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Our Economy Chapters 3 and 4.

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Presentation on theme: "Our Economy Chapters 3 and 4."— Presentation transcript:

1 Our Economy Chapters 3 and 4

2 An Economy – the way a nation makes economic choices regarding its resources
Resources a country may have are land Land – everything on earth in its natural state (coal, crude oil, lake) Capital – money used to start a business and goods used in the production process Labor – All people who work in an economy Entrepreneurship – people willing to risk their time and money to start a business

3 Scarcity The difference between unlimited wants and limited resources creates SCARCITY. Should a piece of land be used for an amusement park or office building? Should more money be spent on our military or for medical research? Should a company sell product A or Product B? Should a consumer buy or lease?

4 Participants in an economy
Consumer – buys the product (economic good or service) Producer – makes the product Government – provides regulation regarding the product

5 Basic Economic questions?
What goods and services should be produced? How should the goods and services be produced? For whom should the goods and services be produced? In a free enterprise (market or capitalist) economy the CONSUMER decides what gets produced!!!!!!!

6 Command Economy Where the government answers all of the questions about their economy Hitler Communism Businesses have little control

7 Market Economy Little government involvement in economic decisions
Consumers answer what gets produced and for whom based on who has the money to buy. The producers decide how it will be produced.

8 U.S. is a Free Enterprise System (capitalism) or private enterprise
Freedom of ownership – can own personal property, businesses, property rights (patents) Freedom to compete – the struggle between two companies for customers

9 Types of competition Price competition – focuses on who has the best price Non-price competition focuses on who has the best quality, service, business location , and reputation.

10 Freedom to take risks and make a profit?
Risk is the potential for loss or failure Example: Opening a business that fails or losing money in an investment like the stock market 1/3 businesses in U.S. fail after 1st year Profit is the money earned from business after all costs and expenses are paid – it is the motivation for taking the risk to start a business

11 Characteristics of Private Enterprise
Political power is in hands of the people There are more than one political party

12 Economic Costs of unprofitable firms
Lay off employees The businesses lose money Investors sell their stock – leaving less money for businesses to use for reinvestment Government does not get as much tax money Increases unemployment compensation and social services

13 Economic benefits of profitable firms
Hire more employees Pay better wages (more money goes back to economy Investors are willing to invest more money Government makes more money in taxes Businesses can afford to donate to charities

14 Services that our Government provides
Military Police Fire protection Free public education Roads, bridges Public libraries Social welfare system: Medicare – elderly Medicaid – poor

15 Supporter of business Provides disaster relief after a natural disaster. Example: Hurricane Katrina Run the Small Business Administration (SBA) – which provides counseling and educational materials to both businesses and home owners To encourage global business activity by establishing trade alliances with other countries Example: Selling Nike shoes to customers in Africa

16 Capitalist Economy (free enterprise)
Political power should be in the hands of the people. There is more than one political party. (democrats, republicans, etc.) The people elect their political leaders. The government is concerned about its people and cares for the people who cannot care for themselves. Examples are: United States and Japan

17 Socialist Economy There is an increase in the government’s involvement in people’s lives. The government tries to reduce the difference between the rich and the poor. Key industries are run by the government. Examples are: telecommunications, mining, banking, and transportation There are a lot of social services such as: Free medical care Free education through college Pension systems and elderly care Taxes are much higher (pay for all of services) Examples: Canada, Germany, Great Britain, Sweden, and Australia

18 Communist Economy The government runs everything.
There is only one political party. Government decides your job, schooling, and housing. Total lack of freedom in this economy. Advantage is? Everyone is taken care of. Examples of communist countries are: North Korea and Cuba

19 Economic Systems Macroeconomics – looking at the big picture of an economy Looking at the unemployment rate for the whole nation Looking at the total cost for medical care across the nation Microeconomics – looking at the smaller picture of an economy Looking at the unemployment rate in Pulaski County Looking at a businesses’ medical cost for their employees

20 Types of competition Direct Competition (Price competition) – competing based on similar product and price Indirect Competition (non-price competition) – competing based on factors not related to price such as quality, service, financing, reputation, business location, etc.

21 Monopolies Exclusive control over a product or the means of producing it. They are not allowed except for: Electric companies and gas companies Example of a company fined for being like a monopoly: Microsoft – Bill Gates

22 Government’s role as a Competitor
U.S. Post office competes with UPS and Fed Ex Tennessee Valley Authority (TVA) – electric company Amtrak – competes with other forms of transportation like subways, busses, taxis

23 Business protection Laws
A patent protects against someone stealing an invention. patents A copyright protects against someone stealing someone’s music or booksHarry Potter and the Half-Blood Prince Tickets (50-100years or death) A trademark protects a symbol

24 Other regulations Equal Employment Opportunity Commission – protects against discrimination in hiring due to age, gender, race, religion, disability, national origin Consumer Product Safety Commission – protects against products that are harmful ( have to do recalls)Recent Recalls

25 Regulation (cont.) Environmental Protection Agency (EPA) – protects against damage to the environment Securities Exchange Commission – regulates the sale of stocks and bonds

26 Regulator of Businesses/Consumer and worker Protection
OSHA – protects against unsafe conditions * Unhealthy chemicals * Unsafe equipment Food and Drug Administration(FDA): Protects consumers against bad food and drugs


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