Upload
avani
View
71
Download
0
Tags:
Embed Size (px)
DESCRIPTION
ECONOMICS DPM REVIEW. Basic Economic Ideas. Scarcity is everywhere! (Unlimited needs/wants-Limited resources) When a choice is made, the opportunity cost is the value of what is given up. Therefore, all countries must make choices when answering the three economic questions. - PowerPoint PPT Presentation
Citation preview
ECONOMICS DPM REVIEW
Scarcity is everywhere! (Unlimited needs/wants-Limited resources) When a choice is made, the opportunity cost is the value of what
is given up. Therefore, all countries must make choices when answering the
three economic questions. What should be produced? Who should produce them? Who will get them?
The Factors of Production (FOPS): Land (natural resources) Labor (people working) Capital (things businesses use to make money) Entrepreneurship (people who invent things, for example)
Basic Economic Ideas
The PPF
Shows the possible combinations of two goods that can be produced
Shows scarcity and opportunity cost: make more of one, give up some of the other
Points inside the curve are possible, but underutilizing resources
Points outside the curve are impossible for now, but might be in the future with technology advances
Supply and Demand
Demand curve: shows what consumers are willing and able to buy at various prices Price goes up, quantity
demanded goes down Supply curve: shows
what consumers are willing and able to by at various prices. Price goes up, quantity
supplied goes up
Supply and Demand
Markets will return to equilibrium without government interference
A price of $1 will create a shortage where the quantity demanded is greater that the quantity supplied. Government imposed=
price ceiling A price of $3 will create a
surplus where the quantity supplied is greater than the quantity demanded Government imposed=
price floor
Supply and Demand
Determinants Demand Curves will shift
due to changes in: Taste and Preferences
of consumers Income of consumers Buyers (number of) Expectations of
Consumers Related goods (price
of) Supplements and
complements
Supply Curves will shift due to changes in: Technology Other goods (price
of) Number of Sellers Expectations of Firms Resource Prices Subsidies and Taxes
Subsidy- “tax in reverse”
Shifting Supply and
Demand Curves INCREASE TO THE
RIGHT DECREASE TO THE
LEFT
Circular Flow Model
Remember: Firms purchase stuff in the factor market People purchase stuff in the product market Below: Red arrows are physical flow and green arrows are
monetary flow
Types of Economic
Systems
Command• Total amount of government interference
Communism
• Large amount of government Interference
• Example- China, North Korea
• Karl Marx
Socialism• Some government interference, government owns the FOPS
Capitalism• Market system with a amall amount of government interference
• Example- United States
Free Market• No government interference
• Adam Smith
GDP: total dollar value of all final goods and
services produced in an economy in a year (measures the growth of the US economy by calculating output of businesses in America)
Types of Unemployment: Seasonal Structural Frictional Cyclical
Economic Indicators
Revenue: money taken in by the federal
government, largest source of revenue- income taxes
Expansionary Fiscal Policy: Government lowers taxes and increases spending (practiced during contraction in business cycle)
Contractionary Fiscal Policy: Government raises taxes and decreases spending (practiced during inflationary period)
American Fiscal Policy
Set up to regulate the US monetary policy and
control the supply of American currency Tools of the FED:
Discount Rate-Amount of interest The Fed charges member banks to borrow money
Reserve Requirement: Percentage of deposits that member banks are forced to hold onto
Open Market Operations: The Fed’s action of buying or selling US government securities
The Federal Reserve
Money is used as a unit of accounting when you
compare prices of the same item at different retailers Exchange Rate: the amount of foreign currency that can
be bought with US currency (effects the price of imports) Absolute Advantage/Comparative Advantage:
Absolute: country/company can make more of an item than another
Comparative: country/company can produce an item at a lower opportunity cost
Protectionism vs Free Trade: protectionists want barriers to trade while those in favor of Free Trade do not
Money and Trade
LEVELS OF
COMPETITION Thus, the MARKET STRUCTURE for an
American business depends on their unique competitive situation
There are 4 basic levels of competition Pure Competition Monopolistic Competition Oligopoly Pure Monopoly
Tips for Credit Cards: Charge only what you
can afford, pay your balance each month, stay away from cash advances)
Which pays more interest: checking or savings account
Are US Treasury Bonds typically seen as a safe investment
Personal Finance