ECONOMICS Unit 2 The way a country manages its money and resources to produce, buy, and sell goods and services

Command Economy Definition: prices are controlled by the government The government controls the supply of a product (how much is made and how much it costs) Ex: the Soviet Union and Communist countries BRAINSTORM: why might command economies fail?

Market Economy Definition: prices and goods are controlled by the Supply and Demand Companies decide how much of a product (iphone) to make based on how many people want it (aka demand) Companies also set the prices for the products they produce Ex: many countries work toward this economy BRAINSTORM: why might a market economy be a good thing?

Mixed Economy Definition: both the government and companies work together They decide prices They both decide what products to produce based on demand Example: The United States, Great Britain, etc. Brainstorm: Is this economic system always successful?

The Law of Supply and Demand Definition: the understanding that the supply of an item effects the demand. - If the supply is LARGE then the demand will be small. - If the supply is small then the demand will be LARGE

Examples: 1. Air Jordan’s are being sold for 100 dollars for a pair of shoes. They are very popular and the store is always selling out. - Supply: up or down? Demand up or down? What should the producer do to the price? Raise or lower 2. The Iphone 5 is replaced by a newer, better version, the Iphone 5BILLION. Apple suddenly can’t sell any Iphone 5’s. Supply is: up or down? Demand is: up or down? What should Apple do to the price to sell more?

3. Write your own example showing supply and demand. -Solve your example

https://americanheritage. byu https://americanheritage.byu.edu/pages/gamesandactivities/supply-and-demand-interactive-chart.aspx http://www.youtube.com/watch?v=Ng3XHPdexNM

Circular Flow Notes Households: Businesses: (producers) Governments: Provide businesses with labor and pay for goods and services Provide government with labor and taxes Businesses: (producers) Pay households income and with goods and services Pay governments taxes and goods and services Governments: gives businesses payment for goods and services provides households with income and goods and services

Types of taxation Progressive Tax: people who make more money are taxed more Regressive Tax: people who make less are taxed more Proportional Tax: people pay the same no matter how much they make http://apps.irs.gov/app/understandingTaxes/teacher/downloads.jsp