Introduction to Economics 5

Capitalism Defined

Warm UpUse the first 15 minutes of class to produce your goods.

NEWS FLASHThere is a gas shortage, therefore all variable costs are increased by $10.You must also create a sign for your store (make sure it includes your logo).You may use left over materials from your clothing or you can buy new paper to create your sign on.

Goods

Physical Capital- Human-made objects used to create other goods and services. E.g. factory building, specialty

machinery, etc… Can save companies time and money

in the production process.

Producer Price Index

PPI- indicator that determines the health of the nation’s economy that judges the price of materials vs. the price of finished goods from year to year.

Output versus Input

Output- the level of production; is most profitable when price is equal to marginal cost.Input- Any change in the cost of an input such as the raw materials, machinery, or labor used to produce a good, will affect supply.

Marketplace

Keep track of receipts in log books for producerFirst 5 minutes-1st person shops, other man’s shop2 minutes-adjust prices5 minutes-2nd person shopsAdd up receipts

Date Product/Purchase

Business Amount +/-

Authorization/ Signature

Balance

Warm Up:The Market

Copy and Answer:Evaluate the market. As a consumer: What items did you buy? Were they affordable? Too cheap? Too expensive? Was anything missing? As a producer: Did you have enough to sell? Why or why not?

Law of Diminishing Return

When one of the factors of production is fixed in supply, additions of other factors will lead to an increase in returns up to a point, but beyond this point returns will diminish.

Increasing returns

Recycling When a producer can reuse a material

in a new way this will increase the output vs. input ratio.

Increasing returns

Education and training When your employees are better

trained in their field/specialization they will be able to be more productive.

If they can have the knowledge to solve problems on their own, they keep work stoppage to a minimum.

Investing in your Company

Take into account new investments, purchase them and get:Education $50- 6 free sheets of white paper/3 colored /2 printed paper or fabricRecycling $75- materials ½ off