1. What is Economics?

2. Economics
Study of how people seek to satisfy their needs and wants by making choices.

3. Dissecting the Definition
Needs: something like air, food, shelter that is necessary for survival
Wants: an item that we desire but that is not essential to survival

4. Microeconomics Individual decision making is micro (small)
Study of economic behavior & decision making of small units, such as individuals, families, & businesses
Individual decision making is micro (small)

5. Macroeconomics Examines major trends for the economy as a whole
Study of economic behavior & decision making of entire economies
Examines major trends for the economy as a whole
Societal decision making is macro (large)

6. Three Basic Questions???
In economics there are 3 basic questions that every country must answer…
What to produce?
How to produce?
For whom should we produce?

7. Economic Systems
A set of rules by which a nation answers the basic questions of what, how, and for whom.

8. Types of Economic Systems
Traditional
Command
Market
Mixed

9. Traditional Decisions are based mostly on customs Difficult to change
Mostly in underdeveloped countries/3rd world countries
Example: Chad

10. Traditional Advantages versus Disadvantages
Low unemployment rate
Little or no money is used
Disadvantages
Not much economic growth
Little scientific development
No choices
Low standard of living

11. Command Government ownership & control of production
Government makes ALL decisions
2 main types Socialism & Communism
Example: North Korea

12. Command Advantages versus Disadvantages
Focuses on Equality
Capable of rapid change
Economies are very stable
Disadvantages
Very little individual freedom
No reason for hard work

13. Market
Means of production are owned & controlled by private individuals or groups
Government plays a small role
Market determines how resources are used
Cannot be found today

14. Market Advantages versus Disadvantages
Can adjust easily to change
Competition
No government interference
Unlimited opportunities to make money
Disadvantages
Society does not always get basic needs
Higher risk for failure
Monopolies are present

15. Mixed Government plays limited but some role in decision making
Focuses on Free Enterprise System
Usually 70% individual control & 30% government control
Sometimes other way around but very rare
Example: United States

16. Additional Info/Vocabulary Terms
Allocate
to divide among or distribute in shares

17. Additional Info/Vocabulary Terms
Resources
the means to accomplish something

18. Additional Info/Vocabulary Terms
Division of Labor
Separate the process of production into specific tasks

19. Additional Info/Vocabulary Terms
Specialization
Concentrate labor on single tasks