Economics part 1

scarcity

scarcity

there are not enough resources to satisfy everyone’s wants and needs

Standard of Living

The degree to which we meet our basic needs (food, clothing, shelter) and the money we have the higher the standard of living in a country

Quality of Life

Non-material factors that impact a citizen’s life - hours worked, feeling safe, freedoms you have or do not have in your society

_____________________+_______________________= scarcity

limited resources, unlimited wants/needs

three economic questions

1. _______ goods and services should be produced?

2. ____ should these goods and services be produced?

3. _______________ these goods and services?

what, how, who consumes

barter type of economy

non-cash system and the trading of different goods and services

Mercantilism

• classical conservatism type of economy

• everything is run by the government

• high tariffs

• very few/ no economic freedoms

• benefits of the home country > benefits of the colony

what type of economy is it if all three questions are answered by the government

communism

what type of economy is it if all three questions are answered by individuals

free market

two significant events in 1776

1. american independence

2. Adam Smith wrote The Wealth of Nations

Wealth of Nations

the basis of classical liberalism (economic capitalism), it was a rejection of mercantilism because of too much government control.

three main ideas of the Wealth of Nations

1. prices should be set naturally

2. invisible hand

3. competition

invisible hand

• economy should be self regulating

• do not need the government artificially setting regulations

core idea of capitalism

best product=lowest price. people and businesses should act on their own self interest would regulate the economy

Martin Shkreli

• “the pharma bro”

• bought prescription pill companies (insulin and life-saving HIV meds_

• would drastically increase the price of these drugs to the point where people could no longer afford them

oligopoly

appearance of competition, but they are all owned by the same company

three major changes that happened before the agricultural revolution

1. three field system

2. enclosure movement

3. new farming technology

three field system

• british farming system in past centuries

• combination of crop rotation, but also leaving ¼ of the land unfallowed (unplanted)

• 1/3 of the land acorss britain was unused

• solution: clover, could feed the live stock, and all of the land was being used and so there’s more food the population.

enclosure movement

made it easier for land owners to get tenants off their land (due to squatter rights)

tenant/ subsistence farmers

only make enough to feed their family, only surviving

squatter rights

if you live on rented land for a long time, you can claim this house/land for yourself.

why enclosure movement was revolutionary

small farms were able to combine into one, and produce more food for the growing population.

urbanization

tenant farmers were now able to move to cities which supplied the industrial revolution with more workers.

industrial revolution

• happened arround________

• brits had all he necessary requirements, ___________

• first time Adam Smith’s __________ put into place

• basic definition: massive transformation in __________________________________________________

• 1760’s

• colonization

• classical liberalism

• how products were made

domestic system/ cottabge industry

products being made in people’s home from start to finish. workers were very skilled.

supply, demand and price for cottage industry

low supply, high demand, high price

factory system

• production of goods now in warehouses

• large machines, and more workers

• unskilled workers, they are specialised

• led to mass production and economies of scale

economies of scale

selling millions of product at a low price

negatives of the industrial revolution

• low pay

• child labor

• long houses

• unsafe working conditions—no working condition regulations

living conditions during the industrial revolution

apartments built with no regulations. heat, water, garbage pickup. became pool of disease

two different viewpoints of factory owners

• robber barons

• captains of industry

responses to the industrial revolution

• luddites (those against technology) would protest and break into factories and destroy machines

Thomas Robert Malthus

• came up with the theory that the population will always outplace food production

• the disparity wuld eventually lead to a famine, or some sort of pandemic where many would die. this natural disaster would be known as malthusian check

• against helping the poor

David Ricardo

• agaisnt any kind of minimum wage, and any kind of government artificially setting a minimum wage

• came up with the iron law wages

iron law wages

wages should be set naturally, using law of supply and demand rather than by the government

samuel smiles

• an orphan who worked in the factories as a child

• paid his way through school and became a doctor

• started his own factories, and started to become extremely wealthy

• wrote a book called Self Help

• opposed neo classical, conservative conservatism

• believes that if he can be successful, anyone can be

• no help from the government

• believed that if people had to suffer under capitalism, that is not a flaw of capitalism. those people were just lazy

birth of progressivism/ modern liberalism

emerged as a reaction to the lack of government regulations in factories. Initially started by JS MIlls

movement towards classical liberalism and towards progressivism

• Upton Sinclair’s book “The Jungle” describing the horrific scene of a meat packing plant

• Theodore Roosevelt inspired to create the government agency called the FDA