ECONOMICS MR. OSBURN THREE ECONOMIC QUESTIONS

WHAT GOODS AND SERVICES SHOULD BE PRODUCED? Each society must decide what to produce to satisfy its needs and wants. How much of our resources should we devote to national defense, education, public health and welfare, or consumer goods? Rank these in order of importance Which consumer goods should we produce? Which consumer goods are most important in America?

HOW SHOULD THESE GOODS AND SERVICES BE PRODUCED? Each society must decide how to use its resources to produce goods and services Should we produce electricity with oil, solar power or nuclear power? Should teachers have classes of 20 or 50 students? Should we produce food on large corporate farms or small family farms? Factors of Production can be combined in different ways.

WHO CONSUMES THESE GOODS AND SERVICES? By the end of the 1990s, the top 25 manufacturers in the USA were launching an average of 13 new products every day. Millions of items available on Amazon.com During “Cyber Monday”, Amazon sold 426 items per second (2013) The USA produces 3,000,000 cars each year (8,219 per day) only 5% of the worlds total production. How do all of these products get divided? Who gets the luxury car vs. a bus pass? Who goes on vacations vs. who stays at home? Who gets access to a good education? How much should teachers earn versus how much doctors should earn?

Factor Payments: the income people receive for supplying factors of production—land, labor, capital. Landowners get rent Workers get wages People that lend money to build factories receive interest

Economic Goals EfficiencyMaking the most of resources

EFFICIENCY

Economic Goals EfficiencyMaking the most of resources FreedomFreedom from government intervention

FREEDOM

Economic Goals EfficiencyMaking the most of resources FreedomFreedom from government intervention Security and PredictabilityAssurance that products are available, payments are made on time, and a safety net to protect against economic disaster

SECURITY

Economic Goals EfficiencyMaking the most of resources FreedomFreedom from government intervention Security and PredictabilityAssurance that products are available, payments are made on time, and a safety net to protect against economic disaster EquityFair distribution of wealth

EQUITY Chief Executives$176, Petroleum Engineers$147, Architectural and Engineering Managers $133, Lawyers$130, Natural Sciences Managers $130, Marketing Managers$129, Computer and Information Systems Managers $129, Airline Pilots, Copilots, and Flight Engineers $128, Financial Managers$123, Sales Managers$119,980

Economic Goals EfficiencyMaking the most of resources FreedomFreedom from government intervention Security and PredictabilityAssurance that products are available, payments are made on time, and a safety net to protect against economic disaster EquityFair distribution of wealth Growth and InnovationInnovation leads to growth, growth leads to higher standard of living

GROWTH

INNOVATION

Economic Goals EfficiencyMaking the most of resources FreedomFreedom from government intervention Security and PredictabilityAssurance that products are available, payments are made on time, and a safety net to protect against economic disaster EquityFair distribution of wealth Growth and InnovationInnovation leads to growth, growth leads to higher standard of living StabilityElectricity, food and clothing, predictable prices, jobs, etc.

STABILITY

ECONOMIC SYSTEMS An Economic System is the method used by a society to produce and distribute goods and services. Created to best answer the problem of scarcity. A society will choose an economic system that aligns with their goals and values.

TRADITIONAL ECONOMY Relies on habit and custom to decide what to produce, how to produce it, and whom to distribute it. Little room for innovation or growth Boys will take the occupations of their fathers, girls follow their mothers Resist change—lack modern conveniences and have a low standard of living

MARKET ECONOMY Economic decisions are made by individuals and are based on trade. Choices made by individuals determine what gets made and how, as well as who consumes the goods. Also called free markets or capitalism.

COMMAND ECONOMY Central government alone decides how to answer all three key economic questions.

MIXED ECONOMY Combination of traditional, market, and centrally planned economies.