Business and Personal Finance
Chapter 1
Chapter
The Fundamentals of Economics
1
economics
opportunity cost
scarcity
factors of production
land
labor
capital
entrepreneurship
economy
traditional economy
bartering
command economy
market economy
supply
demand
equilibrium point
price ceiling
price floor
demand elasticity
elastic demand
Chapter
The Fundamentals of Economics
1
inelastic demand
financial market
depository institutions
non-depository institutions
incentive
Chapter
The Fundamentals of Economics
1
What goods
and services
should be
produced?
How should
the goods
and services
be
produced?
Who should
get the goods
and services
that are
produced?
Chapter
1
The Fundamentals of Economics
Scarcity and Economics
Opportunity Cost is what you
give up to get something
Marginal Costs
Marginal Benefits
The cost of obtaining one
more of an item.
The benefit of purchasing one
more of an item.
Chapter
1
The Fundamentals of Economics
Scarcity and Economics
Scarcity requires that people decide which
goods and services to spend their limited
resources on.
Don’t confuse scarcity in economics with
shortages. Scarcity always exists, shortages
are temporary.
Governments must also manage limited
resources and deal with scarcity.
Chapter
1
The Fundamentals of Economics
Factors of Production
Chapter
1
The Fundamentals of Economics
Types of Economic Systems
Traditional Economy
Chapter
1
The Fundamentals of Economics
Section 1
Supply and Demand
Supply
is how much product businesses will
make at a certain price.
Demand
is how much product consumers will
buy at a certain price.
Chapter
1
The Fundamentals of Economics
Section 1
Supply and Demand
Price of
Inputs
Number of
Suppliers
Influences on
Supply
Technology
Taxes
Chapter
1
The Fundamentals of Economics
Section 1
Supply and Demand
Surpluses
when supply exceeds demand
Shortages when demand exceeds supply
Elastic Demand when demand is affected by price
Inelastic Demand when price has little influence
Government Intervention on Supply
and Demand
• price ceilings – setting the highest price
• price floor – setting the lowest price
Chapter
1
The Fundamentals of Economics
Section 1
Supply and Demand
Chapter
1
The Fundamentals of Economics
Financial Institutions
Section 1
• Manage other
Depository peoples money
Institutions
• Manages money
Nonmade from sales
Depository of financial
Institutions products
Banks
Credit Unions
Savings and Loans
Insurance companies
Investment banks
Mutual Funds
Brokerage Firms
Chapter
1
The Fundamentals of Economics
Section 2
Incentives
The U.S. Economic System