© South-Western Educational Publishing GOALS LESSON 1.1 MARKET ECONOMIES Compare three types of economies Describe and explain the characteristics

© South-Western Educational Publishing

GOALSGOALS

LESSON 1.1MARKET ECONOMIES

Compare three types of economies Describe and explain the characteristics of

a market economy

Scarcity

The conflict between unlimited wants and limited resources.

Scarcity is the most basic problem facing economic systems.

In order to decide how to use its scarce resources, a country must answer 3 economic questions…



Key Economic Questions

1. What to produce? Should resources be used to provide consumer goods, industrial goods, or military goods?

2. How should things be produced? What kinds of industries and equipment should be used?

3. For whom should they be produced? Which of its citizens should benefit most from what is produced?


Types of Economic Systems

Traditional Economy Things are done according to tradition and progress

is slow Developing or third-world countries

Command Economy The government owns the businesses and controls

the economy. Officials make decisions on what /how goods are

produced and how they will be shared.

Types of Economic Systems

Market Economy Businesses and individuals are free to make

their own decisions as they buy and sell in the marketplace (where sellers and buyers do business).

Generally found in countries that have a democratic form of government.

Capitalism,, or free enterprise, means that economic resources are privately owned by individuals rather than by the government.



Characteristics of Market EconomiesPrivate Enterprise

An individual's right to own a business, select a market to enter, and produce with limited government direction.

Yare free to succeed or fail

Private Property You can own, use, sell, and dispose of things of

value or things you create. Business properties can include land, buildings,

tools, and the goods the business produces.

Characteristics of Market EconomiesProfit

The amount of money left over from sales after subtracting all of the expenses of operating the business.

The desire to work hard, to be creative, and to satisfy customers in order to earn a profit is called the profit motive.

Profit motive helped market economies outperform the other types of economies.


Characteristics of Market EconomiesCompetition

The rivalry among businesses to sell their products and services to consumers.

Gives consumers the opportunity to choose from a variety of products and services by comparing the quality, prices, appearance, usefulness, and general appeal of products and services..

Encourages businesses to improve their products, services, and customer satisfaction.



GOALSGOALS

LESSON 1.2MAKE DECISIONS

Explain how an economy meets needs and wants

Describe the six-step decision-making process


Needs and Wants

Needs are things that are necessary for our survival. Ex: Food, clothing, housing, etc.

Wants are things that are not necessary for survival, but add comfort and pleasure to our lives. Ex: Blueray disc player, Xbox 360, Nike shoes, etc.


Goods and Services

Goods are things you can see and touch. Ex: Cell phones, I-Pods, Sporting Equipment, etc. Goods are generally referred to as products.

Services satisfy needs and wants through the efforts of people or equipment. Ex: Vehicle repair, cable company, hair stylist, etc.

Economic Resources

The means through which goods and services are produced.

Also referred to as factors of production.

3 types…



Economic Resources Natural Resources

The raw materials supplied by nature. Come from the earth, water, or air.

Human Resources (Labor) The people who work to produce goods and services.

Capital Resources The tools, equipment, supplies, and buildings that are

used to supply goods and service. Capital is used to start, operate, or expand a business. Money is a type of Capital.

Economic Decision Making

The process of deciding among several alternative wants the one that you most desire.



The Decision-Making Process

6. Review Your Decision5. Act on Your Choice

4. Choose One3. Evaluate Choices

2. Identify Choices1. Define Problem

PROBLEMPROBLEM

GOODGOODDECISIONDECISION


GOALSGOALS

LESSON 1.3HEALTHY ECONOMIES

Discuss three measurements of an economy's health

Name and describe the four phases of a business cycle


Economic Measurements

Gross domestic product (GDP) The total dollar value of all goods and services

produced in a country in one year. Includes three major categories

What consumer spend for food, clothing, and housing.

What businesses spend for buildings, equipment, and supplies.

What government agencies spend to pay employees and buy supplies.

Gross Domestic Product

Base year – prices in any year are compared with this year.

Constant Dollar (real GDP) – dollar amount when the effect of price increases is taken out.

GDP Per Capita – the total GDP divided by the total population.



Labor productivityThe number of item produced per worker. Productivity = Number of units produced (output)

Number of hours worked (input) Ex: Productivity = 10,000 units = 125

80 hours Worker Productivity – the productivity of one worker.



Inflation A sustained increase in the general

level of prices for goods and services.

DeflationA sustained decrease in the general

level of prices.



The Business Cycle

Prosperity The phase where most people who want to

work are employed and businesses produce goods and services in record numbers.

Recession A phase of the business cycle where demand

for goods and services begins to decrease, production decreases, unemployment begins to increase, and GDP growth slows down.

The Business Cycle

Depression A phase of the business cycle marked by a

prolonged period of unemployment, weak sales of goods and services, and business failures.

Recovery The phase in which unemployment begins to

decrease, demand for goods and services begins to increase, and GDP begins to rise again.



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LESSON 1.4PARTICIPATE IN AN ECONOMY

Define three economic roles performed by people in an economy

Discuss standard of living and quality of life


Economic Roles

ConsumerWorkerCitizen


Demand and Supply

Demand is the relationship between the amount of a good or service that consumers are willing and able to buy and the price of the good or service.

Supply is the relationship between the amount of a good or service that businesses are willing and able to provide and the price of the good or service.


Your Economic Well-Being

Standard of living refers to the way you live as measured by the kind and quantity of goods and services you can afford.

Quality of life is the satisfaction and enjoyment that you get from your life.

Documents

© South-Western Educational Publishing GOALS LESSON 1.1 MARKET ECONOMIES Compare three types of economies Describe and explain the characteristics