Unit 2: Economics

What is Economics? “A science that deals with the allocation, or use, of scarce resources for the purpose of fulfilling society’s needs and wants.” – Addison-Wesley

Economics: Social Science concerned with the way society chooses to employ its limited resources which have alternative uses to produce goods and services for present and future consumption

So then the big two concepts are that: Resources are scarce! What is Economics? So then the big two concepts are that: Resources are scarce! Society has unlimited needs and wants! Economics decides the “best” way of providing one to the other

Vocabulary: Capitalism Supply/Demand Centrally Planned Push/Pull Scarcity Business Cycle Recession Natural Resources Free Enterprise Depression Distribution Federal Budget

Supply/Demand as demand increases the price goes up, which attracts new suppliers who increase the supply bringing the price back to normal. as supply increases, the price will go down because demand will decrease

Push/Pull: When people migrate, they don't just leave one place and magically arrive somewhere else. Usually something pushes them away from their native country and pulls them toward a new place. This idea is called the push-pull factor.

Business Cycle: A business cycle is basically defined in terms of periods of expansion or recession. During expansions, the economy is growing in real terms as evidenced by increases in indicators like employment, industrial production, sales and personal incomes. Recession - a period of temporary economic decline during which trade and industrial activity are reduced

Depression: a long and severe recession in an economy or market. The Great Depression – 1929 – 1941

Federal Budget: the ​amount of ​money that is ​available for a ​federal ​government to ​spend in a particular ​year Deficit – we owe money Surplus – we have extra money

Capitalism: an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

Centrally Planned Economy: An economic system in which economic decisions are made by the state or government rather than by the interaction between consumers and businesses. The state can set prices for goods and determine how much is produced, and can focus labor and resources on industries and projects without having to wait for private investment capital.

Free Enterprise: an economic system in which private business operates in competition and largely free of state control.

What type of economy do we have? United States – What type of economy do we have?

We have a mixed economy… public schools and colleges tobacco regulation alcohol regulation farm subsidies meat inspection pharmaceutical regulations health insurance laws car insurance

Scarcity the fundamental economic problem of having seemingly unlimited human wants in a world of limited resources. It states that society has insufficient productive resources to fulfill all human wants and needs.

Natural Resources: materials or substances such as minerals, forests, water, and fertile land that occur in nature and can be used for economic gain.

Factors of Production There are 4 factors that must all be used to produce anything Natural Resources (also referred to as “land”)

Distribution: the action or process of supplying goods to stores and other businesses that sell to consumers

Factors of Production There are 4 factors that must all be used to produce anything Labor – effort of a person for which they are paid

Factors of Production Capital – human-made resources used to create other goods

Factors of Production Physical Capital – Also called Capital Goods, objects that are used to produce other goods

Factors of Production Human Capital – knowledge or skills workers get from education and experience

Factors of Production There are 4 factors that must all be used to produce anything Entrepreneurship – person who takes a risk in combining the other 3 factors to create a new good

QUIZ – Number your paper 1 - 6 1. Which of the following are factors of production? a. Capital and Land b. Scarcity and shortages c. Technology and productivity d. economics and business decisions QUIZ – Number your paper 1 - 6

a. capital and land Answer is …

2. Which of the following is an example of using physical capital to save time and money? a. hiring more workers to do a job? b. building extra space in a factory to simplify production c. switching from oil to coal to make production cheaper d. lowering workers’ wages to increase profits Next question …

b. building extra space in a factory to simplify production Answer is …

3. To what part of an industry does a worker’s education contribute? a. technology b. physical capital c. human capital d. scarce resources next question …

c. human capital Answer is …

next question … 4. Which of the following is an entrepreneur? a. a person who earns a lot of money as a singer or dancer b. a person who creates a game and sells it to a game manufacturer c. a person who starts an all-organic cleaning supplies business that employs others d. a person who works as a highly paid computer programmer next question …

c. a person who starts an all-organic cleaning supplies business that employs others Answer is …

Next … 5. What is the difference between a shortage and scarcity? a. A shortage can be temporary or long-term, but scarcity always exists. b. A shortage results from rising prices; scarcity results from falling prices. c. A shortage is a lack of all goods and services; scarcity concerns a single item. d. There is no real difference between a shortage and scarcity Next …

a. A shortage can be temporary or long- term, but scarcity always exists! answer …

next…. 6. What does an economist mean by the term LAND? a. farmland only b. food crops grown on farmland as well as the farmland itself c. goods and services that are produced form the land d. all natural resources used to produce goods and services next….

d. all natural resources used to produce goods and services! answer …