Basics of Our Economy What is the driving motivation of American consumers & producers?
Key Vocabulary Consumers: those who need/want goods and services produced by producers. Producers: those who produce what consumers need/want. Supply: the amount of a good/service producers make available to consumers Demand: the amount of a good/service consumers want.
Limited Resources How does Scarcity influence…. Consumer Choices? Prices of Goods? Supply of Goods? Demand of Goods?
Types of Costs Fixed Costs: The costs that remain basically constant no matter amount of goods sold. Examples? Variable Costs: The costs that change regularly depending on amount of goods sold. Examples? Total Costs: Fixed + Variable Costs Marginal Costs: The cost of producing one additional unit of a good/service.
Types of Revenue Marginal Revenue (AKA Marginal Benefit): The revenue or benefit of producing one additional unit of a good/service. How do producers make decisions? Cost-Benefit Analysis: Comparing the cost and benefit of a decision. (Benefit should outweigh Cost) Diminishing Return (AKA Diminishing Marginal Benefit) The revenue or benefit of each additional unit goes down.
Key Vocabulary Economic Interdependence Factor Market Product Market Gross Domestic Product (GDP) Standard of Living How does everyone in our economy depend on each other?
How do we Measure our Economy? GDP (Gross Domestic Product): Total Value of all finished goods and services produced in a country. Standard of Living Quality of life based on necessities and luxuries.
Circular Flow Model How many sectors, or parts, does our economy have? What are they? Why is it called the “Circular Flow” model? What is something important that flows from Businesses to Households? …from Households to Businesses? …from Businesses & Households to the Government? …from Government to Businesses & Households?