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Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
Basic economics
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Basic economics


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  • 1. Basic Economics Unit One
  • 2. I. What is Economics?
  • 3. A. Study of Choice
    • All decisions involve choices
    • Resources are finite or limited.
    • Human needs and wants are unlimited.
    • Needs – necessities (water, food)
    • Wants – luxuries, things not needed.
    • Scarce – when there is a limited amount of an item.
    • Shortage – a sudden shortfall of a product.
  • 4. B. Decisions
    • Trade offs – always two or more options in our choices.
    • Costs – What is given up when making a decision.
  • 5. C. National
    • Guns and Butter
    • Guns = Military spending
    • Butter = Domestic Spending
      • Social Security
      • Medicare
      • Medicaid
  • 6.
    • 4. Presidential Decisions
      • FDR
        • Great Depression
        • WWII
      • LBJ
        • Great Society
        • Vietnam
      • GWB
        • No Child Left Behind
        • Tax Cuts
        • War on Terror
  • 7. 5. Production Possibilities Curve
    • A graph that shows alternative ways to use an economy’s resources.
    • Efficiency – Using resources to maximize production of goods and services.
    • Underutilization – Using fewer resources than an economy is capable of using.
    • Examples:
      • Cost – To an economist, countries give up on ideas, products.
      • Law of Increasing Costs –Cost of producing the second item increases.
  • 8. D. Individuals
    • Entrepreneurs use the Factors of Production
      • Land
      • Labor
      • Capital
        • Physical Capital - All human-made goods
        • Human Capital – The skills and knowledge gained by a worker through education and experience.
    • Thinking at the Margin – taking into consideration the consumption of one more unit.
  • 9. II. Different Economies
  • 10. A. Answering the Three Economic Questions
    • What goods and services should be produced?
    • How should goods and services be produced?
    • Who consumes goods and services?
    • Who and how these questions are decided is one of the most significant questions in economics.
  • 11. B. Economic Goals and Societal Values
    • Economic Efficiency- Societies attempt to produce most out of their resources.
    • Economic Freedom- Unlimited choices.
    • Patriotism- The love of one’s country
    • Many feel the USA should ensure economic freedom.
    • Instead of economic or political freedoms, China favors freedom from poverty instead.
  • 12. C. Economics and Values
    • Traditional Economy –relies on habit, custom, or ritual,
      • Slow to change, but evolve into other economies.
      • These rely on bartering, are inefficient.
    • Market Economy –production and consumption are based on exchanges people make.
    • Command Economy – central authority is in control (Moscow in Soviet Union).
    • Mixed economy – in between command and market.
  • 13. D. Adam Smith Wealth of Nations
    • Thought self-incentives like profit motivated people.
    • Companies work to provide best product and lowest price to beat competitors.
    • Marketplace automatically fixes itself – principle known as invisible hand.
    • Government should stay out of economy – policy known as laissez faire.
  • 14. E. Marx & The Communist Manifesto
    • Marx & Engels (his co-author) had the following ideas about people & their delusions: They…
      • are greedy
      • Want things like TV, cars, big houses (materialism).
      • Were power hungry (rich controlled poor).
      • Used religion, alcohol, drugs -to relieve themselves of reality.
    • Society was to evolve –
      • Workers (proletariat) were to revolt against the rich (bourgeois) & take over government, means of production.
      • Socialist society evolves - people distribute wealth evenly & no more oppression.
      • Eventually people would not be greedy and no longer need government, live in harmony, in a communist state.
      • PROBLEM - Dictators can take over easily & create an authoritarian regime.
  • 15. F. Modern Economics and Mixed Economies
    • Countries slide on economic continuum that ranges from command to free.
    • China is now involved in a transition period to move toward privatization (free).
    • Most nations strive to become as free as possible and let decisions be made in the private sector.
    • The USA is also privatizing (more businesses, less regulations.)
  • 16. III. American Economy
  • 17. A. Free Enterprise, Yesterday and Today
    • America’s birth was marked by wishes for new freedoms and less taxes.
    • Over time problems have to be met by solutions from the gov’t. Follows these steps:
      • Market failure: something the private sector cannot do.
      • Public interest –people want gov’t to intervene if the economy cannot provide.
      • Public policy –Government responds with laws.
      • Interest groups lobby politicians, or give them ideas.
      • Examples:
        • Healthcare – unfulfilled.
        • Transportation – too big for companies.
        • Water and sewage – same
  • 18. B. Providing Public Goods
    • Cost of public goods is spread more evenly.
      • The cost would be higher if it were provided privately.
      • These generally benefit society as a whole.
    • Benefits in the economy can be counted through cost and profits. Others are behind the scenes or side effects.
      • Positive externalities: Wal-Mart moving close to town will increase property values.
      • Negative externalities: Coal burning power plants = exhaust that may harm breathing – Government responds with pollution laws.
  • 19. C. Tracking Our Successful Economy
    • Macroeconomics/Microeconomics = Big/Small
    • Gross Domestic Product – Income of a whole nation.
    • Business Cycle – Expansion and contraction.
    • Technology –Anything used to help produce (biggest advantage for USA) has.
  • 20.