1. Economics Economics is the social science that analyzes the production, distribution, & consumption of goods & services. It attempts to explain how all types of economies & economic systems work.

2. Econ Scarcity- society has limited resources & therefore it can’t produce all the goods & services that people want. – 1. Scarcity is important to economies because it shows the limits of the resources that can produce goods. – 2. Society can’t give every person the highest standard of living they want. – 3. Some scarce resources in your home would be oil & gas.

3. Econ Opportunity Costs- the cost of the next best alternative use of money, time, or resources when one choice is made rather than the other. – 1. The opportunity cost of any action is the value of what is given up for the choice that was made. – 2. What can be done to the resources available will affect other opportunities. – 3. “There’s no such thing as a free lunch.” You may think that you are getting a free lunch when it says buy 1 & get the other free, but someone had to pay for the “free” lunch. Whether it is the farmer growing the food, the truck driver delivering the food, or the chef who prepared the food.

4. Econ Production- the process of creating goods & services. The more that it costs companies to produce a good the more it affects our lives cause we have to spend more to get that good. Supply- represents how much can offered by companies or businesses. The quantity supplied refers to the amount of a certain good producers are willing to supply when receiving a certain price. Demand- refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price.

5. Econ Productivity- the amount of g &s that a worker can produce for each hour of work. 1. Everyone benefits when scarce resources are efficiently used. 2. In nations where workers produce a large # of goods & services most folks have a higher standard of living. 3. In nations where workers are less productive, the workers have a lower standard of living.

6. Econ Trade-Offs- In order to get something we want we have to give up something we like to get it. 1. Knowing there will be trade-offs through life is important cause people are likely to make good decisions only if they understand the options that they have. 2. EX: Downloading songs on iTunes. 3. Guns vs. Butter- The more the gov spends on national security to protect us from harm (guns), the less the government can spend on consumer goods to raise the overall standard of living @ home (butter).

7. Factors of Production Factors of Production- Resources required to produce the things we would like to have. – 1. The reason people can’t satisfy all their wants & needs is the scarcity of productive resources. – 2. There are 4 Factors of Production: A. Land B. Labor C. Capital D. Entrepreneurship

8. 4 Factors of Production Land- natural resources not created by man. Natural resources are available at any given time; Economists tend to think of land as being fixed or in limited supply. Labor- The work people do w/ all their efforts, abilities, & skills (JOBS: Dr., dentist, teacher etc.) Unlike land, labor is a resource that may vary in size over time cause of things like war, pop growth/death rate, & immigration impact the quality or quantity of labor.

9. 4 Factors of Production Capital- tools, equipment, machinery, & factories used in the production of goods & services. (EX: hammer, boat, book, wrench, & computer) Entrepreneurship- the ability of individuals to start new businesses in search of making money. – This involves taking risks in order to make $$$$$ – Success comes when entrepreneurs produce new products, improve existing ones, or find a better way to produce a product.

10. Basic ? Of Economics 1. What to produce? – A. A society can’t have everything it wants, so it must decide WHAT to produce. – B. If more than one thing is produced, then that means the less of something else will be produced. – C. EX: A car manufacturer must decide how to use their limited supply of labor, steel, & rubber. They also need to figure out what types & how many vehicles should be produced.

11. Basic ? Of Economics 2. How to produce? – A. For each good & service produced, there is always a tradeoff possible among the factors of production. – B. Owners/Managers of businesses must decide what combination of available resources will get the job done for the least cost.

12. Basic ? Of Economics 3. For whom to produce? – 1. After a society decides WHAT & HOW to produce a good, the goods produced must be allocated to someone.

13. Economic Systems 1. Traditional Economic system- the allocation of scarce resources, & nearly all other economic activity, comes from ritual, habit, or custom. – Individuals are not free to make economic decisions based on what they want or would like to have. Instead their roles are defined by the customs of their elders & ancestors. – Ex= Asia, Middle East, Africa, & Latin America

14. Traditional Economic system Advantages= – 1. The main strength of a traditional economy is that everyone knows their role. – 2. Little uncertainty exists over What to produce or HOW to produce a good. – 3. The FOR WHOM ? Is determined by the customs & Traditions of the society. Disadvantages= 1. It tends to discourage new ideas & new ways of doing things. 2. People who go against the traditions of the society are usually punished.

15. 2. Command Economic System An econ in which a central authority makes most of the WHAT, HOW, & FOR WHOM decisions. The economic decisions are made by the gov: the people have little, if any, influence over how the basic economic questions are answered. EX= North Korea, Cuba, & the former Soviet Union

16. Command Economic System Advantages= 1. It can change drastically over a relatively short time period. 2. Many health & public services are available to everyone @ little to no cost. Disadvantages= 1. Its not designed to meet the wants of consumers, even though many basic needs are provided. 2. The system doesn’t give people the incentive to work hard. In most command economies, workers w/ different skills & responsibilities receive similar wages. People rarely lose their jobs regardless of the quality of work.

17. 3. Market Economies People & firms act in their own best interests to answer the WHAT, HOW, & FOR WHOM ?’s A market- is an agreement that allows buyers & sellers to come together in order to exchange goods & services. EX: Many of the world’s largest & richest economies in the world such as the U.S., Canada, Japan, England, Germany, & France, have a market economy.

18. Market Economies Advantages= 1. Over time, it can adjust to changes in the market. 2. It has a high degree of individual freedom. 3. The gov has a small degree of influence on this type of econ. Disadvantages= 1. It doesn’t provide for the basic needs of everyone in society. 2. It has a fairly high degree of uncertainty that workers & businesses face as a result of change.

19. 4. Mixed Economies A combination of command & market economies that provides goods & services so that all people will benefit. Advantages= 1. Some gov regulation of prices 2. Some gov protection of the people. Disadvantages= 1.Limited power of the people. 2.Some freedoms are restricted.

20. Trade International Trade- trading different goods btw different countries. How does it happen? – 1. Cause of decisions of ppl, businesses, & gov agencies to buy goods & services produced in other nations – 2. To sell goods & services to other nations. What is the U.S.’s role in International Trade? 1. The U.S. is the world’s largest trading nation, providing 12-15 % of the g & s that other nations purchase. 2. The U.S. isn’t as dependent on international trade as some other countries cause of its large, diversified resource base.

21. Trade Gross Domestic Product (GDP)- the dollar amount of all final g & s produced w/ in a country’s national boarder. GDP is the single most important measure of the performance of a country’s economy. This is related to trade cause if a country doesn’t produce a lot of items to sell their economy will suffer. If the econ suffers then the standard of living for the people drops.

22. Trade Specialization- happens when the factors of production perform tasks that they can do more efficiently than others. If a country specializes in 1 good, they can perfect the way that a good is made % can produce more of that good than they could if they had the ability to produce other goods. W/ specialization, they don’t spread themselves too thin by doing too many things at one time. EX Henry Ford & the assembly line or a pro athlete.

23. Trade Economic Interdependence Countries rely on each other to provide the g & s that we consume. Events in one part of a country or world have a big impact somewhere else. EX: Possible labor strike w/ the NFL. If games aren’t being played, then folks that park cars, sell tickets, & serve food don’t make money. These ppl are dependent on the players to play the game so they can make $$$$$.