1. Chapter 2

2.  What are your long term and short term goals?  Keep track of everything you buy and how much you spend on those items/services. (Ask for receipts and record on the activity chart.)

3.  Definition:  A way in which people, businesses, and governments use resources to satisfy wants and needs  The means by which a society produces and distributes goods and services

4.  Answered based on views and wants of people 1. How should goods and services be produced?  For every good and service produced, there is always a trade-off possible among the available factors of production  What combinations of available resources will get the job done for the least cost?  i.e. farmer : 10 people with horse- drawn plows OR 1 person with a tractor???

5. 2. What and how much should be produced?  World of scarcity and trade-offs  If more of one thing is produced, less of something else will be produced  i.e. farming: more corn = less of other crops 3. Who should produce what?  Different people do different jobs  Career choice relates to who should do what

6. 4. Who should share what is being produced?  Distribution of income: money payment for work, the amount of healthcare, education, food each person receives, distribution of goods and services among all members of an economic system THIS DETERMINES TYPE OF SYSTEM!!!

7. REFERENCE INDIVIDUAL GOALS: How will you go about achieving these goals? **Identify steps to achieving the goals! QUESTION: How is this process difficult for an entire national, or even international, economy? What choices would be most difficult to make?

8. 1. Traditional System 2. Command or Controlled System 3. Market or Capitalist System 4. Mixed Economic System

9. Way too confusing!!! But you get the idea

10. 1. Traditional System  System in which economic decisions are based on customs, beliefs, and ways of doing things that have been handed down from generation to generation  Things are done “the way they have always been done”  Exist in: parts of Asia, the Middle East, Africa, and Latin America

11. 2. Command or Controlled System  System in which the government controls the factors of production and makes ALL decisions about their use (controlled economy)  Government may be one person, small group, or larger  Exists in: North Korea, parts of China, Cuba, Venezuela, etc.

12. 3. Market or Capitalist System  A system in which individuals own the factors of production and make economic decisions through free interaction while looking out for their own best interests – THE GOVERNMENT DOES NOT INTERVENE  MARKET: freely chosen activity between buyers and sellers of goods and services  Do business with those who best satisfy their needs and wants  Producers decide how to use their goods and services based on signals from the market  People may sell their labor as they wish  DOES NOT CURRENTLY EXIST IN ANY COUNTRY (Did exist in historical U.S.A.)

13. 4. Mixed Economic System  System combining characteristics of more than one type of economy with others so that the mix varies and the economic system created leans more toward one pure type than another.  Exists in: US, European Union, Australia, S. Korea, Canada (lean capitalist); parts of China, Russia, and parts of S. America (lean command system)

14. 1. Of the three major systems, name one positive and one negative of each. 2. What blend do you think would be the best blend in a Mixed Economy? List at least 4 characteristics (keep them ECONOMIC in nature) and tell me why you think they would be beneficial. 3. The definition of “Mixed Economy” states that it typically leans toward one of the other major systems. Which way does your “ideal” economy lean? Explain your answer.

15.  Percent: parts per hundred Example: Sales tax = PA 6% (.06) Ex. #1 MP3 Player cost $32, 32 x.06 = 1.92 Tax = $1.92 Cost + Tax = Total $32 + $1.92 = $33.92  Figuring Percentages: to find percentage, divide price you pay by original price. Ex. #2 Boots are 35% off of original price of $48. 48 x.35 = 16.80 48 – 16.80 = 31.20 Sales Price = $31.20 Savings = $16.80

16.  Percent: parts per hundred Example: Sales tax = PA 6% (.06) Ex. #1 MP3 Player cost $32, 32 x.06 = 1.92 Tax = $1.92 Cost + Tax = Total $32 + $1.92 = $33.92  Figuring Percentages: to find percentage, divide price you pay by original price. Ex. #2 Boots are 35% off of original price of $48. 48 x.35 = 16.80 48 – 16.80 = 31.20 Sales Price = $31.20 Savings = $16.80

17.  Percent: parts per hundred Example: Sales tax = PA 6% (.06) Ex. #1 MP3 Player cost $32, 32 x.06 = 1.92 Tax = $1.92 Cost + Tax = Total $32 + $1.92 = $33.92  Figuring Percentages: to find percentage, divide price you pay by original price. Ex. #2 Boots are 35% off of original price of $48. 48 x.35 = 16.80 48 – 16.80 = 31.20 Sales Price = $31.20 Savings = $16.80

18.  What role does government play in your school life? (School Regs???)  Free Enterprise with some Regulation  6 Characteristics 1. Little or no government control 2. Freedom of enterprise 3. Freedom of choice 4. Private Property 5. Profit Incentive 6. Competition

19.  Interrelated and Present in American Economy  People work for own self-interest (not the interest of the state or party)  “Invisible Hand” (Adam Smith 1776) – the effect of competition in guiding individuals toward working for their own self-interest, therefore achieving the maximum good for society. (American Dream)  WHY DO WE FIGHT FOR OUR NATION IF WE ARE MOTIVATED FOR SELF-INTEREST?

20. Role of the Government  Capitalism – economic system in which private individuals own the factors of production and decide how to use them within the limits of the law. (market economic system and free enterprise)  Ideal system according to Adam Smith, has never existed in its purist form  Influenced American founders who limited government mainly to defense and keeping peace  This has changed significantly since the 1880s in regulating business and providing public services

21. Role of the Government Continued…  Profit – money left over after all the cost of production have been paid  Cost: Includes wages, rent, interest, taxes, & materials  Government at some level owns property  i.e. post offices, government buildings, fire/police, water/sewer  Eminent Domain: 5 th Amendment: government cannot take private property away to expand its economic role (or for public use without just compensation – must pay owner fair price)

22. Freedom of Enterprise  Free Enterprise System: system in which individuals own the factors of production and decide how to use them within legal limits  Your abilities and resources will help determine the good or service to produce, the quantity, & methods of production  No guarantee of success – may lose money  Legal limits = i.e. age, # hours worked

23. Freedom of Choice  Other side of Free Enterprise  Buyers make decisions about what should be produced  Success or failure of a good or service in the market place depends on individual freedom of choice –You can buy what you want to buy;  Government has intervened in some areas to protect the buyer. i.e. 1) standards for autos, toys and appliances 2) regulate prices to industries where there are only a few companies (public utilities)

24. Private Property  Whatever is owned by individuals or groups rather than federal, state, or local government.  Constitutional Guarantee  Can buy what you can afford and control how it is used, within the law  If you own a business, you can personally make the profit (not the government).

25. Profit Incentive  Desire to make money that motivates people to produce and sell good and services that other want to buy  If no one buys what a seller produces, there is no profit  Risk of failing is part of free-market enterprise  Some industries are so large, that if they failed it would seriously damage the economy as a whole and put thousands out of work.  Example: Chrysler, Farmers, Bank of America

26. Competition  The rivalry among producers and sellers of similar goods to win more businesses by offering lower prices or better quality  Number of competitors affect price of product therefore the higher number of competitors, the lower the prices (or the opposite)  i.e. cars

27. Competition Continued…  Businesses have to keep prices low enough o attract buyers, yet low enough to make a profit.  Competition requires that companies can enter or exit any industry they choose.  Expansion of old industry into new  i.e. Pfatzgraft, VCR’s, VCR players  Barriers: for the most part the U.S. has “weak barriers”  Some professions have stronger barriers  i.e. doctors, lawyers, public utility, TV station,etc.

28. Aims of a Market Economy – Our National Goals 1. Economic Efficiency – using resources wisely so that others will be as well off as possible 2. Economic Growth – expansion of economy to produce more goods, jobs and wealth 3. Security & Equity – protecting people against poverty and supplying them with means to create a “level field” (fair and just) 4. Individual Freedom – allows each member of society to enjoy freedoms of enterprise, choice, private property and decisions in the marketplace 5. Stability – seeks to reduce the standard of living (material well-being and access to goods and services of an individual in reference to the average of the whole nation)

29. SCARCITY To meet these goals a plan of action must be developed. It often involves “economic policy making” by elected or appointed officials – SCARCITY must be factored into their plans!

30. “In a world of scarcity, achieving national goals requires sacrifices by certain members of society. Any program to provide more economic security, more justice, or more equitable treatment of people involves a trade-off.” Key to understanding economic political system!!!

31. 1. High level of economic and personal freedom WHAT IS THAT PRICE?  Freedom and choice come at a price – WHAT IS THAT PRICE? 2. A high standard of living  Standard of living tied to one’s own choice of career, how $ is spent, invested, etc. 3. Diverse lifestyles  People can choose a number of jobs, part-time, full-time, multiple jobs, shifts, etc.

32. TO HAVE A WELL FUNCTIONING ECONOMY: 1. Be able to support yourself (welfare dilemma; values based argument) 2. Education may be offered to you free of charge but does NOT Go without opportunity cost, therefore it is your responsibility to use your education to become a productive member of the free-enterprise 3. Elect responsible government officials