Goods and Services
52
Source:http://www.wealsite.com/shopping-cart-cnvbkgnd.jpg
Labor and Money
Source: http://dothr.ost.dot.gov/careers/workers.gif
Government and Taxes
Source: http://www.voteutah.org/learning/images/taxes1.jpg
Goods and services are
sold to consumers
Money is exchanged in
order to get the goods
and or services one
desires.
Citizens pay taxes so
that government can
provide services to
citizens.
In order to earn the money
to purchase goods and
services citizens provide
their labor to an employer.
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The circular flow of economic activity explains why
we work at our various jobs. We work to earn a
paycheck so that we can pay taxes and purchase
goods and services. At the same time government
uses those taxes to provide needed services for its
citizens.
Goods and Services
53
Source: http://www.campbellsoup.ca/lfe/english/images/bts-goods.gif http://www.econofix.com/bank.jpg
Scarcity
Source: http://www.iwmi.cgiar.org/Press/Images/Scarcity%202000.gif
Supply and Demand
Source: http://www.netmba.com/images/econ/micro/supply-demand/supplydemand.gif
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Scarcity is the idea that there is not enough of most
products for everyone and this causes goods and services to
have a value or price.
The forces of supply and demand cause things to have a price. Market or equilibrium
When supply is lower than demand then there is a shortage price is the price where
and price will increase. When supply is greater than demand
supply and demand are
then there is a surplus and price should decrease.
equal.
The forces of supply and
demand help determine
the price of products.
Law of Demand
54
Source: http://ingrimayne.saintjoe.edu/econ/DemandSupply/Figure4.1.gif
Diminishing Utility
Source: http://www.ltscotland.com/healthykids/resources/soda.gif
Elasticity of Demand
Source: http://www.swedetrack.com/gasoline.gif
An increase or decrease
in one’s pay can affect
the amount of goods and
services you demand.
Chicken and beef are often
substituted for each other
by consumers when one is
higher than the other.
Because everyone needs
gas constantly----gas
has a relatively inelastic
demand
Accessory controllers and
custom chairs see higher
sales when video games
sell well.
Changes in the product
The idea of diminishing utility
preferences and
describes the concept of people
popularity will affect the having a limited desire for a
demand of consumers.
product no matter the price.
The law of demand says that people will tend to buy
more of a product as the price decreases.
Law of Supply
55
Source: http://www.cssd.ab.ca/tech/social/tut9/Hotpotatoes/images/supply.gif
Productivity and Supply
Source: http://www.pm.gov.uk/files/images/Productivity-table.jpg
Resources and Supply
Source: http://www.kings.k12.ca.us/kcoe/curric/history/resources/mountns2.jpg
Gasoline is a product with inelastic supply because no matter
the price it is difficult for producers to process more gas at
the refineries.
Government regulation can
affect the cost of
products thereby affecting
supply and price.
Increases or decreases in
productivity will change
the supply.
The law of supply says that
producers will supply more
of a product as price
increases.
The cost of natural resources The law of diminishing returns states that the productivity
will affect the price
gained from a factor of labor will increase to a certain extent
producers have to charge.
before it begins to diminish.
Comparative Advantage
56
Source: http://www.arizonacap.com/images/made_in_usa3.jpg http://www.korpios.org/resurgent/chinastar.gif
Assembly Line--Mass Production
Source: http://www.power-technology.com/contractor_images/fg_wilson/Assembly-Line.jpg
Opportunity Cost
Source: http://www.stpetersburgtimes.com/News/112300/photos/NIE-Opportunity-costs.jpg
Assembly line production
breaks the manufacturing
process into pieces in order
to speed up production.
Places such as Sam’s Club use
economies of scale to reduce
cost and increase profits.
Blue Collar labor is the
term applied to workers
who perform physical
work.
Some products, such as shoes,
require a large amount of
human labor and are known as
labor intensive jobs.
Comparative advantage is
when a nation can produce The use of technology and
mechanization have helped
a product better or
increase productivity.
cheaper than others.
The increased
productivity of American
workers helps offset
the cheaper labor of
other nations.
An Opportunity cost is
what you gave up in order
to choose something else.
Factors of Production
57
Source: http://www.strom.clemson.edu/becker/prtm320/factors.gif
Command Economy
Source: http://www.tsquare.tv/media/0046_3.jpg
Market Economy
Source: http://www.ded.state.mo.us/images/business/researchandplanning/community/Entrepreneur.jpg
In some mixed economies,
large industries or business
such as transportation
networks are owned by the
government.
English economist Adam Smith
laid the foundations for
modern capitalism with his
book the Wealth of Nations.
In command economies
like China, the
government controls the
factors of production.
In a market economy
people are given many
economic freedoms.
An essential part of every business venture is to
determine the factors of production. What are
the capital costs, resources needed, labor used,
and management required to be successful.
Many command economies
have difficulty making
economic progress because
of a lack of competition
and innovation.
People who risk their
capital to start a business
are called entrepreneurs.
Sole Proprietorships
58
Source: http://members.aol.com/servicebydennis/electrician.gif
Partnerships
Source: http://www.fulton-net.com/~zoom/webdesign/testwebpagemedia/attorneys.jpg
Corporations
Source: http://www.fulton-net.com/~zoom/webdesign/testwebpagemedia/attorneys.jpg
Corporations are the largest types of businesses and
have multiple advantages for investors.
Shareholders in large
corporations allow
people to make a profit
while having minimal risk.
Sole-Proprietorships are
the most common form of
business in the US
Recent corporation scandals
Partnerships are very
have not only bankrupted
successful types of
businesses as people pool corporations but lost money for
millions of people.
their skills and resources.
The factors of production vary greatly from a sole
proprietor who does everything himself to a
corporation that has many specialized jobs.