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Economics EOC review 2015
Transcript of Economics EOC review 2015
Review of the concepts and standards!
SSEF1 -- Explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and tradeoffs for individuals, businesses, and governments.
SSEF2 Give examples of how rational decision making entails comparing the
marginal benefits and the marginal costs of an action.
Compare and contrast different
economic systems and explain how they answer the three
basic economic questions of
what to produce,
how to produce,
and for whom to produce.
SSEF5 The student will describe the roles of government in a market economy.
Define and give examples of productive resources
(factors of production)
What does efficiency mean and why is it important?
What is specialization? Give an example.
OPPORTUNITY COST =
the best alternative given up when individuals, businesses, and governments confront scarcity by making choices.
we can't make more water... so we have to make choices
LAND -- natural resources
ex: water, oil, trees
LABOR - human resources/workers
ex: cook, cashier, teacher
ENTREPRENEURSHIP - person who takes the risk and combines the land, labor, and capital
CAPITAL - tools (physical) or knowledge/skills (human)
Which example of productive resources is matched correctly?
A) land and surgeon
B) capital and oil rig
C) labor and telephone wire
D) entrepreneurship and rice field
Katie decided to pay for a piano lesson instead of going to a movie with her friends. What is her opportunity cost?
A) learning how to play the piano
B) the $10
C) seeing the movie with her friends
D) a new shirt from Rue 21
What is a rational decision?
Marginal = additional
you always want your benefits to exceed your costs...
Going to Six Flags costs $40, but the benefit is 8 hours of roller coaster FUN.... benefits are greater than the cost!
In this production possibilities graph, what MIGHT cause the movement from line 1 to line 3?
A) increased demand for basketballs
B) a shortage of needed raw materials
C)an increase in the number of workers
D) increased efficiency because of new whoopee cushion technology
Which point on the production possibilities curve could represent a situation in which there was a scarcity of materials needed to make products X and Y?
what does a point like X signify?
point of efficiency
if you make 375 tractors and 150 food at point W, what happens if you move to point Y? WHAT DO YOU LOSE??
Increase in resources or technology ... move to the right
decrease in technology or resources... move to the left
Command - Total government control
Mixed - Some government control
Free Market - No government control
Define the economic goals - freedom, security, equity, growth, efficiency, and stability.
Define the command, market, and mixed economic systems with regards to what, how and for whom to produce.
Economic Systems - Command, Mixed, Free Market
- you choose
How does government regulation and deregulation affect consumers and
Why does the government provide public goods and services, redistribute income, protect property rights, and resolve market failures?
goods that are provided by the government regardless of if you pay or not.
why does the government regulate?
to help protect the consumers and producers
ex: parks, police, fire department
SSEF6 Explain how productivity, economic growth, and future standards of
living are influenced by investment in factories, machinery, new technology, and the health,
education, and training of people.
Define productivity: relationship of inputs to outputs
When investing in resources and technology ... how is productivity affected?
standard of living
how quick and effectively you make a product
the average of how much a person can consume in a period of time.
more education = more money = can consume more!
SSEMI1 Describe how households, businesses, and governments are
interdependent and interact through flows of goods, services, and money.
SSEMI2 Explain how the Law of Demand, the Law of Supply, prices, and profits
work to determine production and distribution in a market economy.
SSEMI3 Explain how markets, prices, and competition influence economic
SSEMI4 Explain the organization and role of business and analyze the four
types of market structures in the U.S. economy.
Draw the circular flow diagram.
Include: Product market; Resource (factor)
Flow of goods and services between and
among businesses, households, and
The flow of money.
a way to facilitate the sale, purchase or trade of goods between parties.
What is equilibrium? llustrate on a graph how supply and demand determine equilibrium price and quantity.
What is the role of buyers and sellers in determining market clearing price?
as price increases, quantity demanded decreases
as price increases, quantity supplied increases
people want it cheaper,
companies want to sell for more.
we don't want there to be too few or too many...
Draw on a graph how price floors create surpluses and price ceilings create
c. Define price elasticity of demand and supply.
People Play In Sand Castles Frequently
IRDL - Increase Right Decrease Left
Cost to make
Chicken Fingers Taste Great Fried
IRDL - Increase Right
shortage - D>S
Surplus - S>D
Elasticity - how much S or D is affected based on a change in price
elastic - S or D changes a LOT based on price change
inelastic - S or D does NOT change based on a price change
Define the 3 forms of business organization—sole proprietorship, partnership,
Name an advantage and disadvantage for each.
Explain the different
monopoly, oligopoly, monopolistic competition, and pure
sole proprietorship - 1 person
unlimited liability but keep all profits
unlimited liability, shared responsibility
limited liability, unlimited life
Monopoly - 1 firm selling
1 thing at 1 price
Pure / Perfect Competition - lots of firms selling 1 thing at 1 price
Monopolistic Competition - lots of firms selling lots of things at lots of prices
Oligopoly - few large firms selling similar things at similar prices
SSEPF2 Explain that banks
and other financial institutions are businesses that
channel funds from savers to investors.
SSEPF4 Evaluate the costs and benefits of using credit.
SSEPF5 Describe how insurance and other risk-management strategies protect
against financial loss.
SSEPF6 Describe how the earnings of workers are determined in the
Compare services offered by different financial institutions.
Explain reasons for the spread between interest charged and interest earned.
Give examples of the direct relationship between risk and return.
savings - safe place to store $
checking - IOU, representative $, debit
loans - borrowing $ with promise to repay
Interest charged - what banks collect from us for borrowing $
interest earned - what banks pay us for saving $
banks charge more than they pay (you earn) ...
TO MAKE A PROFIT!
Evaluate a variety of savings and investment options; include stocks, bonds, and mutual funds.
the more you risk, the greater you expect in return.
stocks - high risk, high return.
safe place to keep $, earn small amt of interest
What factors that affect credit worthiness?
What is the difference between interest charged on loans and credit cards?
What is the
simple and compound interest?
current debt balance
# existing credit cards
loans - fixed interest rate
credit card - variable interest rate
simple -- interest on principal ($ borrowed)
Describe the costs and benefits associated with different types of insurance: deductibles,
premiums, shared liability, and asset protection.
Describe the types
of insurance: automobile, health, life, disability, and property.
automobile - covers your car
health - sickness/medical
life - covers your family in case of your death
disability - when you are injured and can't work
property - covers your home, apartment, etc
deductible - how much you pay before insurance company steps in
How does investment
in education, training,
and skill development help someone in the workplace?
SSEMA1 The student will illustrate the means by which economic activity is measured.
SSEMA2 Explain the role and functions of the Federal Reserve System.
SSEMA3 Explain how the government uses fiscal policy to promote price
stability, full employment, and economic growth.
SSEPF3 Explain how changes in monetary and fiscal policy can have an impact
on an individual’s spending and saving choices.
Label and Define the business cycle: peak, contraction, trough, recovery, expansion, recession and depression.
What is the
the national debt and deficits?
Define Gross Domestic Product (GDP).
how inflation is measured
(change in price of market basket items)
increase in quantity and amount
of money, but decrease in value
frictional - between jobs, looking for better
cyclical - business cycle changes, laid off
structural - lack of skills
deficit - spend more than collected
debt - all past deficits + money borrowed
How is the Federal Reserve System organized?
Define monetary policy.
actions taken by the
to alter the
and influence the economy.
What tools does the
Federal Reserve use
to promote price stability,
and economic growth?
Easy / Tight Money Policy
Required Reserve Ratio
Bonds (govt securities)
during a contraction
Explain the tools the government uses to influence the economy (expansionary / contractionary)
Define fiscal policy.
actions taken by the
to influence the economy.
(taxes and govt spending)
less govt spending
more govt spending
Define and give an example of: progressive, regressive, and proportional taxes.
How does an
increase in sales tax affect different income groups?
- same % taken (Social Security)
- more you make, more they take (income tax)
- impacts wealthy less (sales tax)
the more money you make, the less it impacts you...
Mary makes $10,000 a year. The $1000 sales tax on the $12,000 car is a burden!
Tom makes $100,000 a year. The $1000 sales tax on the $12,000 car doesn't really bother him.
SSEIN1 The student will explain why individuals, businesses, and governments trade goods and
SSEIN2 The student will explain why countries sometimes erect trade barriers and sometimes
advocate free trade.
SSEIN3 The student will explain how changes in exchange rates can have an impact on the
purchasing power of individuals in the United States and in other countries.
Define absolute and comparative advantage.
When does most trade take place - absolute or comparative?
What is the
difference between balance of trade and balance of payments?
Absolute - making more of a good than another nation
Comparative - making good at a lower opportunity cost than another nation
nations want to have comparative advantage... lower opportunity cost ... use your scarce resources the best you can
balance of trade -
when # imports = # exports
balance of payments -
value of imports = value of exports
Define and give examples of: tariffs, quotas, embargoes, standards, and subsidies.
What are the costs and benefits of trade barriers?
What is the purpose
of EU, NAFTA, and ASEAN.
Why is free trade good/bad?
Explain why, when exchange rates change, some groups benefit and others lose.
How do you convert currency?
Foreign to USD = problem / chart
USD to Foreign = problem x chart
subsidy - government
costs of trade - trade deficit, less US goods purchased, more competition, hurts infant companies
benefits of trade - more variety, better prices, efficiency (comparative advantage), increase quality
EU - European Union, agreement between 27 nations, reduce restrictions amomg nations
NAFTA - North American Free Trade Agreement, reduce restrictions/barriers between US, Canada, and Mexico
ASEAN - Association of SE Asian Nations, reduce barriers among nations
define EXCHANGE RATE
divide up your laundry when you come home
multiply your suitcase with souvenirs
exchange rates change every day based on a nations performance (GDP, inflation, etc).
floor - min $ above equilibrium
ex: Minimum wage
ceiling - max $ below equilibrium
ex: rent control
Explain what happens when a nations currency is Strong and when a nation's currency is Weak
the wise use of resources
Why is it important?
because our resources are scarce. The more efficient you are, the more you can make.
becoming an expert at a certain job
At a hotel there are bell hops, receptionists, maids, managers, chefs, and valet drivers.
What is the production possibilities curve?
Graph that shows the different ways a nation can use its resources to make goods.
what about a point like A?
what 2 things cause the PPC to grow?
of an action exceeds
the marginal costs.
Define private ownership, profit motive, consumer sovereignty, competition, and government regulation.
Explain the role of profit as an incentive for entrepreneurs.
individuals, businesses, and gov't can own the factors of production
businesses want to make MONEY
Which Goals does each system follow?
deregulation: remove restrictions
increase cost to make
how does investment in education affect standard of living?
increase in PPC to the right...
leading to economic growth.
Why is having a medium
of exchange important?
It is a standard way to set value!
a basic condition that exists
when unlimited wants
exceed limited resources.
businesses want to make money
we have the choice of what to buy and control what the producers make
businesses make best quality/cheapest product in order to get customers
gov't implements rules/restrictions in order to protect consumers, producers, and resources
- equal opportunity
- increase standard of living
- wise use of resources
- steady and even
decrease variety, increase price.
provide for those who can't afford it.
Define the law of demand
What factors cause
demand to shift?
draw a shift
Define the law of supply.
What factors shift supply?
Draw a shift in supply.
equilibrium: S = D
partnership - 2 + people
corporation - owned by shareholders, run by hired employee
The total dollar value of all final goods made in a nation in a year.
How is economic growth measured?
GDP = C + I + G + (X-M)
C - consumer
I - investment (business)
G - government
(X - M) - net exports
How is unemployment measured?
Identify and give examples
of the types of unemployment.
when a person who is
actively searching for employment
is unable to find work
number of unemployed
all currently in the labor force
Define inflation, stagflation,
and Consumer Price Index.
How is inflation measured?
Consumer Price Index
Give examples of
who benefits and
who loses from inflation.
Define aggregate demand.
Define aggregate supply.
What shifts Aggregate Demand?
GDP (C, I, G, X-M)
total demand in
What shifts Aggregate Supply?
cost to produce
Federal Open Market Committee (FOMC)
will they trade?
NO, both will grow turnips
all imports pay 4% fee
only 100 Toyotas per year
no trade with Cuba
no glass stuffing in toys
dairy farmers get
cheap cattle feed
the price of one nation’s currency in terms of another nation’s currency.
travel in nation
foreign companies invest
will not change
can change over time
bonds - low risk, low return
lend $ to govt, guaranteed face value at maturity
ownership in corporation, best long term investment
bucket that holds a diverse variety of
investments (stocks, bonds, savings)
compound -- interest on
principal + built up interest
how much you pay to have insurance
shared liability -
you share the risk with insurance company
asset protection -
having insurance covers your property/self/family
more education = more skills = more money
You are READY
for the EOC!!!
All but Freedom
total amount of goods available
risk - what you are willing to lose
return - what you hope to gain
credit score = 300-850
credit report - detailed report of your credit history showing your creditworthiness