1. Overview of the U.S. Economy

2. Types of World Economies
Traditional- based on certain customs and traditions
Usually represented by hunting and gathering societies
Command- government makes all economic decisions
Decide what will be made, how much, and who will own these goods
Pure Market- government plays no role at all in making economic decisions
Goods and services exchanged without government involvement
Mixed- can include elements of traditional, command, and market economies
Can be closer to pure markets or closer to command economies

3. The Free-Enterprise System
Individuals have the right to:
Own property
Make individual choices
Compete with others in the economy
Make economic decisions for their own benefit
Two major groups of people in free-enterprise system:
Consumers- people who decide to buy goods or services
Producers- person or company who provides goods or services
Consumers influence producers’ decisions

4. The Free-Enterprise System
Producers use human resources (labor to produce goods or services) and natural resources to meet demands of consumers
Federal government in the U.S. provides regulations, or guidelines, for businesses
How to use these resources fairly and efficiently

5. The Circular Flow Model
Consumers, producers, and the government interact with each other in a free-enterprise system
The Circular-Flow Model demonstrates how these interactions/exchanges takes place

6. Prices & The Marketplace
Consumers want low prices while producers prefer high prices
Supply & Demand
Demand is the amount of a good or service a customer is willing to buy at various prices for a set period of time
If you want something and have the money to spend on it, you have contributed to the demand for that product/service
Demand for a good/service is related to its price (law of demand)
When price goes up, demand drops
When price goes down, demand increases
Supply is the quantity of goods/services that producers are willing to offer at various prices for a set period of time (supply can be affected by things like the weather)
Supply of a good/service is related to its price (law of supply)
Producers supply more when they can sell them at a higher price
Producers supply less when they can only sell them at a lower price

7. The Supply & Demand Curve

8. Prices & The Market Place
Competition
Sometimes businesses make the same choice as to what to provide and for whom
These businesses are in competition
Competition is the economic rivalry among businesses selling similar products
Encourages produces to improve or invent new products
Benefits consumers because it can lower the price of goods/services
Competition tends to increase supply- a lack of competition can mean a lack of supply

9. Prices & The Market Place
Surpluses & Shortages
When the Q (quantity) supplied is greater than the Q demanded, there is a surplus
Surplus tells producers they are charging too much or something else is wrong with their product/service
When the Q demanded is greater than the Q supplied, there is a shortage
Shortage tells producers they are charging too little and need to raise their prices

10. How Your Choices Affect the Economy
You are free to save or invest your money
Many ways to invest:
Stocks and sharing in a company’s profits
Bonds that can be repaid to you with additional interest
You can also invest in new businesses
Venture capital helps entrepreneurs develops ideas into products and pay for the cost of running their business

11. How Your Choices Affect the Economy
Business Investments
Corporations use revenue from stocks and bonds to improve their businesses and increase their profits
Hire new employees, purchase new equipment, etc. etc.
Investment and Technology
New technology is developed when companies invest money in technological research and development
Can bring new products to the market, improve efficiency, help increase profits
All investments involve a level of risk- successful investments not only benefit the investor, but the economy as a whole

12. ?
What are the two major groups of a people in a free-enterprise system? Briefly describe both.
What is demand? Briefly describe the Law of Demand. Also, what is supply? Briefly describe the Law of Supply as well
What are three positive effects of competition in the market place?
What is a surplus and what does it say to the producer? What is a shortage and what does it say to the producer?
How do entrepreneurs, small businesses, and corporations use revenue from investments?