Economics Presentation
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Transcript of Economics Presentation
Economics
Production, Consumption and Distribution
Four Questions all Economic Systems
must Address
Four Questions All Economic Systems must address…
What is produced? *Production*
l Goods and services must satisfy the consumers wants and desires
Four Questions All Economic Systems must address…
l HOW should these goods be produced?
*Factors of Production* 1. Capital
2. Land 3. Labor
Combine the factors of production to make or produce the goods and services
Four Questions All Economic Systems must address…
l For WHOM are the goods and services produced?
*Distribution* Getting the goods and services from producer
to consumer
Four Questions All Economic Systems must address…
l HOW MANY goods and services should be produced?
*Consumption* Make enough to have a large profit and still
have consumer demand. How many is determined by supply and demand.
Supply and Demand
Supply and Demand…
l Scarcity is the inability to satisfy all wants at the same time due to limited resources
l Choices must be made as to what to produce, how much to produce and who will receive what is produced.
l PRICE: Mechanism to decide who gets goods and services. The amount that satisfies both producers for profit and consumers for value.
Scarcity
Choices
Price
Supply and Demand determine price through their interaction
l DEMAND: is the amount of a good or service that consumers are willing and able to buy at a certain price
l SUPPLY: is the amount of a good or service that producers are willing and able to sell at a certain price.
LAW OF SUPPLY : Businesses will provide more products
when they can sell them at higher prices
LAW OF DEMAND: Buyers will demand more products
when they can buy them at lower prices
Incentives
l Incite or motivate l Change economic
behavior l Something that spurs
someone into action: sale, coupons, etc.
Resources, Scarcity & Opportunity Cost
Good
l Anything that can be grown or manufactured (made)
l Food l Clothes l Cars
Service
l Something a person does for someone else in exchange for money or value.
l Doctor l Hairdresser l waiter
Resources
l Natural l Human l Capital l Combine to make goods and services
Our Basic Economic Problem…
People have Unlimited Wants
l Food l Clothing l Shelter l Schools l Hospitals l Cars l Transportation
But Resources are Limited
l Land l Soil l Minerals l Fuels l People l Money l Technology
Scarcity
l The inability to satisfy all wants at the same time;
l the NEEDS are greater than the RESOURCES
Since resources are LIMITED consumers and producers must make CHOICES
l CHOICE: selecting from a set of alternatives
l OPPORTUNITY COST: what is given up when the choice is made.
*Scarcity forces us to choose which needs and wants to satisfy with available resources. *Scarcity affects decisions concerning what and how much to produce, how goods and services will be produced and who will get what is produced
Production: (sellers) *Combining resources to
make goods and services.
*Available resources and
consumer preference determine what is produced
Consumption (buyers) *Using goods and
services *Consumer preference
and price determine what is purchased
SELLER Buyer
Economic Systems
Command Economy
l The central government makes decisions and determines how resources will be used.
l The central government owns property and resources.
l Businesses are not run for profit.
l Businesses are not run for profit.
l No competition l Lack of consumer
choice l The government sets
the prices of goods and services.
l China, North Korea, Cuba
Socialism Allows for wider range of free enterprise along with government-run activities l 3 goals:
– The equal distribution of wealth & economic opportunity – Society’s control, through its government, of all major decisions
of production – Public ownership of most land, factories, and other means of
production.
Democratic Socialism – people have basic human rights and elect their political leaders, even though government controls certain industries.
Mixed Economy
l Most common type of economic system
l Government and individuals share the decision making process
l Individuals and businesses make decisions for the private sector
l Individuals own the means of production
l Government makes plans for the public sector
l Government guides and regulates production of goods and services offered.
l A greater government role than in a free market economy
l Most effective economy for providing goods and services
l U.S. and most Western European countries are mixed economies
Free Market Economy
l Also known as capitalism or free enterprise
l Private ownership of property and resources (owned by individuals)
l Individuals and businesses make profits
l Individuals and businesses compete
l Economic decisions are made by supply and demand
l Profit is a motivator for productivity
l No government involvement
l Consumer sovereignty: buyers determine what is produced
The U.S. economy is a MIXED
ECONOMY PRIVATE PROPERTY
FREE MARKETS
PROFIT COMPETITION
CONSUMER SOVEREIGNTY
Markets are allowed to operate
without undue interference from the government.
Money, goods and services flow continuously
among individual households,
businesses and the government
Consumers determine
what goods and
services are produced by what they buy
Money left over after
all business expenses have been
paid.
Rivalry between
businesses for the same
customers; results in
better quality Individuals can
own the means of production & property without
undue government interference
