Economics and You
Decisions, Decisions
 Shaped by different criteria
Values
Goals
Hopes and Dreams
Is there a difference
between Needs and Wants?
Needs
Wants
Opportunity Cost:
If this:
Then _________.
Decision Making Process
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A rational buying decision is a choice made in an organized,
logical manner
Steps in the Decision Making Process:
1. SPECIFY – identify the need or want, determine goals
2. SEARCH – plan specific steps to gather information
3. SIFT – look at all your options, evaluate opportunity costs
4. SELECT – make a choice and act on it
5. STUDY – evaluate results
Economic systems
definitions
Economic system – way a nation uses resources to produce
goods and services
Production – creation of goods and services
Resources – raw materials, labor, knowledge, equipment
Economics – study of how economic systems work
Different Types of Economies
Traditional Economy –
ways to produce products are passed on from one generation to the next
Command Economy
 Government owns most resources and
makes most economic decisions
Market Economy
 People, rather than
the government, own
the resources and
run the businesses
 goal of business is to
earn a profit
Mixed Economy
 Uses market economy ideals and
government controls (U. S.)
Demand and Supply
Law of demand
Consumers will demand more of a product at a
lower price than at a higher price
Law of supply
Producers are willing to offer more of a product
for sale at a higher price than at a lower price
Demand Curve
Supply Curve
Equilibrium Price Graph
Surplus Graph
Shortage Graph
Benefits of the Profit Motive
 Manufacturers attempt to reduce costs
become more efficient, less wasteful
 Prices can be lowered to sell more items
if prices are too high consumers will not buy the item,
company will go out of business
 Consumers can determine what goods and services are
produced – consumer sovereignty
 Competition – forces businesses to serve consumers
Being a Responsible Consumer
 Sharing Limited Resources – WWII
Examples: gasoline, water, forest products, garbage, pollutants
 Protecting Public Safety – car (140 mph)
The Global Economy
Terms to Learn:
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Import
Export
Trade deficit
Trade surplus
Balance of trade
Efficiency
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Absolute advantage
Comparative advantage
Tariff
Quota
Protectionism
NAFTA
European Union
U. S. Economy and World Trade
Products the U. S. Imports
*vehicles, appliances, electronics, oil, etc.
Products the U. S. Exports
 Machinery, electronics, transportation, agriculture, services, etc.
Exchange rate – price of one currency in terms
of another currency
Floating exchange rate – price rises and falls in
relation for world demand for that currency
Government and the Economy
Measuring Economic Performance
 Gross Domestic Product (GDP)
 Inflation
 Consumer Price Index
 Unemployment Rate
The Business Cycle
Peak
Recession
Trough
Expansion
Depression
deep, extended decline in a nation’s economy, can cause
severe unemployment and financial hardship
Government Efforts to Stabilize Economy
 Fiscal Policy (taxes, government spending ↑ or ↓)
 Monetary Policy (interest rates ↑ or ↓)
Business in a Global Economy
 Corporations need to satisfy which group of people
first?
A: Stockholders
Multinational corporations
Employment
Technology
Knowledge
Resources
Why do Politicians (U. S.) often
use the word “protect” when
referring to trade with other
countries?
What do you think?