Economics

1
Economics

• The Basics of Economics

2
Part I

• The Basic Terms of Economics

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Needs vs. Wants

• Needs something humans require for survival
  (food, water, clothing, shelter)
• Wants something desired, beyond what is
  required for survival (IPOD, cell phone)

4
Goods vs. Services

• Good any manufactured product
• Ex. food, shoes, or TVs
• Service work done for others
• Ex. police, restaurants, doctors, beauticians,
  teachers

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People in Economics

• In any society, there are two major players in
  economics
• Producer maker and/or seller of goods and
  services
• Consumer buyer and/or user of goods and
  services (everyone is a consumer)

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Scarcity

• A shortage of goods or services
• In any society, there is never enough of
  everything to satisfy everyones wants and needs
• Unlimited wants and limited resources force
  choices.
• Individuals, businesses, and governments all make
  choices due to scarcity.

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Part II

• Resources The
• Factors of Production

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Productive Resources

• The availability of these impact the economic
  decisions
• Four major categories
• Natural
• Human Capital
• Capital Goods
• Entrepreneurship

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Natural Resources

• Would include the sun, wind, water, oceans,
  rivers, gifts of nature, and mineral resources
  available in an area

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Capital Goods

• These are the Tools
• Things that have been produced by peoples past
  efforts that are used in production of goods and
  services
• Examples Tools, equipment, buildings,
  machinery, factories

• This is not Money!
• Money is NOT a resource Money is a means or
  medium of exchange
• Money is not worth anything by itself, its value
  is what we can exchange the money for.

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Human Capital

• Investing in Human Capital involves training
  education
• When you improve people skills they will be more
  productive
• People with more education will earn more
• Teachers are investing in Human Capital

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Entrepreneurship

• Entrepreneur person who risks capital to
  produce a good or service
• Investor person who provides capital to an
  entrepreneur
• Middleman a trader who buys goods from the
  producer and, in turn, sells the goods to another
  seller or sells directly to the consumer for
  profit (involves mark up in price to consumer at
  each exchange)

• The ability and willingness to see an opportunity
  to make a profit by making and selling a
  good or service the
  willing- ness to risk capital

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Opportunity Recognition

• Entrepreneurs must recognize an unmet demand in
  the economy and try to meet it
• This involves Risk Taking
• China people grow rice in flooded fields, which
  they fish to sell
• Truett Cathy - Chick-fil-a

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Technology

• Advancements in technology have led to higher
  productivity and a higher standard of living.

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Examples of Technology

• The wheel
• Irrigation
• Hydroelectric power
• Automobiles
• Telephones
• Computers

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Part III

• Economic Systems

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Economic Systems

• Economic systems are the ways by which societies
  make economic decisions
• What to produce?
• How to produce?
• For whom to produce?
• There are four types
  of economic systems
• Traditional, Market,
  Command, Mixed

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Traditional

• Depends on History, Traditions, Custom
• Economic decisions repeat those made in earlier
  times
• Decisions are made the way they always have been
• Customs are passed on from one generation to the
  other
• Land is commonly owned
• Barter to trade one good or service for another

• Examples
• Villages of India (remote areas)
• Remote African Tribes

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Command

• Economic decisions are made by the government
• Economic decisions
• What to produce?
• How to produce?
• For whom to produce?

• Examples
• Cuba North Korea
• Former Soviet Union
• China (was command now has a mixed system)

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Market

• Economic Decisions are made by individuals
• Consumers decide what is produced by what they
  purchase
• Producers determine how to produce goods and
  services
• They want the most economical way (have to
  compete with other producers) ONLY the most
  efficient will stay in business

• Income depends upon the productive resources
  that a person has to sell
• Prices market prices are signals that affect
  production and consumption

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Mixed

• Blend of command and market systems
• Most systems are a mixture of systems (not all of
  one or the other)

• Producers determine production but the government
  sets safety standards for products
• United States OSHA, FDA, Safety Laws that
  regulate trade
• Free enterprise found with market/mixed
  economies

Mixed
Command
Market
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Law of Supply and Demand

• Supply the amount of good or service available
  for sale in a market
• Demand the amount of a good or service wanted
  in a market
• When supply is up, and demand is down,
  prices go down.
• When supply is down
• and demand is up,
• prices go up.

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Free Trade

• European Union (NO Quotas, Trade Barriers, or
  Restrictions)
• NAFTA (North American Free Trade Agreement)
• ASEAN (Southeastern Asian Nations) Trying to
  overcome barriers by trading in blocks
• SADC Southern African Development Community
• ECOWAS Economic Community of West African States

• Free Trade trade without barriers or conditions
  
• Lack of government rules or restrictions
• Trade organizations work together to benefit all
  countries

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Trade Barriers

• Any obstacles to trade are called trade barriers
• Natural Trade Barriers
• Mountains
• Rivers
• Deserts
• Oceans

• Political Trade Barriers
• Quotas a limit on an item that can be imported
• Tariffs a tax on an item that is imported
• Embargos the refusal to trade with another
  country