ECONOMICS

D AY 4 – F R I D AY, J A N U A RY 8 T H

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OPENER: DAY 4 - FRIDAY, JANUARY 8TH

OPENER: DAY 4 - FRIDAY, JANUARY 8TH

• Econ Basics Quiz

– Clear off your desk – you only need a pencil or pen

– All electronics should be put away

– No talking, squawking (disruptions), gawking (looking around) or

walking during any assessment

– Make sure to write your name on it and follow all instructions

– Raise your hand if you have any questions

– Double and triple check your answers, then…

– Raise your hand when you’re done

– When you’re papers are collected, be quiet until everyone is done

WHAT DID WE LEARN YESTERDAY? • Economic Equation

Land + Labor + Capitol = Output

Natural Resources + Human Resources + Capitol Resources = Output

• T.O. = Trade Off- the sacrifice of one good in order to purchase or produce another.

• The cost of the T.O. is called a O.C.

• Opportunity Cost- the value of the next best alternative in terms of money, time, value and utility.

• Economic Goal = Achieve the highest productivity or output

with our resources or inputs.

–Don’t waste anything - materials, energy, efforts, money,

and time

• Productivity – the value of our output for every unit of input

(i.e. efficiency)

WHAT DID WE LEARN YESTERDAY?

• To be more productive we must:

–Create more output with the same inputs

–Create same output with less inputs

• How to increase productivity?

• Division of Labor

• Specialization

• Invest in human capital

WHAT DID WE LEARN YESTERDAY?

• We measure and compare productivity using a Production

Possibilities Curve (or Frontier)

• A Production Possibilities Curve (PPC) shows all of the possible combinations of two goods or services that can be produced within a stated period given two assumptions:

1. That the amount of available resources and technology will not change.

2. That all of the factors of production are being used in the most efficient way.

WHAT DID WE LEARN YESTERDAY?

PPC Rules:

1. Any point on the PPC uses existing resources efficiently

2. Any point outside the PPC is not realistic, attainable or sustainable

given existing resources

3. Any point inside the PPC is inefficient

WHAT DID WE LEARN YESTERDAY?

• PPC Movements

WHAT DID WE LEARN YESTERDAY?

Movement Reasons

PPC moves to the right/outward More Resources

Better Technology

PPC moves to the left/inward Fewer Resources

Wars

Natural Disasters: Earthquakes, etc.

Disease: Ebola, Bubonic Plague

Point is inside the PPC Resources are not being used efficiently

ECONOMIC SYSTEMS

• An economic system is a system of production and

exchange of goods and services as well as allocation of

resources in a society.

• The system is determined by who answers the 3 basic

economic questions

1. What goods & services to produce?

2. How should these goods & services be produced?

3. Who gets to consume these goods & services?

TRADITIONAL ECONOMY

• Traditional Economy – an economic system that is based on customs and beliefs.

– People will make what they’ve always made.

– They do things the same way as their parents and grandparents.

– People are not free to make their own decisions on what they want.

• Exchange of goods is done through bartering – exchanges with no money involved

• Examples of these societies do not really exist any more. Native American societies and India in the past were like this.

COMMAND ECONOMIES

• Command Economy – One in which a central authority

makes all economic decisions about how best to

allocate resources.

• Examples of these economies include Cuba, North

Korea, and China.

MARKET ECONOMY

• Market Economy – One in which people or businesses’

use their own best interest to make a profit. These

economies are based on supply and demand.

• Buyers and sellers answer the economic questions as

they come together to exchange goods and services.

• Examples include the USA, Great Britain and Japan

MIXED ECONOMY • Market + Command = Mixed Economy

• There are no pure market or command economies. To some extent, all existing economic systems demonstrate characteristics of both systems and can be called mixed economies.

• Economies are usually closer to one type of economic system than the other.

• People/businesses own most resources and determine what & how to produce, but the government may regulate certain industries.

STRENGTHS OF THESE ECONOMIES

• Traditional – Sets certain economic roles for all members of the community. It is stable, predictable, and continuous for life.

• Command – Capable of dramatic changes in a short time.

• Market – Very resilient and self-sustaining. Is able to self-adjust to change gradually. Individual freedom for everyone. Notable lack of government interference. Decentralized decision making. Variety of goods and services. High degree of consumer satisfaction.

WEAKNESSES OF THESE ECONOMIES

• Traditional –Discourages new ideas and new ways of doing things. Usually has a lack of progress.

• Command – Does not meet the needs of consumers. Lacks incentives to get people to work. Has little flexibility to deal with small changes. New ideas are discouraged.

• Market – Rewards only productive resources. Many people are too young, old, or sick to work. Must guard against market fluctuations.

ECONOMIC GOALS OF THE USA

• Economic Freedom – Be whatever you want to be.

• Economic Efficiency – Waste few resources

• Economic Equity – Anyone can get ahead regardless of gender, ethnicity, etc.

• Economic security – Protect workers from downtimes in economy

• Full employment – Everyone who can work should work

• Price stability – Prices shouldn’t jump up or drop down too

dramatically.

• Economic growth – Economy should improve every year

ALL MARKET ECONOMIES SHARE…

• Economic Freedom – Be what you want to be

• Voluntary Exchange – Trade with whoever you want

(almost)

• Private Property – Government doesn’t own business’

and land

• Profit motive – Motivated by Money

CONTINUUM OF ECONOMIC SYSTEMS

QUESTIONS FOR REFLECTION

• What are the four economic systems?

• Which economic system would you like to live in? And

why?

• How would you feel if a central government controlled

what you could buy and all prices?

HOMEWORK – DAY 4, JANUARY 8TH • Remember – review your notes from class!

• Unit One Test next week

• Before you leave class today, make sure to get your

Guided Reading for tonight!

• Using your Economics textbook or online textbook, read

the rest of Chapter Two – Sections 3 and 4.

• As you read, write in all missing words and phrases.

• Remember to answer the questions at the end with

complete thoughts and sentences.