1. Unit 8: Introduction to Economics By Emily Stine, Philip Hinton, Cassidy Nye, and Nick Ostendorff

2. Basic Info Scarcity is caused by having limited resources for unlimited wants and needs, forcing you to make a choice. 2 types of choices ~individual-decision will affect only the person making the decision ~social- decision will affect many people Needs vs. wants ~Need- basic requirement for survival(food, clothing, shelter, water) ~want-something you would like to have but it is not necessary for survival

3. The Four Factors Of Production Land-surface area and natural resources (air, water, lumber, coal, iron, etc) Labor-human factor of production Physical capital- previously made good used to make other goods (tool, machine, oven, etc) Entrepreneurship- creating a new product, service, or method of production

4. There are three basic economic questions that all economic systems need to answer What good or service shall be produced? -must fill a want or need -must sell for a profit How will the good or service be produced? For whom shall the good or service be produced?

5. There are two types of goods or services Public Goods – for everyone's use- roads, schools, public transportation, etc. Private goods- owned and operated solely for the individual

6. Four types of economic systems Traditional questions are answered based on custom, habit, family history or ritual (“the way things have always been done”) they resist change (stagnant) they work together to support the entire group ex. hunting and gathering societies in Africa command: questions are answered by government officials individuals have very little control Karl Marx felt people should work for the common good ex. China, Cuba, Soviet Union in 1980’s market: questions are answered by the interaction of individuals in the market place (very little government interaction) encourages economic efficiency (specialization), freedom, growth, and consumer sovereignty ex. United States, Great Britain Mixed: shows characteristics of both a command economy and a market economy Sweden, France, South Africa

7. The American Economy based on capitalism where goods are privately owned and operated for a profit – free enterprise Adam smith wrote The Wealth of Nations in 1776: said government shouldn’t interfere (laisez-faire) self interest (individuals will do what is best for them) Competition between sellers would regulate business he believed in division of labor (specialization) “invisible hand” will guide the seller fundamentals of capitalism: people can own private property economic freedom Profit motive competition market is controlled by supply and demand price system government intervention

8. Supply And Demand Supply and Demand Demand is the ability and willingness of people to buy certain products/services a demand schedule is a table that shows how many products a person will buy at certain prices a demand curve is a graphic illustration of the quantity demanded at different prices. The law of demand states people will demand more of an item at lower prices and less at higher prices causes for changes in demand: change in consumer’s income change in consumer’s attitude change in price of a substitute good change in price of a complementary good change in the population

9. Supply And Demand Cont. Elasticity of demand: if there is a change in price and there is a big change in demand, then demand is considered elastic if there is a change in price and there is no change in demand, then demand is considered inelastic Supply is the ability and willingness for producers to make goods/services available to the consumers a supply schedule is a table that shows the various amounts of items a producer will sell at different prices a supply curve is a graphic illustration of the quantities producers will supply at various prices the law of diminishing returns says producers will make more available at higher prices and less available at lower prices causes for changes in supply: weather conditions change in production costs Supply and Demand Together in the Market the equilibrium price is the price where the quantity demanded exactly matches the quantity supplied (“perfect” market situation) A surplus is when the quantity supplied is greater than the quantity demanded if there is a surplus the government might step in and set a price floor (ex. minimum wage, cost of farmers’ crops) a shortage is when the quantity demanded is greater than the quantity supplied if there is a shortage the government might step in and set a price ceiling (ex. rent control laws)

10. Definitions DEFINE: Law of diminishing returns: says producers will make more available at higher prices and less available at lower prices Fixed Cost: same price month to month (car bill, House payment) Variable Costs: varies month to month (clothes, heat, etc) Division of Labor: dividing work up so it can get done faster Specialization: putting workers in one job so they can be efficient at it

11. Know About These price floor, ceiling, surplus and shortage

12. Demand Curve

13. Demand Schedule