2. Economics

3. The student will understand that the production, distribution, and consumption of goods/services produced by the society are affected by the location, customs, beliefs, and laws of the society. What theme is this? Production, Distribution, and Consumption

4. Vocabulary Terms Three Types of Economies:Traditional, Market, and Command Trade barriers, tariff, quota, embargo How economies grow: Entrepreneur, GDP, land (natural resources), human capital, capital, and specialization On the following slide write anything in white in your notes.

5. 3 Types of Economies 1. Command-Government controls everything! 2. Market-It’s all about the consumer! 3. Traditional-Think of a remote village in Africa. Everything is made by hand and made in the village. There is no exporting or importing. Today, no country in the world has a completely traditional, command, or market economy. They are ALL mixed,which means they have parts of all three economies (Think of a recipe.).

6. Pure Market (100) Pure Command (0) Draw this in your notes. (50) Where do you think America would be on this line??

7. Trade Barriers Definition- Anything that makes trade difficult or impossible Examples: physical trade barriers (mountains, deserts), war, a weak economy, too much government regulation A tariff is a tax placed on imported goods. Many nations use tariffs to protect their industries from foreign competition by raising the price of imported goods. If the imported goods are more expensive, consumers will buy the cheaper domestic goods.

8. Quota Quotas set a limit on the amount of certain goods that can be imported into a country.

9. Embargo An embargo forbids trade with another country. Embargoes are usually created for political reasons. For example, the United States prohibits the export of weapons to countries that sponsor terrorism. The embargo is intended to pressure another countries’ governments into doing what we want them to do.

10. Currency Exchange Before people from different countries can buy or sell anything to each other, they have to solve a basic problem. Buyers have to be able to change their money from their country's currency to the seller's national currency. This is called "foreign exchange." Each currency, whether it's the US dollar or the Japanese Yen, has a value in terms of other currencies. This is the "exchange rate." Without a reliable supply of foreign exchange in each country, and without relatively stable exchange rates, world trade would drop drastically. Everything you buy wouldn’t be “Made In China!!”

11. Why do we need a currency exchange system??? If you want to trade with another country, you must have a way to find out how much your currency is worth compared to theirs. US sellers want to be paid in US$, but how much is the US$ worth compared to the rest of the world’s currencies??? The answer- Exchange rates provide a procedure for determining the value of one country’s currency in terms of another country’s currency.

12. How do Economies Grow? Factors of Production There are four factors –land (natural resources), human capital, capital, and entrepreneurship - that influence economic growth. Economic growth is usually measured by calculating the percent increase in Gross Domestic Product (GDP)- the total value of goods and services produced in a country in one year.

13. How do Economies Grow? Resources that influence economic growth Natural Resources- something of value that is not man-made, that is used to create the goods and services we use everyday. What are some examples?? Do all countries have the same natural resources?? Do they give some countries an advantage??

14. How do Economies Grow? Resources that influence economic growth HUMAN CAPITAL – education and training needed to make goods and services. CAPITAL : man-made goods which are used in the production of other goods. Examples: machinery, tools, factories, and technology.

15. Entrepreneurs ENTREPRENEUR- Someone who has an idea for a good or service and takes a risk to produce it (does not have to be a businessman). Why are they important?? They combine the other 3 factors of production in an innovative way to make a profit.

16. Investment and GDP Increasing investment in Human capital= increase in GDP (the opposite is also true). Increasing investment in capital=increase in GDP. Natural Resources do not always = higher GDP. Countries must manage the $$ from their resources wisely. (Best example of not using $$ wisely-Africa) Entrepreneurs = higher GDP.

17. Specialization “Do what you do best; trade for the rest!” Because no country in the world has all of the resources they need to produce all of the goods and services they need, they “specialize” in what they can make. It is an efficient way to work, making the cost lower. Countries focus on products that they make best and that are in demand in the world market. It is like being an expert in something. Think of it this way, it is hard to make A’s in all subjects. Some people are better in some subjects, so that is their specialty.

18. Specialization Advantages of Specialization You make and sell what you are good at a lower cost and trade it for things that would cost you more to make. (Good Example-Japan) There are disadvantages. You can over-specialize (example: one-crop economies) How might this lack of diversification impact a region’s economy?