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. --- 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 --- 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.