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American Free Enterprise
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Public vs. Private Sector Public: the part of the economy that involves the transactions of the government Private: the part of the economy that involves transactions of individuals and businesses.
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Public Good A shared good or service for which it would be inefficient or impractical to: ◦1. make consumers pay individually Examples: ◦ Dams ◦ Roads ◦ Etc…
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Public Good Goods and services consumed collectively, provided by government because market has failed to provide them. Sometimes beneficial: ◦Police ◦National Defense ◦Public Education
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Free Rider Someone who does not choose to pay for a certain good or service Receives benefits of it anyway As if it were provided as a public good
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Market Failure Situation when market fails to function properly Due to: Inadequate competition Buyers and sellers not well informed Resources not distributed well Prices don’t equal costs of production
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Externalities What is an externality? ◦An economic side effect of a good or service ◦Affects uninvolved third party ◦Market failures!
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Positive vs. Negative Positive: beneficial side effect that affects uninvolved third party Negative: harmful side effect that affects uninvolved third party
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EconMovies- Anchorman http://www.youtube.com/watch?v=FBjFDtH- iZM&list=PL1oDmcs0xTD9Aig5cP8_R1gzq-mQHgcAH http://www.youtube.com/watch?v=FBjFDtH- iZM&list=PL1oDmcs0xTD9Aig5cP8_R1gzq-mQHgcAH
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Externalities of building a dam and creating a reservoir: Partner up – come up with positive and negative!
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Positive vs. Negative Externalities of building a dam and creating a lake ◦Positive Swimming Boating Fishing Lakefront views ◦Negative Loss of wildlife habitat due to flooding above the dam Disruption of fish migration along the river Overcrowding due to tourism Noise from boats
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Positive vs. Negative Scenario #1 ◦A city has a shortage of parking spaces near downtown businesses. Should the city build a new parking garage or leave it to the private sector? Are there any externalities? What is your solution?
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Positive vs. Negative Scenario #2 ◦Due to recent growth the Treasure Valley has once again boomed and is now faced with a power shortage. Should they build a nuclear plant? What is your solution? Externalities of building a nuclear power plant? Externalities of your solution?
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Positive vs. Negative Scenario #3 The city dump is filled to capacity, thus Ada County has proposed a new land fill adjacent to your property? ◦What is your solution? ◦Externalities?
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Macroeconomics Macro Means? ◦Large Study of the behavior and decision making of entire economies Study of major trends of the economy
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Microeconomics Micro Means? ◦Small Study of the economics behavior and decision making of small units, such as individuals, families, and businesses.
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GDP Gross Domestic Product: ◦The total value of all final goods and services produced in an economy within a given year. ◦Used to predict business cycles
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GDP Only final product included Effects of inflation taken out U.S. economy, as measured by GDP, is everything produced by all the people and all companies in the U.S.
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GDP Gross Domestic Product: a.NX – Net Exports b.G – Government c.I – Investment d.C - Consumption
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