1. Your One-Day Crash Course!
Economics
Your One-Day Crash Course!

2. Today’s Objective Identify basic micro and macro economic concepts.
Supply & Demand
Economic Indicators
Business Cycle
Economic Cycle

3. Supply & Demand

4. What is it? SUPPLY DEMAND
the number of goods that producers are willing to SELL at a particular price
the number of goods that consumers are willing to BUY at a particular price

5. Law of Supply
As price increases, the amount producers are willing and able to produce will also increase. P3 P2
Supply = Same direction P1 Q1 Q2 Q3

6. Think About it…
Name something that is currently in high supply & low demand.

7. Law of Demand
As price increases, the amount that consumers are willing and able to pay will decrease. P3 P2
Demand = The arrows move in different directions! P1 Q1 Q2 Q3

8. Think About it…
Name something that is currently in low supply & high demand.

9. Graphing Equilibrium – supply and demand are equal
** point of max. profit
Shortage – demand exceeds supply
Surplus – supply exceeds demand D S P3 P2
Equilibrium is the goal because it is the point of maximum profit for a business. P1 Q1 Q2 Q3

10. Effects on the Economy Seller!
If there is a shortage, this means that there is less supply from producers than there is demand from the consumer. Who has more control over the market? The buyer or the seller?
If there is a surplus, this means that there is more supply from producers than there is demand from consumers. Who controls the market?
Seller!
Shortage – seller’s market
Surplus – buyer’s market
Buyer!

11. REVIEW Define supply & demand. Law of Supply Law of Demand
Parts of a Supply & Demand graph
Seller’s Market vs. Buyer’s Market

12. Graphing Worksheet

13. Economic Indicators

14. How do you measure up? Student performance is measured by:
GPA
SAT
Class Rank
Baseball performance is measured by:
Batting Average
Strikeouts

15. Economic Indicators
Economic indicators are figures used to measure a country’s economic performance.
We measure things like:
how much a country produces
whether a country’s economy is growing
how a country’s economy compares to others

16. Gross Domestic Product
GDP is the total market value of all goods & services produced in a country in a given year.
Released the last day of each quarter (reflects the previous quarter)
Key: look for the growth rate of GDP (typically to 3 % each year)
The U.S. economy typically grows around 2.5 to 3 percent per year.
LAGGING
Leading – average hours manufacturing, etc.

17. Measuring the GDP
One of the most important indicators of economy’s status
The U.S. has a very high GDP as compared to other countries.
Examples
Canada: $1.279 trillion
North Korea: $40 billion
China: $8.748 trillion
U.S. – #2 in world
China - #3 in world
Canada – 15 in world
N. Korea - #96

18. What GDP Tells Us…
Changes in GDP show whether the economy is growing or slowing
Commonly used to gauge a country’s standard of living

19. Inflation Rate
Inflation is a general increase in the price of goods & services.
Measured by the Consumer Price Index (CPI)
Released at 8:30 a.m. around the 15th of each month (reflects previous month)
Measures the change in the cost of a bundle of consumer goods & services
Prices are measured by taking a sample of prices at different stores
Used to adjust the annual changes to Social Security payments
LAGGING

20. What causes inflation? Supply < Demand Could result from: War
Price of imports
Too much money in circulation
War – scarce resources are transferred to the war effort, which means there is even less for consumers to buy
Price of Imports – increases in cost of raw materials, production expenses, salaries, etc.
Circulation – too much spending

21. What Inflation Tells Us…
Indicates that the cost of living is getting more expensive
Most people usually get a 2-3% pay raise each year to offset an increase in the cost of living

22. Purchasing Power of the Dollar
Worksheet

23. The Price of Gas (per gallon)
Worksheet

24. Unemployment Rate
Unemployment measures the number of people who are able & willing to work but cannot find work.
Shows whether the economy is picking up or slowing down
Released on the first Friday of each month
Includes number of new jobs created, average hours worked per week, average hourly earnings
LAGGING
Leading – number of weekly unemployment claims

25. Unemployment

26. Retail Sales Index
Measures goods sold within the retail industry, from huge chains to small local stores
Released around the 12th of the month
Does not include money spent on services
Shows if consumers are spending or saving

27. In Summary… What is the purpose of economic indicators?
What is GDP? What does it tell us?
What is the inflation rate? What does it tell us?
What is the unemployment rate? What does it tell us?
What is the Retail Sales Index?
Which indicators are lagging? Which are leading?

28. …the economic roller coaster!
The Business Cycle
…the economic roller coaster!
Distribute: note guide!!

29. The Business Cycle Economies naturally go through ups & downs.
The business cycle is the rise and fall of economic activity over time.
In the United States…
1930s, 50s, 70s, 2000s characterized by a drop in economic activity & rise in unemployment
Slumps followed by new waves of increased productivity and increased GDP
The economy may be influenced by war, foreign competition, changes in technology, changes in consumer wants, etc.

30. Stages of the Cycle

31. Prosperity Also known as the “peak”
Higher wages, more jobs available, higher demand for goods/services
Unemployment is low, GDP is high
People are spending!

32. Recession
Economic activity slows down – less production of goods, downturns in industry
GDP decreasing, unemployment increasing
People are starting to save!

33. Depression Also known as a “trough”
Deep recession that lasts for years and affects the entire economy
Unemployment is high, GDP is low
Government starts trying to “stimulate” the economy
People are saving!

34. Recovery Also known as “expansion”
Rise in business activity after a recession or depression
Innovation occurs – businesses start bringing out new products & services
Unemployment decreasing, GDP increasing

35. Entrepreneurs Who Rose from the Ashes
Many of today’s Fortune 500 companies came from recessions or depressions…

36. General Motors The Panic of 1907 William C. Durant
High school drop-out working as a manager of Buick in Detroit
Acquired Oldsmobile, Cadillac, Pontiac
Launched Chevrolet (later joined GM in 1917)

37. Playboy Enterprises Recession of 1953 Hugh Hefner
Former employee of Esquire who quit when his boss refused to give him a $5 raise
Designed his own magazine with the help of his friends

38. Sirius Satellite Radio
Early 1990s Recession
Robert Briskman
Former NASA engineer
COO at Geostart (satellite messaging company)
Figured out how to broadcast digital radio signals via satellite
Merged with XM Satellite Radio in 2008 to provide commercial-free radio 24 hrs/day

39. What are the four stages of the business cycle?
REVIEW
What are the four stages of the business cycle?
How is each stage characterized by economic indicators?
GDP? Unemployment? Spending or saving?

40. The Effect of Economic Cycles

41. Who is Particularly Impacted?
While the economy as a whole is negatively impacted by economic cycles, certain companies and industries are particularly sensitive to overall changes.

42. Durable Goods
People tend to cut back on the purchase of durables, as the ones they already have can last through the recession.
Manufacturers of durable goods like cars, appliances, and electronics are among the most impacted.
Durables usually benefit the most from booms. As disposable income increases, consumers are likely to go out and buy a new car or iPod.

43. Transportation
GM, Ford, Chrysler and other car companies are significantly impacted by recessions.
Consumers put off buying new cars or purchase less expensive models.
United Airlines & British Airways are leading airlines that suffer in recessions.
FedEx & UPS experience less volume in mailed packages during recessions.

44. Manufacturing
Whirlpool and Sears are home appliance manufacturers subject to decline in demand during recessions.
Demand for appliances is tightly linked to new home sales, which slow during recessions.

45. Construction Home Depot & Lowe’s are home improvement retailers.
Performance is correlated to the house market, which declines during recessions.

46. Other Industries Investment Services Hotels Home Security
Merrill Lynch
Morgan Stanley
Goldman Sachs Group
JP Morgan Chase
Hotels
Home Security
Luxury Commodities (jewelry like Zales)
Advertising Firms

47. Who is Less Impacted?
Certain goods are relatively protected from the impact of economic cycles. Goods that have a relatively inelastic demand with respect to income are generally shielded.
For example, no matter how bad the economy gets, people have to eat and will continue to purchase food. This is particular true for staple foods like bread.

48. Who is Less Impacted? Food Manufacturers & Retailers
Safeway
Wal-Mart
Pepsi
Kraft
Addictive Substances (tobacco)
Medicine & Medical Equipment
Utilities

49. REVIEW What are durable goods?
Which industries are most significantly impacted by economic downturns?
What is inelastic demand?
Which industries are relatively unaffected by economic rises or falls?

50. Supply & Demand, Economic Indicators, Business Cycle, Economic Cycle
Economics in a Day!
Supply & Demand, Economic Indicators, Business Cycle, Economic Cycle