Fundamental Economic concepts
FEC #5- Productivity
- trade/voluntary exchange promotes economic progress
- Mutual gain- both parties winning out; both meet a need or want therefore you have been productive
- Why is trade productive?
- Trade channels goods and services to who values them the most- based on what you value
- Trade allows for specialization- good at one thing, bc of that trade it allows you to do what you want to do
- Specialization allows for advances in technology - anything that makes a process easier and more efficient
- Production Possibilities Curve- a graph that illustrates the usage of resources
- Constant opportunity costs- if you produce the same amount of the same good, your costs stay the same
- Law of increasing opportunity costs- more time, more ingredients to make those things; if i increase my product of one thing, it will increase the costs
- Produce more=cost more
Picture of handout
FEC#6- Economic Systems
The ways in which people (Micro or Macro) organize economic life to deal with the basic economic problem of scarcity
Micro Economic Systems
- individuals/households- creating a budget, bank, money in stocks, financial advisors, personal accountant
- Businesses- creating a budget, personal accounting team
Macro Economic Systems- how an entire country would use its resources to satisfy its population’s needs and wants
\n
Every country/goverment has to answer 4 questions:
What should be produced?
How should it be produced?
Who should get it?
How do you promote progress within the system
\n
Types of Economic systems -
Traditional system -
Comand system - when the government answers the meets of production
Socialism and/or communism? - North korea, russia, china, cuban
Property - government government is choosing social or economic system telling what jobs no private property
Market System - The people are the ones answering for economics and people are controlling what to do
Also known as capitalism - political freedom because we started in economic freedom
Characteristics of a Market System:
Private property
Freedom of Enterprise and choice - you can do with what you want you have you can choice to do what you want freedom of choice, mutual gain
Competition - good the more options the better products and the cheaper product
Specialization and technology - you want them to get really good
Use of Money - use of currency that is universal conversal universal of money
Active, but LIMITED, Government - regulate the economy to protect the people we do not want the governments to dictator what to do
Its a supply and demand issue and not a political issue
\n \n \n
FEC #7 - Circular Flow Model
Also called graph of the market
Shows producers and Consumers and their interactions
FEC #8 Interdependence
- Choices in one part of the economy affect all other part of the economy
- For each, brainstorm a list of all that would affected
- You use your gas money for the month on a new pair of shoes - you will have no way to get anywhere, and you will probably be in a cycle and end up losing their car parents diving you to school no gas, getting to school, not going to school, paying the shoe store instead of the gas will having input into the shoes
- A household saves little to no% of their income over 10 years - they were go in debt and will probably lose their house lose their expenses. Pay interest.
- Volkswagen shuts down their plant in Chattanooga - They will have no investments in their product and will lose their franchise hear in chattanooga many jobs, less goods and service effect the economy,
- Economic Chrisis of 2008 - Recession
- video - housing market low interest rate looked like a high investment rate or housing market, banking industry they made it super easy to get a loan the bank owes a bunch if house and both markets failed at the same time banking industries created auto, businesses, schools and personal loans were affected and failed it went global because they had international loans. inflation rate has dropped and job reports are failing.
- This is a sign of independence for economic crisis of
- Studying 5,6,7,8