Introduction to Economics

Unit 5

I. Early Economic SystemsA. Thousands of years ago…..

1. People lived in nomadic groups2. They depended on hunting and gathering for their

needs

B. Development of Agriculture….1. Humans learned to plant and harvest food2. Groups began to remain in one place3. This change in lifestyle meant it was time for new

things 4. Groups of people slowly developed into villages

then towns and cities.5. The main difficulty was protection.

II. FeudalismA. A system in which a lord gave protection to the people

who worked for him1. The people gave loyalty and economic support to the lord.2. Workers were called serfs.

B. Duties were divided among the people1. Farmers2. Weapon makers3. Soldiers

C. When the lord died, the son received the lord’s land and serfs.

D. This system of protection continued for many centuries.

III. Development of GuildsA. Feudalism was weakened as people moved

to towns and cities.B. Trade caused the towns and cities to grow.C. Two Types of Guilds Developed:

1. Merchant Guild- determined the types and prices of goods to be sold

2. Craft Guild- guilds for specific trades that helped control quality.

This was at the END of the Middle Ages

IV. Other Early Economic SystemsA. Domestic System- workers produced goods

in their homes.B. Factory System- goods were produced in

rented or owned buildings

V. MercantilismA. Idea that a country could become strong if it

stored up a great deal of wealth.B. Government took strict control of collection

of taxes.C. Made sure exports were greater than importsD. Wanted the country to have a large

population

Colonies existed to make money for the mother country!

VI. Free EnterpriseA. The individuals, not the government, makes

the economics decision.B. Each person has the right to make his or her

own choice.

EconomicsUnit 5

Early Economic SystemsThe first kind of economic system was

developed during the Paleolithic EraHunters and Gatherers

In many cases were nomadic- moved around following herds of animals and producing plants to hunt and gather.

During the Neolithic Era people began to settle down and stay in one placeCaused by the Development of AgricultureHelped people farm making it possible to grow

own food in certain months of the year

EconomicsThe study of how individuals and nations

make choices about ways to use scarce resources to fulfill their needs and wants

EconomicsDue to the history of buying and selling

goods there must be a medium of exchange

What does that mean?MONEYThe medium of exchange we use in the United

States is money.

EconomicsIn economics you must have a plan for

making and spending money.What is this called?

BUDGET

EconomicsThere are several different types of

economic systems:CapitalismSocialismCommunismFree Enterprise/Free Market

All were described in the vocabulary section. Are there any questions?

EconomicsInvolves spending moneyExpenditures

Money that government or people spend

Economic Planning Year12 month periodFiscal YearPrior to the new fiscal year government

officials spend numerous hours planning how money will be spent and made during the new year

Gross Domestic Product ((GDP)Total dollar value of all final goods and

services produced in a country per yearMeasured in Dollars

Measure of a country’s overall economic output

Positively correlated with standard of livingVery big part of economics!

Gross Domestic Product ((GDP)Why is it important?

IF GDP goes up each year, the economy is expanding

If GDP goes down the economy is in troubleIt is a measure of our standard of living

Does NOT Show-Quality of goods producedOverall well-being of society (crime, opportunity

available, etc.)

Gross Domestic Product ((GDP)If GDP of a country goes up that means…..

The economy is IMPROVINGIf GDP of a country goes down that means……

The economy is DECLININGGDP is NOT a measure of the quality of goods

produced in a countryQuantity of goods produced and sold

Gross Domestic Product ((GDP)

Gross Domestic Product ((GDP)

EconomicsPeople require certain goods to live

onOur requirements for civilization are

our NEEDSWe must have these to survive!

In Economics, sometimes we do not have enough resources to meet our needs.This is called SCARCITYEconomics is the study of scarcity

EconomicsOn the other side, people have

things they would like to have but do not needThese are our WANTSWe have unlimited wants!!Wants are things we can live without but

in many cases do keep the economy going.

Resource:- LandA. Most Countries have a large supply of

natural resources1. Water2. Forests3. Good Soil4. Coal

B. Some resources must be bought from other countries

1. Oil2. Minerals

Resource:- LandA. Natural Resources are non

renewable Once they are all gone, they are

gone foreverB. Water can be polluted

It is then difficult and expensive to clean

Resource:- LaborA. The work humans doB. Labor needs of the producers of

goods and services in America is always changing.

Resource:- CapitalA. These are the actual items needed

for productionB. Includes anything the business

needs to produce goodsC. Examples: tools, machinery,

factories, money, etc.

Supply and Demand1. Supply: degree of availability of an item

The number of items ready to sell

2. Demand: the usability of the item or how many people want to buy it

3. If supply is GREATER than demand there is a SURPLUS.

Usually causes price of the item to go down.

4. If demand is GREATER than supply there is a SCARCITY.

Usually causes price of the item to go up.

Supply and Demand1. Supply: what is for sale2. Demand: who wants to buy it3. Law of Supply

As the price increases, the supply increases. This means more sellers, yet fewer buyers.

4. Law of Demand As the price decreases, the demand

increases. This means more buyers, yet fewer sellers.