1. Who decides what products will be produced?
Warm Up
Who decides what products will be produced?

2. Individuals What roles do you think individuals play in the economy?
List!

3. Individual Roles in Economy
Consumer
Saver
Investor
Producer
Earner
Borrower
Lender
Taxpayer
Recipient of government services

4. THE Conflict!
The conflict between unlimited wants BUT limited resources forces both individuals and societies to make economic decisions
What to produce
How to produce
For whom to produce

5. Productive Resources
Land
Labor
Capital
Entrepreneurs/management

6. Let’s Create
Create a business and discuss what land, labor, capital, and entrepreneurs/management you will need

7. Economic Systems Every nation has an economic system
An economic system is the way a nation uses resources to produce goods and services
Production is the creation of goods and services
Producing goods and services require resources
Human
Non-human
Is the study of how economic systems work

8. Traditional Economy
The ways to produce products are passed from one generation to the next
Parents teach children how to produce goods and services
Tribes in remote areas of the world still practice traditional economies

9. Command Economy
The government owns most resources and made most economic decisions
Each company receives a plan from the government that told it what to produce
The government determines all prices, styles, colors, and the amounts produced
Individuals have no say in production or their role in it
Currently practiced: N.Korea and China

10. Market Economy
The primary economic system in most industrialized economies
Known as a market or capitalist economy
People own the resources and run the businesses
People make all the decisions (what to produce, how to produce, and for whom to produce)
They set their own prices
The purpose – to make a PROFIT $$$
Profit=price-cost

11. Mixed Economy Some government controls Some market controls
Rate
Limits on what businesses and individuals can do
Some market controls
The U.S. – with market economy dominat

12. Let’s Compare Compare a market economy to
Traditional
Command
Mixed
What are the similarities/differences?

13. What is Circular Flow of the Economy?
Draw a circular flow model showing the roles of households, businesses, and government in a mixed capitalistic economy

14. Going to a Concert? Popular concert Sold out? Shortage of tickets?
How many would buy for $25
More?
Law of demand: consumers will demand more of a product at lower prices

15. Scarcity The basic problem facing every economy
Consumer wants are greater than the resources available to satisfy those wants
Resources are limited
In a market economy, you choose what resources you will use to produce, how much, and the price
You create market forces of demand and supply

16. Demand
Law of Demand - the quantity of a good or service that consumers are willing and able to buy at various prices during a given time period
When the relationship between price and quantity demanded is shown on a graph, it is called a demand curve
Downward from left to right (As price goes up, quantity demanded goes down)

17. Supply
Supply is the quantity of a product that producers are willing and able to make available for sale at various prices over a given time period
Law of supply: producers are willing to offer more of a product for sale at higher prices than at lower prices
As the price rises, the quantity supplied increases
The relationship between price and quantity supplied is shown in the supply curve

19. Equilibrium
By combining the supply and demand curves on the same graph, you can see how supply and demand together determine how much of a product will be produced and the equilibrium price
Equilibrium – price at which the quantity supplied exactly equals the quantity demanded
In other words, consumers are willing and able to buy the same amount of the product as producers are willing and able to supply

20. Draw in Equilibrium

21. Surplus Excess quantity supplied
Eventually will force producers to lower the price
As price comes down, consumers will buy more until it returns to equilibrium

22. Shortage Consumers are willing and able to buy a lot at low prices
They are willing to buy more than are available for sale
Producers will start raising the price again until it reaches equilibrium

23. Challenges for the U.S/Market Economies
Unemployment
Income and wealth gaps
Other: Environmental pollution, economic instability, discrimination

24. Using the Internet Employment data Family income distribution
Family income distribution

25. Closure
What factors determine what will be produced and at what prices in a market economy? Command economy?