1 Free Enterprise System Consumer Roles in the US & Global Economy
2 Consumer Roles in Economy Personal Economic Analysis - The study of the roles people play in an economic system. Citizen Worker/Employee Consumer
3 Economics Today Economics The study of the process that involves making choices as people try to satisfy their needs and wants
4 Needs and Wants Write down at least 10 things you would like to buy within the next month.
5 Economics Today Wants and needs are met by obtaining goods and services Goods – are tangible, can be seen/touched Services – are intangible, cannot be seen/touched
6 Economics Today Scarcity – the lack of something that satisfies a want or need (unlimited wants and needs in a world with limited resources) Because of scarcity we must make choices, which lead to opportunity costs
7 Economics Today Unintended Effects - Things don’t always go as planned Opportunity Costs - The cost of an alternative that must be forgone in order to pursue something else Examples
8 Opportunity Cost What is given up to do something different. Save my money or go on vacation?
9 Mr. Walton just gave the class $1000 to spend on only ONE thing. What are we going to buy? Discuss scarcity, choice, and opportunity costs related to this decision Economics Today
10 Economic Growth Personal Income Consumer Price Index Gross Domestic Product Inflation Unemployment Rate Economic Growth is measured by:
11 Gross Domestic Product Consumer Spending + Government Spending + Business Investment +Foreign Trade =GDP The total value of all final goods and services in an economy
12 Inflation Inflation - When Prices Increase A dollar cannot buy as much as it used to
13 Inflation What can cause an increase in prices? Change in interest rates Surging economy
14 Inflation Who is Hurt by Inflation? Who is Helped by Inflation?
15 A retired person who lives on fixed interest from bank certificates of deposit (CDs) Helped or Hurt?
16 A family that bought a house and has a fixed interest rate mortgage Helped or Hurt?
17 A retired teacher whose income comes from a fixed pension? Helped or Hurt?
18 A two income family. The wife is a medical doctor and the husband is a financial analyst? Helped or Hurt?
20 Labor Force – over 16, willing and able to work Underemployment - Job requires less skills than you have; working part-time instead of full-time Unemployment – over 16, not working, but actively seeking Employment
22 The Business Cycle Prosperity/Peak – The high point of a business cycle Recession/Contraction – Economy is in a period of decline Depression/Trough – The lowest point of a business cycle Recovery/Expansion – A rise in business activity after a recession or depression
23 Our Free Enterprise System The Business Cycle prosperity recession depression recovery years ---->>
24 Our Free Enterprise System prosperity What conditions would exist in an economy if there was: Prosperity/Peak High employment High demand for goods and services Businesses producing as many goods and services as they can
25 Our Free Enterprise System prosperity What conditions would exist in an economy if there was: Recession/Contraction Spending falls Fewer goods and services demanded Unemployment rises
26 Our Free Enterprise System prosperity What conditions would exist in an economy if there was: Depression/Trough High unemployment Low productivity
27 Our Free Enterprise System prosperity What conditions would exist in an economy if there was: Recovery/Expansion Production starts to increase Unemployment decreases GDP grows
28 Four Factors of Production LAND LABOR CAPITAL ENTREPRENEURSHIP
Four Factors of Production Land – all natural resources, minerals, and other raw materials (land, water, vegetation, animal life, atmosphere) 29
Four Factors of Production Labor – the effort that a person devotes to a task for which they are paid 30
31 Capital Physical capital Human capital Liquid capital Four Factors of Production
Physical capital – human- made resources used to produce other goods and services (equipment, tools, machinery, technology, buildings, factories) 32
Four Factors of Production Human capital – knowledge and skills a worker gains through education and experience (college degree, training, on-the-job experiences) 33
Four Factors of Production Liquid capital – Cash or money that can be used to purchase needed factors of production 34
Four Factors of Production Entrepreneurship – The people who organize land, labor, and capital to make goods and services; and assumes risk for the business 35
Global Economy Imports – goods coming in from another country Exports – goods going out to another country Outsourcing – building/making something overseas Tariffs – tax on imported/exported goods 37
38 Global Economy Does what’s happening in the rest of world effect the US? What if we didn’t export or import? Why is this international trade so important? Which countries are the most economically stable?
39 Global Economy Have computers changed the way business is done?