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