Economics: The process of making decisions to satisfy unlimited wants & needs using limited resources
Economic Rewards/Benefits:
What we get out of our decisions that are desirable or positive
Costs:
What we give up in return
What Economic System Do We Use in This Country?
Answer: The Free Enterprise System
Be able to describe the most important facets of a “Free Enterprise System”
Freedom of Choice
The Profit Motive
Competition
Open Mkt. (S & D)
Limit Gov. Control
Be able to identify the freedoms generally allowed in a free enterprise system
When to Buy
When to Sell
To Make Profit
To Compete
To Own
Freedom to Decide
Be able to describe the open market using the concepts of
“Supply & Demand”
Demand:
Supply
- The ability & desire of customers to own products
- Products/Services available for sale
LAWS OF SUPPLY AND DEMAND
PRICE LAWS:
-
The law of demand states that the quantity demanded of a good varies inversely (in
opposite direction) with its price.
In other words, if the price goes up, the number of items being demanded goes down. If
the price goes down, the number of items being demanded goes up.
-
The law of supply states that the quantity supplied will vary directly with the price.
In other words, if the price goes up, suppliers will provide more items. If the price goes
down, suppliers will provide fewer items.
QUANTITY LAWS:
-
If there is a change in demand(at any given price), market price will change directly.
In other words, if people want more items at any given price, the market price will go up.
If people want fewer items at any given price, the market price will go down.
-
If there is a change in supply(at any given price), market price will change inversely.
In other words, if vendors supply more items to the public(at any given price), the market
price will go down. On the other hand, if the vendors supply fewer items to the public (at
any given price) the market price will go up.
Be able to define the following terms associated with the concept of PROFIT:
Income, Expenses, Costs, Gross Profit, Net Profit, & Risk
Profit
Income
Cost
Expenses
Gross Profit
Net Profit
Risk
- Incentive
- the amount of money a business receives from the sales of its goods/services
- The amount of money a company spends to get product into the store
- The amount of money a company spends on the operation of the business
- Amount of money made after the cost of goods is subtracted (Income - Cost)
- The amount of money made after the cost of goods & expenses are subtracted out
- The “gamble” a business takes that it might lose money instead of making money
Profit is Good, but What Do We Risk?
Our own money
The money of other people (friends, relatives, banks, etc.)
Our time & energy that we could spend on a career
Our hopes/dreams (self esteem, inheritance, freedom, etc.)
Be able to discuss ways a business can increase its profits
Increasing Profits
Increase Sales
Increase Efficiency
Boost Productivity
Raise Prices
Be able to define the types of competition & discuss in a short answer question the advantages to
competition in our economy
A rivalry between two or more companies to attract scarce (limited) customer dollars
Market Share
- A company’s part of the total market for a product
Direct vs. Indirect
- Using the same product to compete vs similar but distinctly different ones
Price vs. Nonprice
- Instead of lowest price, compete with better service, quality, location, etc.
Monopoly
- No Competition
Benefits of Competition
New Products & Services
Variety of Products/ Services
Lower Prices
Better Customer Service
Higher Quality Merchandise
More Information Provided
Etc.
In a matching exercise & essay, be able to describe the role of government in a Free Enterprise system
Protect Business Property
Enforce Contracts
Settle Disagreements
Collect & Set Taxes
Provide for Public Welfare
Protect Public Health
Regulate/Stabilize Economy
Conserve the Environment
Protect Consumers
Protect Competition
Regulate the Workplace
Government Services
Military
Police
Fire Protection
Education
Thus Endth the Economics Unit
Infrastructure
Postal
Libraries
Welfare Services