Economic Dictionary Unit 4 What motivates people n

Economic Dictionary Unit 4

What motivates people? n What motivates people to get things they want and need? n $$$$$$

Economic system n The way in which a nation uses its resources to satisfy people’s needs and wants.

Real World Example n What will be produced? How will it be produced? For whom will it be produced? What resources do we have? n The oil rich countries in the Middle East. n n n

For example… n n You go to the mall and want to buy a DVD, t-shirt, & pair of shoes. You only have $10. 00 so you don’t have enough resources (Money) to meet your wants How people handle the problem of satisfying unlimited wants with limited resources

Command Economy n The government decides what goods will be produced, how they will be produced, and how they will be distributed

Real World Example n Example-communist countries like Cuba and N. Korea n -Workers get same pay so poor quality of goods n -little incentive for quality or workers

Traditional Economy Economic system in which social roles (elders) and culture determine how goods are made, sold, and bought. n Resources are determined by inheritance, based on primitive methods and tools n

Real World Example n subsistence farming n People produce most of what they need to survive n Common in poorer countries n Carpet makers, hand made crafts

Market Economy (capitalism) n Based on individual choices and voluntary trade n Free enterprise n Individuals and business make economic decisions

Real World Example n Skill, education and type of job determine salary n United States’ economy has a large portion of market economy

Mixed Economy n Economic system that has features of traditional, command, and market

Real World Example n Most countries are mixed n United States- examples: minimum wage (government determines), quilts made by the Amish (traditional) and private owned businesses (market)

Voluntary Trade People trade freely n Trade is the voluntary exchange of goods, services, or both. n

Real World Example n One country (US) decides to trade with Japan n Japan has products US citizens want-electronic, cars, technology

Trade Barriers n. Any law or practice that a government uses to limit free trade between countries. Trade barriers can be physical barriers as well.

Real World Example n Tariffs (taxes) and quotas n Embargos (US against Cuba) n Physical barriers could be war or landforms

Exchange Currency/Rate n Amount of one currency that can be purchased for a given unit of another

Real World Example n n n Money is currency Value of currency between countries changes -it affects the cost of goods between countries Ex: In Japan it costs more yen to buy an Australian dollar so Japan pays more for Australian products

Currency n Money in any form that is accepted as a medium of exchange, but specially paper money

Real World Example n Currency is name of a country’s money- it looks different and is valued different n Euro – the common currency of most of Europe n Saudi Arabia-riyal n Israel-shekel n Japan-yen

Entrepreneur n Someone who brings together land, labor, and capital goods to produce goods and services

Real World Example n Business owner who thrives on free enterprise n Bill Gates –Microsoft n Walt Disney—Disney animation company (expansion)

Human Capital n Knowledge and skills that allow workers to produce goods and services and earn an income. n People exchange their labor for wages. n Investing in their human capital helps people earn higher wages

Real World Example n College education is human capital n Trained employees n Japan’s greatest resource is the skill of their people

GROSS DOMESTIC PRODUCT (GDP) n Total market value of all goods and services produced in a country

Real World Example n U U. S $13 trillion Saudi Arabia $366 billion Japan $4 trillion Botswana $17 billion What can the GDP tell you about a countries economic development?

CAPTIAL n Resources that people use to make other goods

Real World Example n Factories n Machinery n Tools n These are key for economic growth