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Unit 9: Economics
Transcript of Unit 9: Economics
Factors of Production
Types of Economies
Types of Competition
Types of Businesses
the study of choices in a world full of
study of choices made by individuals & individual businesses
study of choices made by entire industries & countries
The key to economics, is
having more wants** than you have resources
You can't buy a new car without enough money.
You can't get everything done b/c there's not enough time.
What is another example?
things you can hold
you pay someone to do
choose one thing over another
the value of what you gave up
Can you think of your own example?
Four Economic Questions
What should be produced?
How should it be produced?
How much should be produced?
For whom should it be produced?
Who answers these questions?
decisions based on tradition
- custom, beliefs, religion
- Little to no technology
- "The way it's always been"
decisions made by government
- Example: Communism
- There is no private property
Financial support for education
Basic needs like housing, medical provided by govt
Little choice of goods
Small supply of many goods
Quality of goods is poor
Little individual freedom of choice
decisions made by individuals
- based on supply & demand
- AKA "Capitalism"
- PROFIT = biggest motivation
Unequal distribution of wealth
decisions made by individuals & government
So basically... all countries have some kind of mixed economy.
Consider the US...
also called "natural factors"
also called "human factor"
1. What is something you've recently bought?
2. Why didn't you buy more?
3. Are your wants limited or unlimited?
4. Are your resources limited or unlimited?
5. How would you define economics?
1. Who controls prices in the US? What are the benefits to our type of economy? Disadvantages?
2. Describe Amish people and their economy. What are the benefits? Disadvantages?
3. What type of economy does China have? What are the benefits? Disadvantages?
4. What is communism? What is the opposite of communism?
5. Give an example of a trade-off & opportunity costs.
6. Define economics.
7. What are the 4 factors of production and give examples that relate to your small business.
Knowing what you know about scarcity, how can we make sure our businesses are productive?
Focusing on one small task
Division of Labor
dividing tasks among people
applying knowledge to a task
(i.e. computers, scissors, wheels, radio)
training, educating people to be more effective
meaning, make the most of what we have
Keep all profit
Quick decision making process
Hard to raise funds
Hard to get qualified employees
Examples of companies that started as a sole proprietorship:
Ray Croc mortgaged his home to take over a small fast food location, McDonald's Corporation.
Sam Walton purchased a Ben-Franklin store that later grew into WalMart.
James Cash Penney bought out his partner in 1912 and became sole proprietor of his store, JC Penney.
two or more people
Raise more money
Bring in special talents
Complex decision making
Fully responsible for finances
many individuals own stock in company & it is treated as its own entity
Easy to raise money
Professionals run business (board)
Ownership can be easily transferred
Corp. responsible for debt
Owners have little say
More govt regulation
Corporation pays tax on profits, owners pay tax on earnings
To become a corporation
1. Get permission from govt via charter
2. Stockholders invest $ to gain ownership
3. Stockholders elect board of directors to run corporation
1. Which type of business is the oldest and most common?
2. In a sole proprietorship, what happens if the owner dies?
3. Even though ____________________ make up 90% of businesses in the US, _____________________ make 85% of the profits.
4. Why should Americans buy from Americans?
it closes or passed down to family member
Types of Businesses
What do you already know?
aka. Market/Pure Competition
Many companies compete with similar products and no one has total control.
Little price difference between products
Few barriers to entry and exit
Producers have a degree of control over price
Examples: potato chips, Toothpastes, toilet papers, computer software and operating systems
Few companies compete with very similar products
One company can greatly impact the market
Examples: Movie Producers, Video Game Producers, Cell phone companies, Soft Drink
One company controls everything in that market.
Illegal in the USA, unless government operated
Examples of USA government: Post Office, Greenville Utilities
In other countries: DeBeers Diamonds
USA monopolies that were broken up: AT&T, Standard Oil becomes ExxonMobil and Chevron Corporation
buying up all
US Government has
to stop harmful
How do corporations become monopolies?
usually large, multinational, & multi-industry
Organizations not interested in making a profit.
Want to benefit society rather than make a profit.
Before we talk about the types of competition, there are some words you need to know:
consumer decides what is produced. (Customer is always right)
No one person/group controls the market on a product and there are no barriers to enter this market
Individuals answer all 4 questions and allow for free trade; capitalism
individuals willing to give up an FoP for a personal gain
consumers' willingness to buy a good
Graph that shows the amount of a product that would be bought at all possible prices
Law of Demand:
as prices increases, demand decreases
Example: How many of you would buy a pizza at these prices? Let's graph it.
For different goods, the
of demand changes.
(the extent to which demand changes when price changes )
If something is ELASTIC, then a price change can cause a BIG difference in demand
If something is INELASTIC, then a price change does not really cause a difference in demand
aste / preference
Reasons that Demand Changes
examples: UNC wins championship, so everyone wants shirts
It's winter, so demand for gloves goes up
example: economy is doing better, the unemployment rate is down, people buy more
example: PB&J, Shoes & laces
example: Coke & Pepsi
What would happen to the demand for Tony's Pizza after a new health kick to not eat carbs?
What would happen to the demand for Tony's Pizza after a decrease in the unemployment rate?
What would happen to the sale of Tony's Pizza after a new dessert pizza comes out?
What would happen to the demand for Tony's Pizza after a new pasta business opens?
a little bit
a little bit
example: Brain surgery
1. List and compare the types of competition.
2. What type of business would you open & why would you choose that over another type of business?
3. How can you increase productivity?
4. Give examples of each of the 4 factors of production.
producers' willingness to sell a good
Graph that shows the amount of a product that would be sold at all possible prices
Law of Supply
Example: How many of you would sell a pizza at these prices? Let's graph it.
For different goods, the
of supply changes.
(the extent to which supply changes when price changes )
If something is ELASTIC, then a price change can cause a BIG difference in supply
If something is INELASTIC, then a price change does not really cause a difference in supply
ntrance/exit of substitute
Reasons that Supply Changes
examples: Nike goes out of business, so Adidas sells more shoes
example: sewing machine breaks, you can't produce as much
example: price of cotton increases, so cost of T-shirts increases
a little bit
a little bit
as prices increases, supply increases
What happens to the supply of Tony's Pizza after the cost of tomatoes goes up?
What happens to the supply of Tony's pizza after Michelangelo's closes?
What happens to the supply of Tony's pizza after Tony gets a better, larger double oven?
1. Draw a demand graph and label all parts.
2. In which type of business do the owners NOT get to make decisions? Who does make the decisions? What are the advantages of this type of business?
3. Describe the types of economies and the pros/cons of each.
4. What is the difference between trade-offs & opportunity costs?
5. What is productivity & how can you increase it?
Supply & demand work together
to determine price
Remember that supply & demand can shift. This means equilibrium can change.
when more is supplied than demanded
when more is demanded than supplied
Why would a surplus or shortage happen?
Gov't sets a price minimum above equilibrium
anything up here
anything down here
i.e. minimum wage
i.e. gas cap
govt puts a cap on prices to keep goods/services from getting to expensive
Rent control in NYC
Gas prices in 1970s
US minimum wage
1. Contrast the 4 types of competition.
2. What are the advantages of the 3 types of economies?
3. Explain 2 types of businesses & which one you'd choose & why.
4. Give 1 definition of economics.
Federalism & Economics
What is the relationship between national & state economies?
Part time employment-works less than 35 hrs a week
Full time employment- works 35 hours or more a week, usually receives some type of benefits
% of ppl without a job that are actively looking for one
Which state should you move to to insure that you have a job? Why?
Which state should you NOT move to? Why?
Rural vs. Urban
major cities w/ large populations
low populated areas outside cities
Which one plays a larger role in our economy?
Cost of Living
a.) What is the equilibrium price & quantity?
b.) What happens if you set price at $10?
c.) What happens if you set price at $20?
d.) What would happen to price if demand increased? Draw a graph.
e.) What would happen to price if supply increased? Draw a graph.
Circular Flow of Economics
1. Who answers economic questions in a market economy? Command? Traditional?
2. What is an example of a product with inelastic demand? Elastic demand?
3. What are substitute goods? Compliments?
4. What is THE economic problem?
5. How can you increase productivity?
6. Review circular flow!
Tips for Remembering Demand:
ises = To the
owers = To the
Exit of a Substitute
goods & services