  CONSUMER MOST IMPORTANT  CONSUMER SOVEREIGNTY  Consumers as king or ruler of the market  MARKET  IMPORTANT PART OF OUR ECONOMIC SYSTEM  LOCAL, STATE, NATIONAL, GLOBAL  CONNECT CONSUMERS & BUSINESS IN FACTOR & PRODUCT  CONSUMER MOST IMPORTANT  CONSUMER SOVEREIGNTY  Consumers as king or ruler of the market

FEATURES OF CAPITALISM  ECONOMIC FREEDOM  CHOOSE TYPE OF JOB  CHOOSE WHEN & WHERE WE WANT TO WORK AND FOR HOW MUCH  CHOOSE PRODUCTS WE BUY  BUSINESS CHOOSE THE PRODUCTS THEY PRODUCE OR SALE  ECONOMIC FREEDOM  CHOOSE TYPE OF JOB  CHOOSE WHEN & WHERE WE WANT TO WORK AND FOR HOW MUCH  CHOOSE PRODUCTS WE BUY  BUSINESS CHOOSE THE PRODUCTS THEY PRODUCE OR SALE

FEATURES OF CAPITALISM  PRIVATE PROPERTY RIGHTS  TAKE BETTER CARE OF ITEMS YOU OWN AS OPPOSE TO RENTING  FREEDOM TO DISPOSE OF IT  INCENTIVE TO WORK, SAVE, AND INVEST  PRIVATE PROPERTY RIGHTS  TAKE BETTER CARE OF ITEMS YOU OWN AS OPPOSE TO RENTING  FREEDOM TO DISPOSE OF IT  INCENTIVE TO WORK, SAVE, AND INVEST

FEATURES OF CAPITALISM  COMPETITION  CAPITALISM THRIVES ON THIS  INVISABLE HAND (ADAM SMITH) DRIVES PRICES DOWN  REWARDS MOST EFFICIENT PRODUCERS & FORCES OTHERS OUT OF BUSINESS  COMPETITION  CAPITALISM THRIVES ON THIS  INVISABLE HAND (ADAM SMITH) DRIVES PRICES DOWN  REWARDS MOST EFFICIENT PRODUCERS & FORCES OTHERS OUT OF BUSINESS

FEATURES OF CAPITALISM  THE PROFIT MOTIVE  FREE TO RISK EVERYTHING IN BUSINESS VENTURE  GOES WELL-PROFIT  GOES BADLY - BANKRUPT (REPO)  PROFIT: AMOUNT LEFT OVER AFTER ALL COST OF PRODUCTION HAVE BEEN PAID  THE PROFIT MOTIVE  FREE TO RISK EVERYTHING IN BUSINESS VENTURE  GOES WELL-PROFIT  GOES BADLY - BANKRUPT (REPO)  PROFIT: AMOUNT LEFT OVER AFTER ALL COST OF PRODUCTION HAVE BEEN PAID

FEATURES OF CAPITALISM  VOLUNTARY EXCHANGE  YOU AND THE SELLER-GIVE AND TAKE  BOTH PARTIES FEEL THAT THEY WILL BENEFIT  VOLUNTARY EXCHANGE  YOU AND THE SELLER-GIVE AND TAKE  BOTH PARTIES FEEL THAT THEY WILL BENEFIT

SPREAD OF CAPITALISM  NO ONE PERSON INVENTED  SPECIALIZATION  COMPARATIVE ADVANTAGE  NO ONE PERSON INVENTED  SPECIALIZATION  COMPARATIVE ADVANTAGE

ADAM SMITH  WEALTH OF NATIONS 1776  LAISSAZ-FAIRE ECONOMICS  HANDS OFF - NO GOVERMENT REGULATIONS OR INTERFERANCE  INDIVIDUALS SEEKING TO MAKE A PROFIT BENEFIT ALL OF SOCIETY  INVISABLE HAND  COMPETITION  WEALTH OF NATIONS 1776  LAISSAZ-FAIRE ECONOMICS  HANDS OFF - NO GOVERMENT REGULATIONS OR INTERFERANCE  INDIVIDUALS SEEKING TO MAKE A PROFIT BENEFIT ALL OF SOCIETY  INVISABLE HAND  COMPETITION