Ch. 5: Economic Concepts Vocabulary: economics, supply, demand, barter system, money system, market economy, command economy, mixed economy, traditional economy Supply and Demand • Supply is the amount of goods or services a business has for sale • Demand is how much of a product or service people want to buy. • As supply increases demand decreases, and as demand increases, supply decreases. The Effects of Supply and Demand • The reason that explorers left to the New World was because of Supply and Demand. • In Europe people wanted spices. • Europeans started looking for a quick and inexpensive way to China and India to get spices. • The explorers accidentally ran into the American continents. The Effects of Supply and Demand • While looking for spices, Spain discovered large amounts of gold and silver in the New World. • Since there was more money in Europe, people were buying new things. • Eventually, poor people began coming to the Americas in order to raise livestock and grow plants that people in Europe wanted. Barter System • A barter system is where people trade for the things they need or want. • The Native American tribes used barter before the Europeans arrived, and often bartered deer and beaver pelts with the Europeans for guns, bullets, or cloth. Money System • Bills or coins are used to trade for items or services. • Money was originally made of valuable metals, like gold, silver and copper, although some cultures used turquoise (a blue rock), or even shells as money. • Coins today are still made of metal, but bills are made of paper. • We trade paper bills not because they are made of valuable materials, but because of what the government agrees that it will buy. Types of Economies • Market Economy: Business owners decide what to make and sell. • Command Economy: The government decides what to make or sell. • Traditional Economy: People inherit the money, wealth, or resources from their families. • Mixed Economy: A combination of a market, command, and traditional economy. (The United States has a mixed economy) Questions about Chapter 5 1. 2. 3. 4. 5. Who determines how much money is worth? What is a mixed economy? What is demand? What is supply? What happened when Spain accidentally found the New World?