Brief Response:
• Adam Smith organized many ideas into what we call
economics today. In his essay, The Wealth of Nations,
1776, Smith argued …..
– ….the abilities and skills of a nation are its sources of wealth…..
• Which factor(s) of production would Adam Smith be
most likely to identify as the source of a nation's
wealth? Do you concur? Explain. (2)
• Answer: he would likely identify labor or
entrepreneurship rather than land or capital as the most
important factor of production.
1
CH 1, Sect 3
CH 2, Sect 1 &2
2
Section 3 p. 19
Terms: listed in front of section
• Trade-off
• 19 alternative choices
• Limited spending power
• Variety of wants
• Variety of criteria
3
CH 1, Sect 3
• Opportunity cost
• 20 the cost of the next best alternative use of
money, time, or resources
• When one choice is made over another.
• “what are you giving up?” “Why?”
4
CH 1, Sect 3
• Production possibilities frontier
• 21 a diagram representing various
combinations of goods and/or services an
economy can produce
• Considers all available resources
5
CH 1, Sect 3
• Cost-benefit analysis
• 24 a way of thinking about a problem
– Compare
• the cost of an action
• To the benefit(s) received
– A person’s ability to predict and handle risk is
important here.
6
CH 1, Sect 3
• Free enterprise economy
• 24 consumers and privately owned businesses
decide:
– What to make?
– How to make it?
– For Whom to make it?
7
CH 1, Sect 3
• Standard of living
• 25 the quality of life based on
• Possession of necessities and luxuries that
make life easier
• Is it a low or high standard of living? Explain.
8
Chapter 2 Economic Systems and Decision Making
Section 1 p. 33; Terms: listed in front of section
• Economy/economic system:
• 33 an organized way of dealing with and
providing for the wants and needs of a people.
– Traditional
– Command
– Market
9
Chapter 2, Section 1
• Traditional economy
• 34 allocation of scarce resources based on
– Ritual
– Habit
– Custom
• Rarely creative or innovative
10
Chapter 2, Section 1
• Command economy
• 35 allocation of scarce resources based on:
• Government planning
– Prices controlled so most people can afford things.
– Quotas
• does not allow for more demand of a product that is in short
supply.
• People wait in lines and might not get what they want anyway.
11
Chapter 2, Section 1
•
•
•
•
Market economy:
36 aka free market economy
Buyers and sellers act the way they want
Prices are set between
– What the seller wants to be paid
– What the buyer is willing to pay
– Supply of the good/service
– Demand for the good/service
12
Section 2 p. 41
Terms: listed in front of section
• Social security
• 42 a federal program of benefits for working people
– Retirement
– Disability
• 90% of Americans participate
– Retirees
– Disabled persons
– Survivors
• Spouses
• Children
– Medicare recipients
• 65 or older
13
Chapter 2, Section 2
• Inflation
• 43 a rise in the general level of prices
– People need more money to pay for
•
•
•
•
Food
Clothing
Shelter
Caused by
– Economic change
• Rise in price of a key resource
• Raise in salaries and wages of employees
– Falling value of currency
• Too much money available
14
Chapter 2, Section 2
• Fixed income
• 43 an income that does not increase even
though the cost of living increases.
– Retirement
– Government benefits/entitlements
15
Hwk Assessments, Class Work,
to Know
16
CH 1 sect 3 Assessments: Checking for
Understanding
• 1
• When making economic decisions
• People try to get the most value for their
investment
– Time
– Money
– Some other resource
17
CH 1 sect 3 Assessments
• 3
• All economic decisions involve trade-offs.
• Opportunity cost of a choice is the cost of the
next best use of
– Money
– Time
– Resources
18
CH 1 sect 3 Assessments
•
•
•
•
4
Circular flow diagram
Production possibilities frontier
Cost-benefit analysis
19
CH 1 sect 3 Assessments
• 5
• Economic issues are an important part of
many political campaigns
• An understanding of the issues will help a
citizen to decide how to vote in an election.
20
Cartoon analysis
separate sheet of paper, use the last one.
• What does the 8 million pound gorilla represent?
• Why that representation?
• Who are the two men standing in front of it? (occupation)
• EC: name them (2 pts each)
• What is the reporter’s accusation?
• Why is each response to the accusation a continuation of the failure of
both to respond adequately? (2)
• Why do you think they do not answer the question straight out?
21
Cartoon analysis
•
What does the 8 million pound gorilla represent?
– The banking failure that caused the financial crisis and the 2008 Recession
•
Why that representation?
– Because it is too large to control and dangerous
•
Who are the two men standing in front of it? (occupation)
– Politicians (presidential candidates)
•
EC: name them (2 pts each)
– Barack Obama and John McCain (running for president)
•
What is the reporter’s accusation?
– That neither candidate has adequately described their policy toward handling the financial
crisis.
•
Why is each response to the accusation a continuation of the failure of both to
respond adequately? (2)
– One says “hope” (which is not real action)
– The other dodges the topic, blaming his opponent for not supporting the Surge (a military
policy in Afghanistan).
•
Why do you think they do not answer the question straight out?
– A real answer might not be popular with special interests or voters
22
CH 2 sect 1: Assessments:
Checking for Understanding
• 1
• Those who act in their own best interests will
receive the benefits.
23
CH 2 sect 1: Assessments
• 3
• Sets economic roles
– stable
– predictable
– continuous
– But it discourages ideas
24
CH 2 sect 1: Assessments
• 4 Advantages:
• Great change in short
time
• Disadvantages:
• Does not meet needs
and wants of
consumers
• Lacks incentives to work
hard
• Large bureaucracy
• Little flexibility
• Ideas discouraged
25
CH 2 sect 1: Assessments
•
•
•
•
5 Advantages
Adjusts to change gradually
Individual freedom
Lack of government
interference
• Produces great variety of
goods and services
• High consumer satisfaction
• Disadvantages
• Lacks services people want
and need
• Workers and businesses
face high uncertainty as a
result of change.
– Recession
• Does not provide basic
needs of everyone
26
CH 2 sect 2 Assessments: Checking for
Understanding
• 1
• They help us to determine if the system meets
our needs
27
CH 2 sect 2 Assessments
•
•
•
•
•
•
•
•
3
Economic freedom
Economic efficiency
Economic equity
Economic security
Full employment
Price stability
Economic growth
28
CH 2 sect 2 Assessments
• 4
• Some believe that increase furthers the goal
of economic equity
– Because it is FAIR
• Others believe that it conflicts with the goal of
full employment and economic freedom
– By raising unemployment
– Preventing employers from paying what they feel
are fair wages.
29
CH 2 sect 2 Assessments
• 5
• People choose their own
– Occupations
– Employers
– Uses for their money
• Producers choose
– What they will produce
– Where they produce
– How they produce
30
P. 23 Images: guns vs butter
•
•
•
•
Question
Different production levels
Why?
producing one good/service uses resources
that could be used to produce the other
good/service
31
Image, 34
•
•
•
•
Question
Ritual
Habit
custom
32
image, 35
•
•
•
•
•
•
Question
1
Profit,
inventory
2
Graduating students will be living and working in a
market economy.
–
–
Must be able to understand how the economy works
Must be able to compute interest rates
33
Image, 37
• Question
• The government
34
Image, 38
• Question
• Must be reasonably competitive
• Resources must be free to move from one
activity to another
• Adequate information available to everyone
35
image, 42
• Question
• Legislation that bans discrimination for any
reason
36
Image, 43
• Question
• Social Security
37
Economic Choices
handout
• EC: Vocabulary:
• Decision
– A process of identifying the best way to achieve a goal
• Alternatives
– Opportunities from which people can select: options
• Advantages
– Good points about an alternative
• Disadvantages
– Bad points about an alternative
• Choice (Decision)
– The alternative (option) selected
• Opportunity cost
– The best alternative NOT chosen, the opportunity GIVEN UP in a decision.
38
Economic Choices
• Ariel is going to the prom.
• Two guys have asked her
• EC: Ariel has to decide on how best to use her
“valuable human capital”
– Herself
• to have the best time possible.
• The two guys offering their valuable human
capital are:
39
Economic Choices
Ariel’s Alternatives
• Alternative:
• Spider Man:
• Alternative
• Harry Potter:
40
Peter Parker (Spiderman) (1 each)
•
•
•
•
•
•
•
Advantages:
Strong
Brave
Handsome
Web
Can “fly/swing”
Spider sense
• Disadvantages
• Many dangerous enemies
• Not as handsome when
Peter Parker
• Always fighting crime, may
suddenly leave the prom
• May have an extreme,
unrequited crush on Mary
Jane Watson
• Low self-esteem
41
Harry Potter (1 each)
•
•
•
•
•
Advantages
Can use magic spells
has a magic wand
Can fly
Dressed better for a
prom
• Has many friends
• Cool accent
• Inherited money
•
•
•
•
•
•
Disadvantages
Has dangerous enemies
Wears glasses
Seen as a “nerd”
Never seen as buff
Short?
42
Economic Choices
Ariel’s Alternatives
• Alternative:
• Spider Man:
• Alternative
• Harry Potter:
43
Brief Response
• Discuss inflation as it affects one of the
following: (2)
• Labor:
• Consumers:
• Government spending:
44