The Basics of the Economic System

A) Division of Labor 1) Divide the production process up into specific tasks

A) Division of Labor 1) Divide the production process up into specific tasks 2) By doing this you create specialization

A) Division of Labor 1) Divide the production process up into specific tasks 2) By doing this you create specialization –a. specialization – workers concentrating on a single task, making them more efficient

A) Division of Labor 1) Divide the production process up into specific tasks 2) By doing this you create specialization –a. specialization – workers concentrating on a single task, making them more efficient 1. Tools can also be specialized

A) Division of Labor 3) The accumulation of these tools and products will lead to wealth

A) Division of Labor 3) The accumulation of these tools and products will lead to wealth –a. wealth allows for further investment –b. “it takes money to make money”

A) Division of Labor 4) Ex. The auto industry and Ford’s assembly line

II) The Basic Economic Questions A) What?

II) The Basic Economic Questions A) What? –1) What do we sell?

II) The Basic Economic Questions A) What? –1) What do we sell? B) How?

II) The Basic Economic Questions A) What? –1) What do we sell? B) How? –1) What is the most cost effective way of making the product?

II) The Basic Economic Questions A) What? –1) What do we sell? B) How? –1) What is the most cost effective way of making the product? C) For Whom?

II) The Basic Economic Questions A) What? –1) What do we sell? B) How? –1) What is the most cost effective way of making the product? C) For Whom? –1) Who will buy this product?

III) The Role of Profits in the Economy A) Profit is the reason people go into business

III) The Role of Profits in the Economy A) Profit is the reason people go into business B) Resources are scarce, the key is to use your limited resources to make the largest profit

III) The Role of Profits in the Economy A) Profit is the reason people go into business B) Resources are scarce, the key is to use your limited resources to make the largest profit –1) This goes back to the basic economic questions (what, how, for whom?)

III) The Role of Profits in the Economy A) Profit is the reason people go into business B) Resources are scarce, the key is to use your limited resources to make the largest profit –1) This goes back to the basic economic questions (what, how, for whom?) –2) What product should we produce to make the most profit?

III) The Role of Profits in the Economy C) Businesses that make a product people want, will be the ones who have the allocation of resources

III) The Role of Profits in the Economy C) Businesses that make a product people want, will be the ones who have the allocation of resources –1) allocation of resources – the problem of how to distribute scarce resources given unlimited wants

III) The Role of Profits in the Economy C) Businesses that make a product people want, will be the ones who have the allocation of resources –1) allocation of resources – the problem of how to distribute scarce resources given unlimited wants –2) If successful, a business will be able to have those scarce resources, meaning that people will pay their asking price (if unsuccessful, they will not be able to allocated those resources)

Project A) You and a partner must create a new “original” product B)You must answer each of the basic economic questions and make a list of the necessary factors of production to make your product (typed) C)You must create an advertisement, in color, for your product (basic) D) Due Monday