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• Money was originally made of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?