2. ECONOMIC SYSTEM COMPONENTS

3. Private Ownership l Control of productive resources land labor capital that are used to produce goods and services

4. Supply and Demand l Consumers are the demand l Producers are the supply When demand is high prices go up When production is higher than demand prices go down

5. Profit Motive l Desire to make money for goods and services consumers want. l Most powerful force that drives our economy

6. Competition l Have to offer the best product or service for the lowest price. l Requires efficient management of productive resources

7. Free Economic Choice l Individuals & businesses have the right to make choices about spending earning saving investing producing

8. Government Involvement l Regulates taxes, spending and monetary policies

9. Gross Domestic Product l The most frequently used method for measuring economic performance l Current value of all goods and services produced in a country in a year l GDP

10. Consumer Price Index l A common method for measuring inflation l Measures monthly changes in the price of about 400 goods and services that people buy regularly

11. LAW OF SCARCITY l All economic systems are based on the fact that resources are limited while needs and wants are unlimited !

12. Applies to: l Individuals l Businesses l Government

13. ANTI-TRUST LAWS l Prevents monopolies restraints of trade

14. MONOPOLY l A single company controls the entire supply of a product or service

15. PROGRESSIVE TAX l Income Tax is an example l People with the higher incomes pay the higher tax