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Economics Basics

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Economics Basics. Wants and Needs. What is the difference ... Shows the basics of how economic systems work and how firms and people fit into these systems ... – PowerPoint PPT presentation

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Title: Economics Basics


1
Economics Basics
2
Wants and Needs
  • What is the difference between the two?
  • Needs essentials
  • Wants luxuries

3
Goods Services
  • Good tangible things that satisfy human wants
    and needs
  • Service intangible things that satisfy human
    wants and needs

4
Economic Way of Thinking
  • Decision making process.
  • Determining how the choices you make will impact
    you economically

5
Basic Economic Problem
  • SCARCITY
  • Results from unlimited human wants/needs and
    limited available resources

6
Three Basic Economic Questions
  • What goods and services should be produced?
  • How should these goods and services be produced?
  • For whom should these goods and services be
    produced?

7
Who answers these questions determines what type
of economic system you have
  • Command the government
  • Market the people
  • Mixed the people with government oversight
  • Traditional the customs and beliefs of society

8
Spectrum of Economic Control
Command
Market
MIXED
Total government control of the economy
Private citizens control the economy
9
The 4 Types of Economic Systems
10
Four Factors of Production
  • Land / Natural Resources
  • Labor/Human Resources
  • Capital
  • Entrepreneurship

11
Land/ Natural Resources
  • Things in their natural state and have not been
    altered by humans
  • Examples trees, crude oil, coal, land

12
Labor/Human Resources
  • Human effort that is applied in producing the
    goods and services
  • Example lumberjack, truck driver

13
Capital
  • The tools used in labor to make the product
    machines, trucks, factories
  • Capital can be raw materials after they have been
    altered by labor Previously produced goods
    Example lumber gasoline
  • Money is only considered capital if it is used to
    purchase things necessary for production Example
    money spent to purchase a factory

14
Entrepreneurship
  • What is needed to bring all other aspects of
    production together
  • Managerial ability- include the ability to
    organize, direct, control
  • Risk taking have to take risks in order to be
    successful

15
Circular Flow Model
Lets look at the big picture How do economies
function?
  • Shows the basics of how economic systems work and
    how firms and people fit into these systems

16
Product Market
Factor Market
17
Circular Flow Model
  • Flow of money is counter-clockwise
  • Flow of goods/services the factors of
    production is clockwise

Goods Services
Factors of Production
18
A look at the top of the circular flow model
  • Households buy products from the product market
    finished goods and services which are supplied
    by the firms
  • Jeans move from the firm to the product market
    and then to you the household buyer
  • Money from the household flows to the product
    market and then back to the firm

19
A look at the bottom of the circular flow model
  • Households provide factors of production to firms
    in the form of labor they sell, natural resources
    they own, or in savings they invest
  • Firms buy the factors of production from the
    households firms pay wages to workers, which
    serves as income to households
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