Class 1 Review
● What is a business?
● Are profits bad?
– Do not think emotionally
– Think economically
● Who determines what products are offered?
– How do people say what they want?
(vote?)
1-1
Measuring the Economy
● Gross Domestic Product, GDP
– The sum of all goods and services
produced within a nation’s boundaries
● U.S. GDP > $14 trillion
● China GDP > $5 trillion
1-2
Productivity: Key to Global Competitiveness
● Productivity describes the relationship
between the number of units produced and
the number of human and other production
inputs necessary to produce them.
Total
=
Productivity
1-3
Output (goods or services produced)
Input (human/natural resources, capital)
Economics - 1
Microeconomics
1-4
Economic Thinking
● Freakonomics
– Economics applied to abortion
– Economics applied to daycare
– Economics applied to drug dealers
● Think differently
– Milton Friedman’s “Free to Choose”
1-5
Overview
● Economics—social
science that analyzes
the choices made by
people and
governments in
allocating scarce
resources.
1-6
Supply and Demand
● What is your pet worth?
(vote with your dollars)
1-7
Economics
● Microeconomics—study of small economic
units, such as individual consumers, families,
and businesses.
– Assumes everyone acts in their own best
interest (is greedy)
– Who is not greedy? Politicians?
● Macroeconomics—study of a nation’s
overall economic issues, such as how an
economy maintains and allocates resources
and how government policies affect the
standards of living of its citizens.
1-8
Microeconomics:
The Forces of Demand and Supply
● Demand—willingness and ability of buyers to
purchase goods and services.
● Supply—willingness and ability of sellers to
provide goods and services.
1-9
Factors Affecting Demand
●
●
●
●
●
●
●
●
Consumer preferences
Incomes
Prices of substitute products
Advertising
Number of buyers
Economy
Quality
Future expectations
1-10
● Demand Curve
– Graph amount of a product that buyers purchase at
different prices
– Demand curves typically slope downward and to the
right; lower prices attract larger purchases
1-11
● Expected Shifts in Demand Curves
1-12
● Shift in the Demand Curve
1-13
●Supply Curve
Shows the relationship between different prices and
the quantities that sellers will offer for sale,
regardless of demand
1-14
Factors Affecting Supply
●
●
●
●
●
●
Costs of goods
Costs of labor
Costs of technology
Availability of suppliers
Taxes
Weather (how?)
1-15
● Expected Shifts in Supply Curves
1-16
Shifts in the Supply Curve
1-17
● Law of Supply and Demand
Equilibrium price
1-18
Supply and Demand
● Consider the market for lemonade.
What happens when:
– There is a heat wave
– The price of sugar goes up
– The cost of a can of soda falls
– There is a baseball game on the street
1-19