12/3 Warm-UpPut your name on p. 213-214 and pass up.

1. What are the 3 basic economic questions?

2. What is the manufacturing process where interchangeable parts are added to create an end product?

Bonus Question: SCOTUS refused to hear a case about taxes. Describe it.

Remember Yoda?

There is no try….

Origami Yoda demo-Skilled craftsperson vs. assembly line

Origami Yoda experiment analysis Who produced the most Yodas? Skilled

craftspeople or assembly lines? Who produced the best Yodas? Which was more rewarding/fun?

Costs of Production review

Walmart is trying to decide if they should hire more workers during the Christmas season.

Fixed costs? Opportunity cost?

Variable costs? Incentive?Marginal costs? How do they decide?

Marginal revenue?

After the quiz Start work on review on pp. 219-220

Capitalism , Free Enterprise, or Market Economy

p. 215-216 in manual

Objective: Examine the components of a market economy through notes and circular

flow diagram.

Definitions Capitalism: an economic system in which

private citizens own and use the factors of production in order to seek a profit.

Free Enterprise/Market Economy: another term used to describe the American economy. In a free enterprise economy, competition is allowed to flourish with minimum government interference.

Features of Capitalism 1. Private Ownership of Resources: we have the

freedom to own and use, or dispose of, our own property as we choose as long as we do not interfere with the rights of others. This gives us the incentive to work, save, and invest because we can keep what we earn.

Features of Capitalism2. Self Interest Motives (economic freedom):

Choice is a key element in a free enterprise system. Each person can choose the type of job they want to have and when and where they want to work.

As consumers we have the right to choose the products that we will buy.

Features of Capitalism Businesses have the right to choose the products that

they will produce and sell. Individuals must accept the consequences of their

decisions (i.e. if someone starts and business and fails, the government usually won’t help them out).

Features of Capitalism Profit: the amount of money left over after all

the costs of production have been paid.

Profit Motive: the driving force that encourages individuals and organizations to improve their material well-being.

Features of Capitalism 3. Consumer Sovereignty: the idea that the consumer

is the “king” or ruler of the market, the one who determines what products will be produced (businesses try to produce the products

that people want most.)

Coke’s epic failure-New Cokewas on the market for 79 days

Features of Capitalism4. Markets: places

where the prices of goodsand services are determined as exchangetakes place.

Features of Capitalism 5. Competition: the struggle that

goes on between buyers and

sellers to get the best products at

the lowest prices. This competition

keeps the cost of production low

and the quality of goods higher

than they would be otherwise.

Buyers also compete to find the

best products at the lowest prices.

The Spread of Capitalism Two important concepts that laid the

foundation for the market system that is the base of capitalism:

the idea that people could work for economic gain.

the idea that the government should have a very limited role in the economy.

The Spread of Capitalism Adam Smith: Scottish economist and philosopher

who wrote The Wealth of Nations in 1776, which describes English life and trade and describes the basic principles of economics for the first time.

The Spread of Capitalism1. Smith believed that all individuals seeking a

profit end up benefiting society as a whole.

2. From the ideas of Smith and others, developed the idea of laissez-faire economics. (“to let alone”) According to laissez-faire, the government should not interfere in the market place. The government’s role is strictly limited to just a few actions that allow for free competition in the marketplace.

He also believed that the invisible hand guides a nation’s resources to their most productive use. Tools of the invisible hand include self-interest and competition.

Greed is Good

The Circular Flow of the Economy

Factor Market

Product Market

Classwork REVIEW SHEET p. 219-220 TEST on Intro to Econ Wednesday STUDY – STUDY – STUDY

Chickenomics: How does the San Diego chicken use thesecharacteristics of a Free Market EconomyFree Market Economy to become successful?

Chickenomics video (21:23)

Give an example of each: Private Ownership of Resources Self-Interest Motives Consumer Sovereignty Market Competition