2. How do economic concepts and policies affect your personal finances?
The Fundamentals of Economics
Chapter 1
How do economic concepts and policies affect your personal finances?

3. 1 The Fundamentals of Economics
Chapter 1
The more you know about how an economy operates and the impact economic factors can have on your finances, the better educated you will be when making life decisions about the use of your financial resources and planning for the future.

4. 1 economics opportunity cost scarcity factors of production land labor
The Fundamentals of Economics
Chapter 1
economics
opportunity cost
scarcity
factors of production
land
labor
capital
entrepreneurship
economy
traditional economy
bartering
command economy
market economy
supply
demand
equilibrium point
price ceiling
price floor
demand elasticity
elastic demand

5. depository institutions non-depository institutions incentive
The Fundamentals of Economics
Chapter 1
inelastic demand
financial market
depository institutions
non-depository institutions
incentive

6. 1 The Fundamentals of Economics Chapter
What goods and services should be produced?
How should the goods and services be produced?
Who should get the goods and services that are produced?

7. Explain opportunity cost.
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Explain opportunity cost.
Discuss the concept of scarcity and factors of production.
Compare different economic systems and their methods for allocating goods and services.
Explain how prices are determined through supply and demand.
Distinguish between elastic and inelastic demand.

8. Scarcity and Economics
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Scarcity and Economics
Your decisions about what to do with your money is the essence of economics and personal finance.
economics
the study of the decisions that go into making, distributing, and using goods and services

9. Scarcity and Economics
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Scarcity and Economics
Action
Opportunity Cost
Trade- Off
opportunity cost
what you give up to get something else

10. Scarcity and Economics
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Scarcity and Economics
Marginal Costs
Marginal Benefits
The cost of obtaining one more of an item.
The benefit of purchasing one more of an item.

11. Scarcity and Economics
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Scarcity and Economics
Scarcity
Shortage
scarcity
requires that people decide which goods and services to use or not use due to limited resources and unlimited wants

12. Scarcity and Economics
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Scarcity and Economics
factors of production
resources needed to produce goods and services

13. Types of Economic Systems
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Types of Economic Systems
Traditional Economy
Command Economy
Market Economy
all three economic questions are answered by customs and tradition
Bartering may be common.
a system in which a central authority controls all economic decisions
supply, demand, and a system of pricing allow people to make the economic decisions through free interaction
There are aspects of each type found in all nations.
economy
how a nation makes decisions to allocate its resources
bartering
the exchange of products without the use of money

14. Types of Economic Systems
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Types of Economic Systems

15. Supply and Demand 1 The Fundamentals of Economics Section 1
Chapter 1
Section 1
What Is Economics?
Supply and Demand
demand
how much consumers are willing and able to buy at a certain price
supply
how much producers are willing and able to produce at a certain price

16. Supply and Demand 1 The Fundamentals of Economics Section 1
Chapter 1
Section 1
What Is Economics?
Supply and Demand
Price of Inputs
Number of Suppliers
Influences on Supply
Technology
Taxes

17. Supply and Demand 1 The Fundamentals of Economics Section 1
Chapter 1
Section 1
What Is Economics?
Supply and Demand
price ceiling
a maximum price set by the government that can be charged for goods and services
equilibrium point
the price at which consumers and producers agree

18. Supply and Demand 1 The Fundamentals of Economics Section 1
Chapter 1
Section 1
What Is Economics?
Supply and Demand
price floor
a minimum price set by the government that can be charged for goods and services

19. Supply and Demand 1 Demand Elasticity Elastic Demand Inelastic Demand
The Fundamentals of Economics
Chapter 1
Section 1
What Is Economics?
Supply and Demand
Demand Elasticity
Elastic Demand
Inelastic Demand
demand elasticity
the degree to which demand is affected by price
elastic demand
when demand for a product is affected by price
inelastic demand
when price has little influence on demand

20. 1 The Fundamentals of Economics Section 1 What Is Economics?
Chapter 1
Section 1
What Is Economics?
Can businesses create inelastic demand for their products? Explain your answer and, if yes, provide examples.
Answers should indicate an understanding of inelastic demand. Businesses may try to create inelastic demand by making customers loyal to their products. Drug companies with prescription drug patents create inelastic demand.

21. Explain financial markets and financial institutions.
The Fundamentals of Economics
Chapter 1
Section 2
The U.S. Economic System
Explain financial markets and financial institutions.
Identify incentives.
Describe how different groups respond to incentives.

22. The Fundamentals of Economics
Chapter 1
Section 2
The U.S. Economic System
The Financial System
In the United States, there are two financial markets or exchanges that bring buyers and sellers together.
financial market
a mechanism that provides the means for purchasing and selling stocks, bonds, and commodities, and other financial instruments

23. The Financial System 1 Characteristics of the Financial System
The Fundamentals of Economics
Chapter 1
Section 2
The U.S. Economic System
The Financial System
Characteristics of the Financial System
Financial markets provide the means for companies to find investors and lenders.
The sale prices for stocks change constantly.
Advancements in technology have made the world one large financial market.

24. The Financial System 1 The Fundamentals of Economics Section 2
Chapter 1
Section 2
The U.S. Economic System
The Financial System
Commercial banks
Credit unions
Savings and Loan Associations
Depository Institutions
Insurance companies
Investment bankers
Mutual funds and stock brokerage firms
Non-Depository Institutions
depository institutions
businesses that manage money deposited in their institutions
non-depository institutions
institutions that do not handle deposits, but do act as intermediaries between savers and borrowers

25. Incentives 1 There is generally an award attached to an incentive.
The Fundamentals of Economics
Chapter 1
Section 2
The U.S. Economic System
Incentives
There is generally an award attached to an incentive.
incentive
encourages specific behavior and helps motivate individuals to take specific action

26. Incentives 1 The Fundamentals of Economics Section 2
Chapter 1
Section 2
The U.S. Economic System
Incentives

27. 1 The Fundamentals of Economics Section 2 The U.S. Economic System
Chapter 1
Section 2
The U.S. Economic System
How do incentives for each group impact the economy?
The government offers tax deductions to home owners. The government may encourage more people to buy a new home, which would increase the demand.

28. Limited government output Increased productivity and output
The Fundamentals of Economics
Chapter 1
Adam Smith
Born in Scotland in 1723
His most famous work was The Wealth of Nations
Smith’s “laissez-faire” means:
Competition
Division of labor
Limited government output
Increased productivity and output + + =

29. The Fundamentals of Economics
Chapter 1

30. The Fundamentals of Economics
Chapter 1

31. End of