Unit Two Economics in Louisiana

Economics is the study of the producing, disturbing, and consuming of goods and services. A person who studies the economy is called and economist. Economist seek to understand the way communities, societies, or countries address the issue of scarcity and decide how to allocate limited resources.

Four Questions There are 4 fundamental questions of economics that must be answered in order for every type of economy to function.

Four Questions What is being produced or offered? How will it be produced or offered? How much should be produced or offered? For whom will it be produced? (Who will buy the product or service?)

All Write Round Robin Terms to Know Goods Service Consumer Producer Resources Supply Demand Trade off Scarcity Opportunity Cost

Three Types of Economy The three economic system models are traditional economy, command economy, and market economy.

Traditional Economy Three aspects help to define a traditional economy: 1 st heavily dependent on agriculture 2 nd the people tend to barter 3 rd economic decisions often based on traditions

Traditional Economy Underdeveloped nations (countries) may follow this system The four economic questions are answered by customs or traditions Jobs are handed down from father to son Men and women have different kinds of jobs.

Traditional Economy in Louisiana Before the French settled Louisiana, the Native American groups had a traditional economy. They hunted and engaged in agriculture. They also bartered with other groups. Their customs beliefs and repeated patterns of behavior helped guide decisions about what had value and what was fair in the course of economic exchange.

Command Economy The government directs the economic system and tries to control how producers answer the four basic economic questions The government makes rules and regulations that control what is produced and how and where it is produced Government mandated controls also affect people’s access to economic goods

Command Economy Communist government use this system The government officials decide how to answer the four basic economic questions

Command Economy in Louisiana At the time Louisiana was established, a king ruled France. This kind of government was called a monarchy. Beginning in 1700, the French king and his advisers made detailed plans for how they wanted Louisiana’s economy to develop so that it would enrich France. Their schemes were not successful, but their plans provide an example of how a commend economy functions.

Market Economy In a market economy, economic decisions are made at an individual level. The four basic economic questions are answered by the producers based on their beliefs about how consumers will respond to what they produce Supply and demand influence what is produced and how it is produced

Market Economy The USA and most of the western world operates in this way Also called the free enterprise or capitalist system People own property, operate businesses, and make key decisions about the four questions of economics Government regulates to ensure fair business practices and safety of workers and consumers

Check on Learning Describe the three kinds of resources that help consumers satisfy their needs and wants What does scarcity mean? What is an opportunity cost? What is the difference between a consumer and a producer?

Factors of Production

Factors Of Production Land Labor Capital

Factors of Production: Land Refers to all natural resources used to produce goods and/or services These resources include but are not limited to: Oil, coal, iron, water, forests

Factors of Production: Labor Labor is the effort people devote to tasks for money Labor includes by is not limited to: Medical care provided by a doctor Instruction provided by a teacher Repair of a television by a technician

Factors of Production: Capital Refers to any human-made resource that is used to produce other goods and/or services Economy requires both human and physical capital

Examples of Physical Capital Buildings Equipment Tools

Examples of Human Capital College Education Training Job Experience

Supply and Demand

Supply the quantity of a good or services that producers are willing and able to offer for sale at various prices at any given time.

Demand the quantity of a good or services that the consumers are willing and able to buy at various prices at any given time.

Supply and Demand Video Clip

Supply and Demand These two forces combined result in the law of supply and demand: More will be brought at lower prices and less at higher prices, More will be produced at higher prices than will be produced at lower prices.

Law of Demand There is an inverse relationship between price and quantity demanded

Law of Supply There is a direct relationship between price and quantity supplied

Louisiana Economic History

What we already know… Traditional Mercantilism

Market Economy in Louisiana Colonial period (Mercantilism) ended with the Louisiana purchase United States bought LA from France in 1803 Agriculture drove to economy in LA

Cash Crops A crop that is produced for it Commercial (cash) value rather than for use by the grower The earliest crops were tobacco and indigo Sugar cane and cotton replaced those Why? How can opportunity cost be use to explain this?

Civil War and LA economy The end of the Civil War brought great suffering for Louisiana economy Why? What factor of production was scarce? The state struggled economically until after World War II

After World War II Advances in technology brought new equipment to farms These machines replace human labor

After World War II Oil became a valuable resource in the early 20 th century (1900’s) The demand for oil during and after WWII gave the state new economic direction

21 st Century (today) Louisiana’s economy is part of the interdependent global economy The new economic direction in LA now seeks more diversity and less dependence on the oil industry

Check on Learning What was the initial focus of LA economy? Name two important crops in Louisiana? How did World War II affect the oil industry in LA? What is the new economic direction for Louisiana?