Warmup 4/12/12
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Warmup 4/12/12 What are the 4 factors of production?
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Warmup 4/12/12. What are the 4 factors of production?. The American Economic System. Basic Economic Unit Part II. Types of Economic Systems. Traditional. Characteristics: Little Change Based on Custom How answer the economic questions? How they always have. Command. Characteristics - PowerPoint PPT Presentation
Transcript of Warmup 4/12/12
Warmup 4/12/12
What are the 4 factors of production?
The American Economic System
Basic Economic Unit Part II
Types of Economic Systems
Traditional
Characteristics: Little Change Based on Custom
How answer the economic questions? How they always
have
Command
Characteristics Government
controls means of production
Little individual influence
Communism & Socialism
How answer the economic questions? Government does
Socialism
Gov. owns some factors of production and distributes products and wages
Communism
Socialism under the dictatorship of the communist party
Market
Characteristics: Private
individuals control the factors of production
Individual freedom
How questions answered? By businesses
and consumers
Mixed
Characteristics: Some individual freedom some
government control
How are questions answered? Individuals do but have some
government intervention
All economies are actually mixed. What determines whether an economy is considered market or command depends on the level of
Government involvement.
Who developed the principles of a market economy?
Adam Smith
What was the Wealth of Nations?
Smith’s book that explained the principles of Capitalism
What did Smith mean by Laissez-faire economics?
“To let alone” Government
should stay out of marketplace except to ensure competition
The Invisible Hand
Belief that individuals on their own would work for own self-interest
Would be guided by “invisible hand” to use resources efficiently
Warmup
Describe the 4 types of markets.
Characteristics of Market/Free Enterprise System
Little or no government intervention – governments role in econ. is to ensure competition
Free Enterprise – Competition with little gov. interference
Freedom of Choice – individuals can choose what work to do and what we buy
Characteristics Continued
Private Property – right to own and use our property as we choose within certain legal limits
Profit Incentive – the driving force of capitalism, the ability to accumulate wealth
Competition – the struggle between buyers and sellers to get the best products at lowest prices
What does the Circular Flow Model illustrate?
How resources, goods and services, and money flow in a circular pattern
Market
The exchange of goods and services between buyers and sellers
Factor Market
Where productive resources (the factors of production) are bought and sold
Consumer Sector
Workers earn wages, salaries, and tips in exchange for labor.
Product Market
Market where goods and services (finished products) are offered for sale
Business Sector
Workers spend their incomes at businesses in exchange for goods and services.
What happens when less is exchanged in the circular flow?
The economy shrinks, productivity goes down
What happens when more is exchanged?
Economy grows, productivity increases
What is productivity?
The amount of output that can be produced by a set amount of resources in a given period of time
Productivity
Goes up when can produce the same amount of output in less time
Or
When can produce more output with same amount of resources in same time
Increasing Productivity
Specialization when people, businesses or countries focus on what they do best
Division of Labor breaking down of a job into small parts performed by different workers
Investing in Human Capital spending to improve worker skills
What do these practices create between individuals, communities and nations? Economic Interdependence creates
dependence between people for goods and services
