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Name: _____________________________________________ Date: _________________________ Per: ____Economics Outline NotesWhat is Economics?EconomicsDefinition:______________________________________________________________________________________________________________________________________________________________There will always be a demand for things people ____________ and things they ________________._____________________ = required for survival_____________________ = things we would like to haveScarcitySince we have unlimited needs and wants and limited resources, this leads to _____________________.Lack of a particular resource is called scarcityExamples of scarce resources: ______________________________________________________________________________Examples of resources that are not scarce: ______________________________________________________________________________Three things to know about scarcity:Scarcity is not the same as ___________.Scarcity requires ____________.This is generally done through price. When a resource is scare price rises.Leads to ___________. Definition = struggle between consumers and producers to get the best goods and services at the lowest price. Law of SupplyLaw of supply - as the ___________ of an item goes up, suppliers will attempt to maximize their profits by increasing the ______________ offered for sale Businesses will provide ________ products when they can sell them at higher pricesLaw of Demandthe _____________ the price, the _____________ the quantity demanded Consumers will purchase __________ products when they must buy them at higher pricesLaw of Supply and Demandthe effect that the availability (supply) of a particular product and the desire (or demand) for that product has on pricelow supply + high demand = ________________greater supply + lower demand = ___________________Making Economic DecisionsThree Basic QuestionsAn economy needs to answer three basic questions because of scarcity:___________________ to produce___________________ to produce___________________ to produce Trade-offsThe alternative you face if you decide to do one thing rather than another.____________________ forces us to make choices!When you face trade-offs, there is always an _______________________________________________.Definition: _______________________________________________________________Example: _______________________________________________________________Other CostsFixed = ____________________________________________________________________Variable = ____________________________________________________________________Total = ____________________________________________________________________Marginal cost = ____________________________________________________________________Marginal benefit = ____________________________________________________________________Making Economic Decisions: Cost- Benefit AnalysisComparing _________________________________ and ____________________________________.If we decide rationally, we should choose actions where the benefits are_________________ than the costs. Example: Regular Buffet = $5 Steak Dinner + Buffet = $8The Marginal Cost = $3 and the Marginal Benefit is SteakWhich is of higher value to you? You will choose which one is worth more to you, $3 or steak.Economic SystemsTypes of Economic Systems Traditional EconomiesA pure traditional economy answers the basic economic questions according to __________________. Things are done as they were in the past based on tradition, customs, and beliefs (religious). People grow their own food and make their own goods.Examples: ____________________________________Command SystemsThe ___________________________ controls the factors of production.The individual has little ____________________________________ over how the economic questions are answered in a pure command system. Examples: _______________________________________________________Market System (Free Market Economy)A system based purely on __________________________________________In this system the ________________________________ does not intervene.___________________ own the factors of production and decide the answer of the basic economic questions. Buyers and sellers exchange goods and services as they choose.Examples: ________________________________________Mixed Economic SystemsThis economic system contains elements of the _______________________ and ____________________system of government with few elements of ____________________________ economics. Examples: ________________________________________________________Adam Smith and Capitalism _______________________ economist and philosopherWrote The ____________________ of ________________________ in 1776Individuals left on their own would act in their own ___________________________________Guided by _____________________________________Role of government is to guarantee free __________________________________________Laissez-faire economics = “ to let alone” _______________________________________________________________________Influenced the philosophy on economics of the ______________________________________Capitalism________________ - An economic system in which private citizens own and use the factors of production in order to seek profit.Another term used is _________________________________________ , which is a system which allows ____________________________ to flourish.Sprung from two concepts:People could work for economic ___________________________________________________________ should have a limited role in the economy. Components of Capitalism______________________________ - where prices of goods and services are determined______________________________- ability to choose job and when/where we want to work.___________________________________ - freedom to use and own our property as we see fit.______________________________ - struggle between buyers and sellers to get lowest prices.______________________________- driving force that encouraged people to improve position____________________________ - buyers and sellers freely and willingly engaging in market transactions Factors of Production and What’s GDP?Production in the U.S.Generally produces two things:______________________________________________Factors of ProductionThe economic resources necessary to produce goods and services.There are four types:____________________________________________________________________________________________________LandAlso known as ________________________________________“ The gifts of nature”Examples:___________________________________________LaborThe ______________________________________ and __________________________ efforts that people contributeCapitalManmade items: factories, tools, _______________________________, and ________________________________ used to make other products.EntrepreneursThe ___________________ who use the other factors of production in new waysOpening new _______________________ and creating new _____________________Invention vs. Innovation – assumes risks for new business ventures Examples:_________________________________________________________Productivity Definition: ______________________________________________________________________________________________________________________________________________Applies to all __________________________ of productionWays to improve productivity ___________________________________ = concentrating on one good or service___________________________________ = dividing one job into multiple smaller jobsInvesting in _______________________________________, or the skills and abilities of peopleLeads to economic ____________________________What is gross domestic product (GDP)?Currency value ( such as U.S. dollar) of all ____________ goods and services produced within a country in a given periodTotal _________________________ of a nation_______________________ of nation’s economic well-beingMeasure of a nation’s economic ______________________ from one period to the next What’s included in GDP?_______________________________ by households___________________: groceries, clothes, iPods_____________________: haircuts, oil changes________________________________ by businesses and householdsFixed assets for _________________________New homes, inventories _______________________________ expenditures by local, state, and federal governmentRoads and schools ________________________________Value of a country’s___________________ to other nations, minus its ________________from other nations GDP = Consumption + Investment + Government spending + Net Exports What’s not included in GDP?Intermediate goods Used goodsUnderground production (___________________________________)Financial transactionsHousehold productionStay at Home MomsTransfer payments Standard of Living_____________________ of life based on the how much we haveThe ___________________________ of necessities and luxuries that make life easierQuantity vs. QualityGDP measures how much, but not how wellExample: ___________________________What GDP does not tell usDoes not measure ________________ distributionDoes not measure non-monetary output or _______________________________Does not take into account desirable _________________________________, such as leisure or environmentDoes not measure social ________________________________Correlates to ______________________________________________ but is not a measure of standard of livingMoney and TradeFunctions of MoneyHas _____________ functions:Medium of _________________________________________ of valueMeasure of _________________. Types of Money Anything people are willing to ____________________ for ___________________ can be considered money. Most common types of money today: Coins = ______________________________________________________Currency=__________________________________________________________________________ Accounts _____________________ Accounts Protecting the Financial SystemFederal Deposits ________________________ Corporation (FDIC)____________________________________________________________________________________________________________________________________The Federal ReserveResponsible for regulating the ______________ in the US.Also responsible for supervising the __________________________ in the mercial BanksSavings and Loan Associations (S&Ls)Credit UnionsPrimarily controls the amount of money in the US through monetary policyThe actions that determine the size and rate of growth of the money supply, which in turn affects __________________________If the money supply grows too fast, the ________________________________ will increase; if the growth of the money supply is slowed too much, then economic growth may also slowTradeMoney____________________ trade because its value transfer between countries Trade Value Activity!Group 1Group 2Group 3Group 4Group 5 TotalRound 1Round 2Round 3The Economy and YouWhat can you do to be involved in the economy?_______________________________Read/Watch the ________________Gather _______________________ on businesses Understand __________________________=________________________________________________________________________________________________________________________________Examples: Jolly Ranchers/CandyUnderstand the Role of ________________________To provide what the __________________________________cannotMaintain __________________________________________ incentives Your Role in the EconomyWhat is your role in the economy? __________________________Consumer Rights ___________________________ : Movement to educate buyers about the purchases they make and to demand better and safer productsConsumer ________________________________________ major rights:Right to a safe productRight to be informedRight to chooseRight to be heardRight to redress (payment for damaged goods) Consumer Responsibilities If your product isn’t _________________________, it is the consumers responsibility to begin the process of getting it _________________NOT BY YOURSELF!Fixing it yourself will cancel ______________________, the promise made by seller to repair or replace a product within a certain amount of time.Ethical Behavior=_________________________________________________________________Examples: Returning a used itemRole as a ConsumerUse of your incomeDisposable: __________________________________________________________________Discretionary: __________________________________________________________________ (rent, utilities, groceries, etc.)You can pay using:CashCharge Account/ Credit CardDebit Cards _______________________ MakingOpportunity Cost_______________________Deciding how you will spend your money Consider your __________________ SavingDefinition: _______________________________________________________________________Saving is good for the economy as a whole:You have more money to ____________________ laterWhen a business saves, they can expand _______________________________If you place your money in a savings account, you earn _________________________, the payment received when you lend money or allow someone else to use your moneySaving involves a ____________________________Buying something bigger later vs. something cool now ................
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