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Basics of Economics

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Patti Griffin

on 4 May 2016

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Transcript of Basics of Economics

Basics of Economics
TRADITIONAL Economy
Found in rural, non-developed, and/or third world countries
Economic decisions are defined by elders and customs.
Tradition - doing things the same way year after year
Men & women have specific roles
Concerned with subsistence (self sufficient) & basic survival
Agrarian economy - hunting and gathering type of culture
Amish, Indian Tribes, Vanuatu, Pygmies of Cong, Eskimos, Belarus
COMMAND Economy
Government is in full control (or dictates) what is produced and how it is priced.
Also known as a planned or managed economy.
Command economies vary from a strong command Examples: China, Cuba, France, and Sweden.
MIXED Economy
Mix of Market & Command
Government takes care of people's needs.
Market takes care of their wants.
Competition is present in the marketplace.
Examples: United States, England, Australia
Economics
Is the study of how
individuals

and
societies
seek to satisfy
needs
and
wants
of others through incentives, choices, and allocation of scarce resources.
Traditional Economy in Alaska
FREE ENTERPRISE or MARKET Economy
There are 4 basic Economic Systems
This is an idea of a perfect economy, but does not exist.
Supply & Demand of goods & services determine the price.
This generates competition within the marketplace.
Most economic systems that consist of Free Enterprise are mixed with Command.

Advantage:
Producers strive to create the best goods and services on the market to eliminate competition.

Disadvantage:
An economic system like this could promote illegal business practices and could create a serious break between the rich and the poor
Advantage:
Equal standard of living for everyone because the government oversees and distributes the necessities of life such as healthcare, national security, social reforms and school systems.

Disadvantage:
Fewer choices in the marketplace because government controls who enters. Also, there is less competition in the market, therefore some items are unavailable.

Military in Russia
Advantages:
Private economic freedom; centralized economic planning; freedom to buy, sell and possess; government provided services for public good (Social Services); and governmental safeguards (FDA, EPA, USDA).

Disadvantages:
Taxes must be paid for government services, governmental restrictions (laws & regulations).
4 Types of Resources
1)
Natural
-
land, crops, & minerals
used to produce goods & services.
2)
Human
- the
labor that people put forth
to produce the goods & services.
Examples: workers & supervisors.
3)
Capital
- money and man-made items (machines & buildings) needed to produce the goods & services.
4)
Entrepreneur
- the person(s) with the business skills to use the top 3 resources to provide the goods/services in the market. Examples: computer skills, communication skills, etc.
Scarcity - when a resource is limited

Customer - person who
purchases
the good/service

Consumer - person who
uses
the good/service

Other terms you should know:
goods, services, needs, wants,
The Wheel of Economics
People work and get paid with taxes taken out
Businesses produce goods/services
Taxes go to government
Government uses tax money to help others, roads, schools, public safety, etc.
People purchase goods/services based on needs & wants
Recession
- when the economy
slows
down so that everyone is affected.
The economy declines and the GDP declines two quarters in a row.

GDP
-
Gross Domestic Product
- how an
economy is measured (in $).

Other Terms
What is the
effect
of the
limited role
of government in US economic system?
Markets
determine the products that are produced and sold. (
not government
)
This means that the government allows anyone to create a business as long as laws are followed. The government has a limited role in what we can buy and sell whatever we want as long as it is legal. However, the government does play a large role in the sale of foods, legal drugs, environment, etc. for consumer safety.
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