1. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.11  12.1 Students understand common terms & concepts and economics reasoning. Standard Address 1

2. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.12 LESSON 3.1 The U.S. Private Sector  Describe the evolution of households.  Explain the evolution of the firm with respect to the changes in production processes.  Demonstrate your understanding of why international trade occurs. Objectives

3. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.13 CHAPTER 3 U.S. Private and Public Sectors 3.1 3.1The U.S. Private Sector 3.2 3.2Regulating the Private Sector 3.3 3.3Public Goods and Externalities 3.4 3.4Providing a Safety Net

4. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.14 CHAPTER 3 U.S. Private and Public Sectors  Why did households go from self-sufficiency to relying on markets?  How did firms evolve to take advantage of large-scale production?  Why do countries trade?  If the “invisible hand” of competitive markets is so great, why do governments get into the act?  Why are some people poor even in the world’s most productive economy? Consider

5. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.15 LESSON 3.1 The U.S. Private Sector  household  utility  firm  Industrial Revolution Key Terms

6. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.16 Household

7. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.17 Households  All those who live under one roof are considered part of the same household.  Households make economic choices.  What to buy  How much to save  Where to live  Where to work

8. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.18 Evolution of the Household  In 1850, the economy was primarily agricultural (about 2/3 of America’s labor force worked on farms.)  Now only about 2 percent of the U.S. labor force works on farms.

9. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.19 Evolution of the Household (Cont)  In 1950, only about 15 percent of married women with children under 18 years old were in the labor force.  Today more than half of married women with young children are in the labor force.  The rise of two-earner families has reduced the significance of specialization within the household.

10. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.110 Households Maximize Utility  Utility is a level of satisfaction or sense of well-being.  Economists assume that households try to act in their best self-interests by selecting products and services that are intended to make them better off.

11. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.111 In what ways has households evolved over time?  Over time, there are more two-earner households due to the higher education levels among women and the increased demand for labor.  Therefore, there is less production in the home and more purchasing in the market.  Members of many households have moved from working on a farm to working in an office or a factory Checkpoint: Pg-63

12. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.112 Firms

13. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.113 Firms  A firm is an economic unit formed by a profit-seeking entrepreneur who combines resources to produce goods and services and accepts the risk of profit and loss.

14. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.114 Evolution of the firm  Specialization and comparative advantage help explain why households are no longer self-sufficient.  Transaction costs could easily cancel out the efficiency gained from specialization.  It would take too much time to specialize in every task, for example in making a sweater.  Sheep  Wool  Yarn  knitting

15. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.115 Cottage Industry

16. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.116 Evolution of the firm (cont)  The cottage industry system—an entrepreneur hired households to turn raw material into finished products.

17. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.117 Centrally Planned Factories

18. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.118 The Industrial Revolution Centrally Powered Factories  Promoted more efficient division of labor  Allowed for direct supervision of production  Reduced transportation costs  Facilitated the use of specialized machines

19. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.119 The Industrial Revolution  Began in Great Britain around 1750  Development of large-scale factory production

20. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.120 The Industrial Revolution  If you made this sweater from scratch what would it be worth?  Think about what it cost to produce  How much time did you have to invest?  How many resources did you have to use?  How much are all your specialization skills worth?  How much is this sweater worth? Revenue $ – Cost of Production $ = $ Profit $

21. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.121

22. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.122 How have production processes changed over time?  The production process evolved from self-sufficient rural households to Cottage industry, where specialization occurred in the household. From there the industrial revolution led to factories Checkpoint Pg. 65

23. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.123 The Rest of the World  The rest of the world affects what U.S. households consume and what U.S. firms produce.  International trade  Gains from international trade occur because the opportunity cost of producing specific goods differ from across countries.

24. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.124  [Insert Figure 3.2 U.S. Production as a Percentage of U.S. Consumption] U.S. Production as a Percentage of U.S. Consumption Need to IMPORT Need to EXPORT

25. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.125 The Rest of the World (Cont)  Trade in raw materials  If production falls short of consumption, the U.S. purchases the difference from other countries.  If production exceeds consumption the U.S. sells the difference to other countries.  The U.S. is a net importer of oil and metals and a net exporter of crops.

26. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.126 Why does international trade occur?  International trade occurs because the opportunity cost of producing specific goods differs across countries. Checkpoint Pg. 66

27. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.127 Key Concepts #1. #2. #3. #4. Assessment

28. © SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.128 Key Concepts Assessment