1. Chapters 1-5

2. Chapter 1 Want vs. Need Needs are required for basic survival
Used interchangeably
Needs are required for basic survival
Food
Clothing
Shelter
Wants are anything other than what is needed for basic survival.
Electricity
Technology (Computers, Cellphones)

4. Chapter 1 Scarcity – Resources are limited Factors of Production
Creates competition
Exists because people cannot satisfy every want
Shortages are temporary
Factors of Production
Land – Natural resources and location
Labor – Work people do
Capital – Manufactured goods used to make other goods and services
Entrepreneurship – Ability to start a new business or create new products
Technology – Use of science to develop new products and production methods

5. Something to Think About
What is your most scarce resource?
What competing uses do you have for that resource?
All of the factors are important, but which factor do you consider to be the most important? Why?

6. Chapter 1 Trade-offs – Exchanging one thing for the use of another
Economic models – Theories in a simplified format to represent the real world
Shows how people behave economically
Not always accurate due to inability to predict human nature
Economic thought can influence laws and government policies
Often depend on a person’s values/beliefs
Economics does not judge whether a policy is good or bad

8. Chapter 2 Three Basic Questions:
What goods and services should be produced?
If a product is produced, then another product ceases production
How should they be produced?
Consider resources
Who will get the goods, and how will they distributed?
Consider the population
Consider form of distribution and price

9. Chapter 2 Types of Economic Systems
Traditional – Based on customs and beliefs, passed down for generations
Inuit, Africa, Native Americans prior to Europeans
Command – Gov’t leaders answer the three basic questions
USSR, China, Liby, Afghanistan, Iraq, Iran
Market/Capitalist – Individuals make the choice
No true Capitalist economy in the world
Mixed – Combination of market and command economies.
United States, Canada, Mexico, Brazil

12. Chapter 2 Role of Government Freedom of enterprise and choice
Adam Smith – famous economist who wrote Wealth of Nations
Described an economic system called capitalism
Pure capitalism – laissez faire (gov’t hands off)
Basis of the US’ economic system
Freedom of enterprise and choice
Individuals own and control the factors of production
No guarantee of success – 80% of new businesses fail in the first year
Gov’t place few restrictions to protect the individual
People buy what they want
Demand determines production
Gov’t sets safety standards

14. Something to Think About
Why might less government involvement be helpful to an economy?
Why might less government involvement hurt an economy?

15. Chapter 2
Profit incentive – Produce goods and services to earn a profit (make money)
Private Property – property owned and held by individuals/groups
Controlled by the individual
Protected by the US Constitution
Competition
Creates lower prices and better quality goods and services

16. Something to Think About
Think of a situation in which quality was more important to you than price and vice versa.
How did you compare quality?
How did you compare price?

17. Chapter 3 Disposable vs. Discretionary Income
Money left after paying all taxes
Money left after paying for necessities/ can be saved/ spent on luxury items
Ability to consume depends on a person’s income and how much is spent or saved

18. Chapter 4
Credit – Receive funds for services or goods with intent of paying back those funds in the future
Principal – amount borrowed
Interest – amount added on for the privilege of borrowing
Installment debt – loan paid back overtime
Debit Cards – Not loan; transfer funds directly from bank account to store
Credit rating – determines the risk of a bank lending money

19. Chapter 4 Financial Institutions
Commercial Banks – Offer widest range of services
Savings and Loans Associations – Lower interest rates
Credit Unions – Owned and operated by members; higher interest rates for savings, lower for loans
Finance Companies – Collect debt for stores’ loans; high interest rate for loans

20. Chapter 4
Truth in Lending Act – Expanded government’s role in protecting users of consumer credit
Equal Credit Opportunity Act – Creditors cannot discriminate on basis of race, religion, national origin, gender, marital status, or age
1974 – Women no longer depended on fathers and husbands to sign a loan or receive a credit card
Usury laws – set a maximum interest rate in a state
Bankruptcy – Occurs when a person cannot repay any of their debts

22. Something to Think About
How does the Equal Credit Opportunity affect you?
Does this mean you will automatically be approved for credit?
Why or why not?
Why do you think it is important that states establish their own interest ceilings instead of having it be the same nationwide?

23. Chapter 5
Comparison Shopping – making comparisons to decide what to shop for and where to shop
Advertisements and coupons help save time and money
Trade-offs in Food Stores
Club Warehouse Stores – Offer lower prices, but items only sold in bulk with fewer options
Convenience stores – Carry few items, higher prices, open longer
Brand names – Well-known nationally or regionally
Supermarkets/Wholesale Stores – Wider selection with market prices
Some supermarkets produce their own brand
Generic products have no brand name

24. Chapter 5 Comparing Clothing
Current Styles – Change from year to year, can be expensive because new clothes must be bought annually (if not more frequently)
Classic Styles – Basic, do not change as much, help clothes last longer, saves money
Service flow is the amount of time you get to use the product and the value you place on that use
Factor in the coast of care involved in clothing that must be hand washed or dry cleaned versus machine washable

25. Something to Think About
How can the cleaning method affect the service flow of a piece of clothing?

26. Chapter 5 Getting More for Less
Clothing costs have decreased significantly over time.
Clothing sales generally happen at the end of a season
Bargain fanatics buy items just because they are on sale
If you buy an unnecessary item because it’s on sale, you may not be saving money at all.

27. Chapter 5 How much should you spend on a house?
Avoid spending more than you can afford
You will need the cash down payment and closing costs
Be aware of points or fees paid to the lender
Financing the purchase of a House
Different types of mortgages and financing packages available
Mortgages involve down payments and interest
Paid in monthly installments
Property tax, homeowners insurance, and mortgage insurance often included

28. Chapter 5 Renter rights and responsibilities Usually sign a lease
Be wary of clauses in lease; read carefully
Have the right to use the property as stated in the lease and privacy
Must pay rent on time, take care of property, alert landlord of needed repairs
In case of damaged property, tenants pay a security deposit
Must give written notice if leaving prior to lease’s end
Landlords must obey building and safety laws
Rent-control laws limit the amount a landlord can charge

29. Chapter 5 Buying a vehicle
Registration fees are state fees paid annually
Normal maintenance and repairs
Depreciation or a decrease in value
Insurance
Cost varies based upon age, sex, and driving history

30. Something to Think About
What are some reasons why car owners might continue to make expensive repairs on an old instead of buying new one?