Bell Ringer Answer the essential Question What is
Bell Ringer: � Answer the essential Question: ◦ What is an economy?
Global Economics Marketing Chapter 4
What is an Economy? � Economy-the choices way a nation makes economic ◦ Economic choices: the way a country uses its money and resources to produce, buy and sell goods � Resources-all the things used in producing goods and services ◦ Factors of Production: � 1. land-everything on the earth and the seas in its natural state � 2. labor-all the people who work in the economy �Full and part-time workers
◦ 3. capital-money needed to start and operate a business �Also includes goods used in production process �Infrastructure-physical development of a country (roads, bridges, utilities etc) ◦ *4. entrepreneurship-skills of people who are willing to risk time and money to run a business � Scarcity-difference between wants and needs and available resources � Economy depends on development ◦ Development- is the country rich or poor
Factors of development 1. Life Expectancy- this is the average life span of persons born in the country 2. Gross Domestic Product(GDP) 3. 4. 1. -total amount (in dollars) of products a country can produce in one year 2. -Total Per Capita – per capita =per person Literacy Rate- (Education) the overall populations ability to read and write Types of Industry- ways money are made
Types of Industry 1. Primary Industry- Agriculture Industry this is the way a country uses its natural resources to make money 2. Secondary Industry- Manufacturing Industry this is the industry that makes products or turns natural resources into useable products
Types of Industry � 3. Tertiary-Retail Industry is where goods and services are sold � 4. Wholesale-goods are sold to anyone other than a standard customer usually requires a membership (Sams Costco) � 5. Quaternary-Research Industry where they gather information for the other industries to use.
Classification of Development 1. 2. 3. Developed Countries 1. They are generally industrialized and are Economically Developed) 2. High life expectancy 3. High literacy Rate 4. All types of industries Developing Countries 1. 2. 3. 4. Low to medium life expectancy Low to medium literacy More agriculture Trying to improve its economy Underdeveloped
How Does an Economy Work? � Countries must answer 3 questions when deciding how to use resources: ◦ 1. What goods and services should be produced? ◦ 2. How should they be produced? ◦ 3. For whom should they be produced?
Bellringer � Get a sheet paper and notes � Essential Question: ◦ Describe a market and command economy?
Market Economies � Definition: economy in which there is no government involvement in economic decisions � Government lets the market answer the three Economic questions ◦ 1. What should be produced? �Consumers decide what should be produced by the producers
Market Economies ◦ 2. How should goods and services be produced? �Businesses decide how products will be produced �This forces competition among business to produce quality goods at lower prices. �Business want to encourage people to buy their product over another ◦ 3. For whom should the goods and services be produced? �People who have more money are able to buy more goods �Buying goods is motivation for people to make money
Command Markets
Command Economies � Definition: system in which the government controls the factors of production and makes all decisions about their use � Government questions answers the 3 basic economic ◦ One person decides what will be produced �Dictator or central planning committee controls everything ◦ Government runs all businesses and decides how goods and services will be produced �Main concern of production is military based
Command Markets ◦ Government decides who will receive what is produced �(in theory) wealth is dispersed evenly to everyone to make sure basic needs are met. �The government provides housing, food, medical aid, education, and jobs for everyone. �Individuals are told where to work(maximize) � Fill out worksheet of video as you watch � Freedom of Sound Video ◦ https: //youtu. be/LCSpxfm. Gpc. A
Bellringer: � Get a sheet of paper and notes ready ◦ Essential Question: �Describe a mixed economy.
Mixed Economies � Market Economies + Command Economies= Mixed Economies � All economies are mixed economies � All economies have some form of governmental involvement. � *most economies are closer to one type of economic system over the other* � The United States is more closely aligned with a Market Economy.
Mixed Economies � Mixed Economies must answer 3 questions when deciding how to use resources: ◦ 1. What goods and services should be produced? � Business own most resources and determine what and how to produce, but the Government regulates certain industries � Government creates mandatory laws and regulation for businesses (ie. Minimum wage, number hours you can work etc. ) ◦ 2. How should they be produced? � Business decides how they will produce but the Government imposes mandatory laws and regulations on business (ie. Pollution ordinances, materials that can be used etc. ) ◦ 3. For whom should they be produced? � Consumers tell business what they want supplied and how much they demand.
Government Classifications � Political philosophies influence how laws and rules are made, and how individuals are treated. � Classification is based on how much government interferes with the free market � Three political philosophies: capitalism, socialism, communism
Political Philosophies Capitalism-economic system characterized by private ownership of businesses and marketplace competition 1. ◦ Characteristics of Capitalism � The government cares about its peoples well being. � Democracy-the government is governed by the people � Japan and the United States are capitalistic countries.
Political Philosophies: � 2. Socialism-increased involvement in people’s lives and economy ◦ Characteristics of Socialism: �Main goal is to keep prices low and provide employment for many �Government runs key industries and makes economic decisions (mining, banking, transportation etc. ) �Socialist economies tend to have a large variety of social welfare services to allow everyone to have a certain standard of living. �Canada, Germany, Brazil, Australia, Sweden
Political Philosophies � 3. Communism-government runs everything ◦ Characteristics of Communism �People are assigned jobs=no unemployment �Privatization-process of selling government owned businesses to private individuals �There is little to know economic freedom in these countries. �Cuba, North Korea, and parts of China
Classwork � 4. 1 Assessment 1 -6
Bell Ringer � Economic measurements: � Write down two things about an economic depression and an economic expansion. �Great depression of Aug 1929 - March 1933 �Great recession of Dec 2007 - June 2009
Economic Measurements 1. 2. 3. You will learn a country’s goal of an economy. You will learn the measurements used to analyze the economy. You will learn the 4 phases of the business cycle as it relates to the economy. What makes an Economy Successful? 1. 2. 3. 4. Productivity rate Gross Domestic Product Inflation/interest rate/pricing Unemployment Rate
Economic Measurements � 1. Employee Productivity-output per worker hours measured over a period of time � Ways to increase productivity: ◦ 1. new equipment/facilities �Allows for workers to work more efficiently = more work in the same allowed time ◦ 2. additional training/financial incentives �Training is used to give workers the ability to work more efficiently with the current process of production they have in place �Financial-giving bonuses if you reach a particular output range set forth by the company ◦ 3. reduce workforce; increase responsibilities �Saves the company money but adds additional stress to employees to maintain current output
Economic Measurements � 2. Gross Domestic Product (GDP)-measure of the goods and services produced in a country � What is GDP? � GDP = C + G + I + NX ◦ C = private consumption and consumer spending ◦ G = the sum of government spending ◦ I = overall countries investment including capital spending ◦ NX = (total exports – total imports) GDP is universally used by all countries so countries can be measured and compared to each other when it comes to overall economic health
Economic Measurements � 3. Inflation rate-rising prices ◦ Every dollar you own either buys more of goods and services or less of goods ands services based on inflation rates ◦ Low inflation (0 -5%)=stable economy = the more you 1 dollar can buy ◦ High inflation (5. 1% plus)=money doesn’t have same value it used to have= less your 1 dollar can buy The Government will try to control inflation ◦ The Federal Reserve bank tries to control inflation by manipulating interest rates
Economic Measurements �When inflation is going up Federal Reserve Bank will move to slow the economy down by making it hard/unappealing to borrow money (they raise BANK interest rates) Measures of Inflation: ◦ 1. Consumer Price Index (CPI)-measures change in price over time of 400 specific goods and services used by the average urban household ◦ The urban group makes up 89% of U. S. households
CPI � � � � FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks) HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture) APPAREL (men's shirts and sweaters, women's dresses, jewelry) TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance) MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services) RECREATION (televisions, toys, pets and pet products, sports equipment, admissions); EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories); OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
Economic Measurements ◦ 2. Producer Price Index (PPI)-measures wholesale price levels in the economy ◦ The PPI covers about 10, 000 goods and services and are recorded on a monthly basis. � � � � mining, manufacturing, agriculture, fishing, and forestry natural gas, electricity, construction, . wholesale and retail trade; transportation and warehousing; information; finance and insurance; real estate brokering, rental, and leasing; professional, scientific, and technical services; administrative, support, and waste management services; health care and social assistance; and accommodation.
Economic measurements ◦ CPI and PPI are directly related with PPI being the trendsetter what happens to the PPI directly effects what happens to the CPI � 4. Unemployment rate - is a measure of the prevalence of unemployment and it is calculated as a percentage by dividing the number of unemployed individuals by all individuals currently in the labor force. ◦ The more people we have working the more likely we are in a economic expansion.
Business Cycle � Business Cycle: recurring slowdown and growth of an economy � Four � 1. Stages Prosperity-when economy is flourishing � 2. Recession-period of economic slowdown � 3. Depression-period of prolonged recession � 4. Recovery-increase in overall economic activity
Prosperity � Currently United States is in Expansion since June of 2009: � Economic Expansion is usually occurring at a time of prosperity. The 4 economic measurements are holding the economy very well. 1. Great time for business to start up 1. 2. 3. 4. Productivity is up Interest rates on capital are low, but there is pressure to raise interest rates during this time. GDP is increasing because of spending power Unemployment is low
Recession � Economic slowdown that last for at least 2 quarters or 6 months � Actions during a recession 1. Consumers spend less • • Consumers begin to save money rather than spend because they don’t trust the market place. But prices are holding steady on CPI 2. Inflation rate increases • Federal Reserve increases bank rates to discourage borrowing, and over spending. 3. Companies begin to make cutbacks to workforce 4. Unemployment is raising-production decreases
Depression (ROCK BOTTOM) � https: //youtu. be/Kfe. HWna. K 7 r. Y � The last United States Depression was December 2007 -June 2009 Actions during a recession: 1. 2. 3. 4. 5. Companies make severe cut backs to workforce Inflation rate is high – fed raises rates because people may not be able to pay back rates due to increased inflation. High unemployment rates- production is very low Companies unwilling to hire new employees New businesses close to decreased consumer spending – consumers are only spending on the necessities because of economic uncertainty, and falling prices
Recovery � When the GDP and economic measurements make a turn to regain the economic market. � Actions 1. 2. 3. 4. during this time Companies begin to hire new employees Consumer spending begins to increase Inflation rate begins to go down Unemployment rate decreases
Why does this Relate to Business � The business cycle moves identical to the economic cycle. prosperity
Quiz: Good Luck
Quiz: 1. How are the 3 basic economic questions answered for the 3 market economies. (12 pts) 2. Name the factors of production necessary to create goods and services in an economy. (4 pts) 3. Name 2 economic measurements used to gauge the success of an economy. What do they gauge? (4 pts) 4. Describe 1 phase of the business cycle. (5 pts)
- Slides: 41