1. Week 20: 2/1-2/5

2. App 1 – College or not 1.What is the marginal cost of getting a 4 year Bachelor’s degree rather than a 2 year Associate’s degree? 2.According to the first graph, what are some of the opportunity costs of investing in education? 3.What level of education seems to give you the most financial utility (best monetary return for your investment)? 4.If this data is accurate, why would anyone choose to get a Bachelor’s degree? What are the costs/benefits not covered in this data?

3. Economic Systems How a society chooses to use scarce resources to satisfy people’s wants – Traditional – Command – Market

4. Economic Systems Traditional Economy – Simplistic system structured around customs and survival – Hunter/gatherer societies – Good of the group takes precedence over individuals

5. Economic Systems Command Economy – Centrally-planned system – Govt owns means of production – Communism/Socialism

6. Economic Systems Market economy – Laissez-faire (leave-alone, or hands off), free enterprise – Competition – Producers specialize – Private property – Consumer sovereignty: consumers direct economy by “voting” for products with their wallets

7. App 2: Traditional, Command, Market Tell me whether each of these describes a traditional, a command, or a market economy: 1.Johnny finds an apple tree. He picks lots of apples and shares them with everyone. 2.Johnny finds an apple tree. He puts a fence around it and starts charging people for the apples. 3.Johnny finds an apple tree. The government takes it and distributes the apples evenly amongst everyone. 4.Sally spends most of her time working hard to make herself more wealthy. 5.Sally’s wages are the same as everyone else around her no matter what types of job she does. 6.Sally spends most of her time looking for food or shelter.

8. Circular Flow Model of a Market Economy: allows you to visualize how elements of market economies fit together Product Market Factor Market Buy goods,services Consumer spending Income from resources Sell land, labor, entrepreneurship Payment for resources Buy productive resources Business revenue Sell goods, services $$$$ Businesses Households

9. Application 3: Create a circular flow model Choose a product/company and show how it fits into the circular flow model. Ex: Product Market Ex: Dick’s Sports Factor Market Ex: Rubber NIKE Joe shoes $$ from selling shoes shoes $$ for shoes Salary $$ Joe’s time, labor Rubber $$ for rubber

10. Economic Systems Mixed Economies: combine elements of traditional, command, market – Most common Some industries nationalized – controlled by govt. – Others are privatized: left in private ownership

11. US Economic System USA = Modified free enterprise system – Private/public partnership – Government is both a producer and a consumer

12. Circular Flow Model of US System Product Market Factor Market Buy goods,services Consumer spending Income from resources Sell land, labor, entrepreneurship Payment for resources Buy productive resources Business revenue Sell goods, services $$$$ Businesses Households Govt. spending products taxes resourcesspending taxes products

13. App 4: Circular Flow Model of U.S. Create another circular flow model similar to your last one, however, this time show how it would look in the US.

14. US Economic System Existence of market failures – When people who are not part of a market interaction either benefit or pay its costs Ex. Free riders = those who do not pay for goods/services but benefit anyway – Ex. Fireworks display, traffic lights

15. Market Failures, cont. Externality = side effect of a transaction that affects someone other than producer or consumer – Can be negative (pollution), or positive (neighbor’s flower garden)

16. US Economic System Public Goods: when govt. provides a product or service, fixes a market failure – No one is excluded from benefits – One person’s use of product does not reduce its usefulness to others – Ex: street lights – Private companies can’t compete

17. Application 5: Public Good, Y or N For the products below, write Y if it is a public good and N if it is not. If not, explain WHY not; which criteria is missing?: 1.Roads 2.Public Schools 3.Welfare 4.National Defense 5.Public pool 6.Banks 7.Sewer Systems 8.Fireworks displays