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You Can’t Always Get What You Want
But You Can Get What You Need
Production is knowing –
What -
How - For Who -
Factors of Production-Land- fixed
Capital- items used in service
Financial Capital- money
Labor- skill
Entrepreneurs- risk takers
To have Value- an object must be
Scarce and
Wanted
But what gives an object its wealth?
Wealth-accumulation of products that are:
Tangible
Scarce
Useful
Transferable
Adam Smith- 1776
Wealth of Nations
Single job skill = production
“Nation’s wealth is defined by the sum of its labor-produced goods, not by who owned those goods.”
“A true-free competitive market-operatingwith a minimum of government intervention would bring about the greatest good for society.”
“Laissez-faire”- government’s role
Supply- volume for sale
Law of Supply- more is offered at ahigher price and less at a lower price
When sales slow, maximum price reached
Demand- desire, ability and willingness tobuy a product
Law of Demand- quantity sets the price
When demand drops, price dropsand less is produced
Pricing Theory- similar goods for similar price
Competition keeps prices down
Buyer competition keeps prices steady
Similar products sell within a narrow range
Prices get customers toforget minor differences
Competition
Monopoly- one seller of a product
Natural monopoly-
Costs minimized
“Franchise” tag
Oligopoly- dominant few
Technological monopoly- patents
Invention- covered for 20 years
Design- covered for less time
Copyright- lifetime plus 50 years
Macroeconomics- national economics employment, G.D.P., inflation, growth,distribution of income
Unskilled labor- least amount of human capital invested
Semiskilled labor- work machines with minimum training
Skilled labor- use complex equipment without
supervision
Professional labor- knowledge basededucation and managerial skills
Theory of –Wage Determination-
Supply and demand for a worker’s skill
Comparable worth- equal pay for equal work
Part time workers- less than 35 hrs.weekly
Minimum Wage-
Texas- $6.55
Lowest legal wage
Does minimum wagelower the number ofpeople who have ajob?
Minimum Wage
3% of Texas workers
1.7 million or 2.2% of U.S. workers
Tipped employees
$2.13 per hour
If tips plus $2.13 do not equal $6.55, employer must make up the difference
Employees under 20
May be paid $4.25 per hour for the first90 days on the job
Stimulates consumption- more money tolow-income workers
Increases the average living standard
Creates incentive to work
Pros of minimum wage-
More people enter the job market instead of pursuing further education
Wage increase passed on to customers
Prices unemployable out of the market
Cons of minimum wage-
Evolution of Money
Barter economy- goods for services
Money- a medium of exchange
Medium of exchange- something accepted by all parties
“Salarium” – Roman salt payment formilitary service = “Salary”-
Characteristics of Money
Portable
Durable
Divisible
Limited in supply
Developmentof Banks
Colonial banks issued own money
Gold or silver backing
1865 – 1,600 state banks10,000 kinds of paper currency
“Greenbacks” – federal currency
“Legal tender” – guaranteed
“Gold Certificates” – backed by gold - 1861
“Silver Certificates” – silver backed – 1878
“Treasury Coin Notes” – 1890 – both
Gold Standard- 1900, currency backedby set price
1933- gold or certificates must declareGold Reserve Act of 1934 exchangegold certificates
Abandoning the Gold Standard
1930s cashing in for gold
“Inconvertible fiat money standard”-Neither gold nor silver monetary standard
Ones – 18 months
Fives- 15 months
Tens- 18 months
Twenties- 2 years
Fifties and Hundreds – 8 years
Life Span of Money
Trade union- skilled workers, same job
Industrial union- all workers, same industry
Right to work law-Illegal to force unionmembership as term ofemployment
Closed shop- union workers only
Union shop- membership required afteremployment