• Why study economics?
Helps analyze the impact of decisions and strengthen decision making.
• How does scarcity impact an individual?
Forces individuals to make decisions. Raises awareness of the need to conserve.
• Trade-Off – deciding to do one thing instead of another.
ex… government – decides to spend more on education, must cut money from another program, or increase taxes.
• Opportunity Cost – the sacrifice that is made, or what you give up to do or have something else.
ex… government – in above decision, the opportunity cost is the money which must be taken from another program, or increased taxes that must be collected from citizens.
• How do societies decide what to produce?
need – something a person must have to survive
(food, clothing, shelter) want – something not necessary for survival, but desire to have.
good – something that is tangible, having been produced service – something intangible, done to help
• Economic Systems
capitalism/market economy – a system in which there is little to no government involvement. (private individuals control)
command economy – a system in which the government controls the factors of production, and makes all economic decisions
mixed economy – a system in which there is a combination of two or more economic systems (ex… US mixed market)
traditional economy – a system in which economic decisions are based mostly on customs. (hunting, fishing, agriculture, barter)
Goals of the US Economy
1. Provide jobs
2. Efficient use of resources
3. Continued economic growth
4. Equal access to jobs and education
Characteristics of the US Economy
1. Private property
2. Profit incentive
4. Freedom of choice
5. Freedom of enterprise
6. Limited government involvement
The Wealth of Nations
• Wealth of Nations – written by Adam Smith, book provided a basic outline of the economic theories embedded in a market economy.
• (Invisible Hand) – A free market while appearing chaotic and unrestrained is actually guided to produce the right amount and variety of goods.
(supply, demand, and competition)
• (Laissez-Faire) – the idea that the government should not interfere with the economy. The Invisible Hand will regulate the economy, government influence will decrease productivity.