INTRODUCTION TO ECONOMICS.pdf

INTRODUCTION TO ECONOMICS Economics - study of how individuals and societies make decisions about ways to use scarce resources to fulfill wants and needs. Macroeconomics - focuses on the actions that governments and countries take to influence broader economies. Microeconomics - concerned with the...

INTRODUCTION TO ECONOMICS Economics - study of how individuals and societies make decisions about ways to use scarce resources to fulfill wants and needs. Macroeconomics - focuses on the actions that governments and countries take to influence broader economies. Microeconomics - concerned with the actions of individuals and businesses. Resources - things used to make other goods Needs - things we need in order to live (ex. Division of labor - different people Food , shelter, clothing) perform different jobs to achieve Wants - things we desire but can live without greater efficiency (ex. Gadgets & jewelry) Consumption - how much we buy Production - how much goods and services an If we INCREASE land, labor, capital we individual, business, country makes. INCREASE production Goods - tangible products we can buy If we DECREASE land, labor, capital we Services - work that is performed for DECREASE production others GPD (Gross Domestic Product) - the total 4 Factors of production peso value of ALL final goods and services 1. Land - Natural resources produced in a country in a year 2. Labor - Physical and Intellectual 3. Capital - Tools, Machinery, and Cost and Revenues Factories Cost - the total amount of money it 4. Entrepreneurship - Investment takes to produce an item Revenues - the total amount of peso a 3 parts to the Production Process company or the government takes in Factors of Production - what we Fixed Costs - the amount of money a need to produce goods and services business must pay each month or year Producer - company that makes Variable Costs - the amount of money goods and/or delivers services a business pays that changes over time Consumer - people who buy goods Total Costs = Fixed + Variable Costs and services Capital Goods - are used to make other goods Consumer Goods - final products that are purchased directly by the consumer Changes in Production Specialization - dividing up production so that goods are produced efficiently  Marginal Costs - the additional cost Fall of the Berlin Wall in 1989 of the NEXT UNIT produced Collapse of the Soviet Union 1991 Profit - the money you have left after Free Market Capitalism (w/ some paying for business expenses (Profit = Mixed Economies) the only show in Revenues - Total Cost) town Cost Benefit Analysis - a process of comparing the projected costs and Free Market Economies benefits of a decision to determine its Economic questions answered by feasibility producers and consumers Limited government involvement Traditional Economics - A basic economic Private property rights system where customs and traditions guide Wide variety of choices and products how trade and business are done U.S. & Japan Economic questions answered by Adam Smith custom 18th century Scottish economist Predominantly Agricultural Published “The Wealth of Nations” in Developing or “3rd World” 1776 Trade and barter oriented Explained the workings of the free Low GPD & PCI (per capita income = market within capitalism economies avg. inc.) Invisible hand of the market Laissez-faire - government stays out Command Economies - A system where the of business practices to let the market government or a central authority controls and place determine production, directs all economic activities, including what consumption, and distribution goods are produced, how they're made, and Individual freedom and choice who gets them. emphasized Economic questions answered by the government Principles of Capitalism Very little economic choices Competition - more businesses means No private ownership lower prices and higher quality Communism products for consumers to buy. Old Soviet Union, Old Communist Voluntary Exchange - the concept China, Cuba, and North Korea that people may decide what and when they want to buy and sell Karl Marx Private Property - property owned by 19th century German economist an individual Author of “Communist Manifesto” Consumer Sovereignty - the power of and “Das Kapital” consumers to decide what gets ○ Government should control produced economy and distribute goods Profit Motive - people want to make and services to the people or save money. Their “Self Interest” Founder of revolutionary socialism motivates Capitalism. and communism Social Safety Nets - policies and programs that help individuals and Communism Falls families manage risk and volatility, Market reforms in China in the mid protect them from poverty and 1970s  inequality, and help them to access ○ Usually the “labor” in economic opportunity. production Salary - the amount of pay a person Mixed Economy/Socialism - A mixed gets over a year (especially for economy is where private businesses run, but ”professional” jobs). the government also plays a big role in White Collar controlling and supporting the economy. ○ Office job Government involvement and ○ Usually control production ownership and control of property, decision making, and companies. When Production Decreases Government control of business Downsizing - laying off employees to Social “safety new for people save costs Socialism Outsourcing - Hiring workers in other Common in Europe, Latin, America, countries to do a set of jobs and Africa Bankruptcy - A condition under which a person or corporation is John Maynard Keynes declared unable to pay debts Out of Business - lose all your A British economist said that to help a business, money, and profits country recover from a depression, the The current trend in the U.S is that government needs to spend money to manufacturing jobs are declining boost investment and spending. The Invisible Hand doesn’t always How does “Labor” protect itself? work Labor Unions - organizations of workers who have banded together to achieve a common goal Keynesian Economics ○ Wage protection Government should intervene in ○ Workplace safety economic emergencies through tax ○ Benefits and spending (Fiscal Policy) and ○ Job protection changing the money supply (Monetary Policy) Collective Bargaining & Strikes This is done to smooth out the Collective bargaining - business cycle (expansion and Representatives of the Union and the recession) and keep inflation low. company negotiate a contract for the This economic theory says that the workers; usually they rely on government should spend more compromise during tough times to help the Strikes - times when workers refuse to economy and spend less when the work until owners improve conditions economy is doing well. Labor Wages - what companies pay employees for their labor (usually based upon an hourly rate) Blue Collar ○ Manufacturing, work with hands