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Micro economicsbasics of_our_economyweek2
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  • 1. Basics of Our Economy
    What is the driving motivation of American consumers & producers?
  • 2. 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.
  • 3. Limited Resources
    How does Scarcity influence….
    Consumer Choices?
    Prices of Goods?
    Supply of Goods?
    Demand of Goods?
  • 4. Types of Costs
    Fixed Costs:
    The costs that remain basically constant no matter amount of goods sold.
    Variable Costs:
    The costs that change regularly depending on amount of goods sold.
    Total Costs: Fixed + Variable Costs
    Marginal Costs:
    The cost of producing one additional unit of a good/service.
  • 5. 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.
  • 6. Diminishing Marginal Benefit (Return)
  • 7. 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?
  • 8. 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.
  • 9. Circular Flow Model
  • 10. 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?