Economics: Chapters
One and Two.
“The dismal science.”
What is the fundamental
economic problem?
 1. Scarcity.
 2. Economics is the study of how we can lesson the
problem of s...
Needs v. Wants.
Needs
 1. A human need is
something that a
being must have to
live.
 2. Food, air, water,
shelter….
 3....
Bill Gates Home?
What are the three economic
questions?
 1. WHAT to produce?
 2. HOW to produce it?
 3. For WHOM?
 4. Who answers these...
Dictatorship or Democracy?
 1. If one person or small group answers
the three economic questions, then it’s a
dictatorshi...
Which factor of production do
economists say is the most
important?
ENTREPRENEURSHIP!
Capital v. Labor Intensive
Economies
Capital
 1.It is the heavy use
of technology and
machines to operate
the economy.
 ...
What is Production?
 1. Production is:
 Putting land, labor, and capital into
PRODUCTION
Value, Utility, and Wealth
 1. VALUE is worth that can be expressed
in dollars.
 2. Utility. In order to have VALUE it m...
Better Productivity
Division of Labor
 1. This is the mass
production of products.
 2. Mass production
brought the price...
Economic Interdependence
 1. Modern/Market economies must trade with other
regions of the world.
 2. No country/region h...
Interdependence
Continues….
 1. Workers now compete internationally for
employment.
 2. Poor countries:
 Are overpopula...
Adam Smith
 1. Revolutionary, economic thinker who championed
the free market economy.
 2. All the powerful European pow...
The Wealth of Nations-1776
 1. There should be NO
government involvement with
business or trade.
 2. No government
monop...
Adam Smith Continued….
 1. His book was published in
1776.
 2. What do you think the
American revolutionaries
would thin...
Mel Fisher
 1. Is Fisher an entrepreneur?
 2. What eminent domain issue did he have to fight?
 3. Without the PROFIT MO...
Economic Choices and
Decision Making
 1. Trade-Offs.
 2. Opportunity Costs.
 3. Production Possibilities.
 4. Cost-Ben...
Chapter Two-Economic
Systems
 Economics Systems:
 It is an ORGANIZED way of managing the four factors
of production to p...
Three Kinds of Economic
Systems
1. Traditional.
2. Command.
3. Market.
Traditional System-
Advantages
 1. Everyone knows their role/place.
 2. Exact certainty about WHAT, HOW, for
WHOM to pro...
Disadvantages
1. Discourages new ideas.
2. Stagnant society.
3. Lack of economic progress.
Advantages of a Command
Economy
 1. Economy can change directions quickly. Soviet
Union WWII.
 2. Guaranteed jobs.
 3. ...
Disadvantages
 1. Needs first, few wants provided.
 2. Hard work not rewarded.
 3. Large government bureaucracy.
 4. L...
Advantages of a Free Market
 1. Adjusts quickly to consumer demand.
 2. Lots of individualism/innovation.
 3. Less gove...
Disadvantages
 1.Little support for some people.
Homeless people….
 2. Worker uncertainty.
 3. Market failures-
Depress...
Mixed Economy
 1. Market failure and imperfect
competition makes it necessary for the
government to intervene in the econ...
Free Enterprise v. Capitalism
 1. F.E. is a competitive system that has no government
barriers for individuals to go into...
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Economics Chapters One and Two: Intro to Basic Economics.

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Economics Chapters One and Two: Intro to Basic Economics.

  1. 1. Economics: Chapters One and Two. “The dismal science.”
  2. 2. What is the fundamental economic problem?  1. Scarcity.  2. Economics is the study of how we can lesson the problem of scarcity.  3. How can we BEST use the worlds resources to help the most people.
  3. 3. Needs v. Wants. Needs  1. A human need is something that a being must have to live.  2. Food, air, water, shelter….  3. It is the most basic of the material world. Wants  1. Wants go beyond what is needed to live.  2. Human wants are unlimited.  3. We live in a world of scarce resources.  4. When needs and wants collide it creates SCARCITY.
  4. 4. Bill Gates Home?
  5. 5. What are the three economic questions?  1. WHAT to produce?  2. HOW to produce it?  3. For WHOM?  4. Who answers these three questions in the United States?  5. The CONSUMER!  6. CONSUMER SOVEREIGNTY!
  6. 6. Dictatorship or Democracy?  1. If one person or small group answers the three economic questions, then it’s a dictatorship.  2. If the consumers answer the economic questions it’s a democracy.  3. All market economies today are democracies.
  7. 7. Which factor of production do economists say is the most important? ENTREPRENEURSHIP!
  8. 8. Capital v. Labor Intensive Economies Capital  1.It is the heavy use of technology and machines to operate the economy.  2. Technology/Machine s are very expensive to buy and operate. Labor  1. The heavy use of human labor to maintain and build the economy.  2. In poor countries human labor is cheap and plentiful.  3. Human labor is much slower and less productive.
  9. 9. What is Production?  1. Production is:  Putting land, labor, and capital into PRODUCTION
  10. 10. Value, Utility, and Wealth  1. VALUE is worth that can be expressed in dollars.  2. Utility. In order to have VALUE it must have a purpose or use.  3. WEALTH is the accumulation of money or goods with VALUE.
  11. 11. Better Productivity Division of Labor  1. This is the mass production of products.  2. Mass production brought the price of manufactured goods down.  3. This helped create a consumer economy.  4. Fredrick Taylor-Time motion studies. Specialization  1. Breaking down complex tasks down into simple ones.  2. This is the heart of mass production and the division of labor.  3. What American is famous for maximizing the division of labor idea for production?
  12. 12. Economic Interdependence  1. Modern/Market economies must trade with other regions of the world.  2. No country/region has all the resources it needs to grow.  3. Countries that trade the most are the wealthiest.  4. 80% of all the worlds trade is between the North America, Europe, Japan, China, and Australia.  “No country ever went broke because of good trade.” Ben Franklin.”
  13. 13. Interdependence Continues….  1. Workers now compete internationally for employment.  2. Poor countries:  Are overpopulated and have rock bottom wages compared to wealthy countries.  Have few taxes.  Have weak or no environmental laws.
  14. 14. Adam Smith  1. Revolutionary, economic thinker who championed the free market economy.  2. All the powerful European powers practiced MERCANTILISM.  3. Mercantilism is the control of the economy by the government.  4. The government controls trade and creates monopolies.  5. Mercantilism led to colonies.
  15. 15. The Wealth of Nations-1776  1. There should be NO government involvement with business or trade.  2. No government monopolies.  3. No government barriers for individuals to go into business for themselves.  1. Who/What would regulate business and trade?  “ INVISIBLE HAND.”  “Greed and Competition” would regulate the markets.  2. This “Hands Off” by government was/is called:  “LAISSEZ-FAIRE”
  16. 16. Adam Smith Continued….  1. His book was published in 1776.  2. What do you think the American revolutionaries would think of it?  3. What caused the Boston Tea Party?  4. Which side do you think Smith would take?  1. Republicans today view Adam Smith as one of their main economic thinkers.  2. Alexander Hamilton is also a Republican founder.  3. A Republican today is known as a “Hamiltonian.”
  17. 17. Mel Fisher  1. Is Fisher an entrepreneur?  2. What eminent domain issue did he have to fight?  3. Without the PROFIT MOTIVE, where would the treasure be today?  4. Should it be held only by a museum?  5. Without investors, could Fisher have found the treasure?
  18. 18. Economic Choices and Decision Making  1. Trade-Offs.  2. Opportunity Costs.  3. Production Possibilities.  4. Cost-Benefit Analysis.  5. The above helps us make rational choices.
  19. 19. Chapter Two-Economic Systems  Economics Systems:  It is an ORGANIZED way of managing the four factors of production to provide for the wants and needs of the society.
  20. 20. Three Kinds of Economic Systems 1. Traditional. 2. Command. 3. Market.
  21. 21. Traditional System- Advantages  1. Everyone knows their role/place.  2. Exact certainty about WHAT, HOW, for WHOM to produce.  3. Custom, custom, and more custom.
  22. 22. Disadvantages 1. Discourages new ideas. 2. Stagnant society. 3. Lack of economic progress.
  23. 23. Advantages of a Command Economy  1. Economy can change directions quickly. Soviet Union WWII.  2. Guaranteed jobs.  3. Most resources available to all, but limited.
  24. 24. Disadvantages  1. Needs first, few wants provided.  2. Hard work not rewarded.  3. Large government bureaucracy.  4. Little social/political freedom.
  25. 25. Advantages of a Free Market  1. Adjusts quickly to consumer demand.  2. Lots of individualism/innovation.  3. Less government interference with business and individuals.  4. A lot of social/economic/political freedom.  5. Great variety of consumer goods.
  26. 26. Disadvantages  1.Little support for some people. Homeless people….  2. Worker uncertainty.  3. Market failures- Depressions/Recessions.
  27. 27. Mixed Economy  1. Market failure and imperfect competition makes it necessary for the government to intervene in the economy.  2. The “Invisible Hand” does work with Monopolies and oligopolies.
  28. 28. Free Enterprise v. Capitalism  1. F.E. is a competitive system that has no government barriers for individuals to go into business for themselves.  2. Capitalism is a competitive system that involves large financial investments in technology and machinery.  3. Both are motivated by the PROFIT MOTIVE.  4. Private property and free exchange of goods/services are also protected. Maryland v. Dartmouth College.

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