- 1. Basic Economics Unit One
- 2. I. What is Economics?
- 3. A. Study of Choice
- All decisions involve choices
- Resources are finite or limited.
- Human needs and wants are unlimited.
- Needs necessities (water, food)
- Wants luxuries, things not needed.
- Scarce when there is a limited amount of an item.
- Shortage a sudden shortfall of a product.
- 4. B. Decisions
- Trade offs always two or more options in our choices.
- Costs What is given up when making a decision.
- 5. C. National
- Butter = Domestic Spending
- 6.
- 4. Presidential Decisions
- 7. 5. Production Possibilities Curve
- A graph that shows alternative ways to use an economys
resources.
- Efficiency Using resources to maximize production of goods and
services.
- Underutilization Using fewer resources than an economy is
capable of using.
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- Cost To an economist, countries give up on ideas,
products.
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- Law of Increasing Costs Cost of producing the second item
increases.
- 8. D. Individuals
- Entrepreneurs use the Factors of Production
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- Physical Capital - All human-made goods
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- Human Capital The skills and knowledge gained by a worker
through education and experience.
- Thinking at the Margin taking into consideration the
consumption of one more unit.
- 9. II. Different Economies
- 10. A. Answering the Three Economic Questions
- What goods and services should be produced?
- How should goods and services be produced?
- Who consumes goods and services?
- Who and how these questions are decided is one of the most
significant questions in economics.
- 11. B. Economic Goals and Societal Values
- Economic Efficiency- Societies attempt to produce most out of
their resources.
- Economic Freedom- Unlimited choices.
- Patriotism- The love of ones country
- Many feel the USA should ensure economic freedom.
- Instead of economic or political freedoms, China favors freedom
from poverty instead.
- 12. C. Economics and Values
- Traditional Economy relies on habit, custom, or ritual,
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- Slow to change, but evolve into other economies.
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- These rely on bartering, are inefficient.
- Market Economy production and consumption are based on
exchanges people make.
- Command Economy central authority is in control (Moscow in
Soviet Union).
- Mixed economy in between command and market.
- 13. D. Adam Smith Wealth of Nations
- Thought self-incentives like profit motivated people.
- Companies work to provide best product and lowest price to beat
competitors.
- Marketplace automatically fixes itself principle known as
invisible hand.
- Government should stay out of economy policy known as laissez
faire.
- 14. E. Marx & The Communist Manifesto
- Marx & Engels (his co-author) had the following ideas about
people & their delusions: They
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- Want things like TV, cars, big houses (materialism).
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- Were power hungry (rich controlled poor).
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- Used religion, alcohol, drugs -to relieve themselves of
reality.
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- Workers (proletariat) were to revolt against the rich
(bourgeois) & take over government, means of production.
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- Socialist society evolves - people distribute wealth evenly
& no more oppression.
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- Eventually people would not be greedy and no longer need
government, live in harmony, in a communist state.
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- PROBLEM - Dictators can take over easily & create an
authoritarian regime.
- 15. F. Modern Economics and Mixed Economies
- Countries slide on economic continuum that ranges from command
to free.
- China is now involved in a transition period to move toward
privatization (free).
- Most nations strive to become as free as possible and let
decisions be made in the private sector.
- The USA is also privatizing (more businesses, less
regulations.)
- 16. III. American Economy
- 17. A. Free Enterprise, Yesterday and Today
- Americas birth was marked by wishes for new freedoms and less
taxes.
- Over time problems have to be met by solutions from the govt.
Follows these steps:
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- Market failure: something the private sector cannot do.
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- Public interest people want govt to intervene if the economy
cannot provide.
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- Public policy Government responds with laws.
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- Interest groups lobby politicians, or give them ideas.
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- Transportation too big for companies.
- 18. B. Providing Public Goods
- Cost of public goods is spread more evenly.
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- The cost would be higher if it were provided privately.
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- These generally benefit society as a whole.
- Benefits in the economy can be counted through cost and
profits. Others are behind the scenes or side effects.
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- Positive externalities: Wal-Mart moving close to town will
increase property values.
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- Negative externalities: Coal burning power plants = exhaust
that may harm breathing Government responds with pollution
laws.
- 19. C. Tracking Our Successful Economy
- Macroeconomics/Microeconomics = Big/Small
- Gross Domestic Product Income of a whole nation.
- Business Cycle Expansion and contraction.
- Technology Anything used to help produce (biggest advantage for
USA) has.
- 20.