Economics Economic Basics Vocabulary Economics Study of how

Economics

Economic Basics • Vocabulary: • Economics: Study of how people meet their wants and needs • Scarcity: Having a limited quantity of resources to meet unlimited wants • Opportunity Cost: The cost of what you have to give up • Demand: The desire for a certain good or service • Supply: The amount of a good or service that is available for use • Producers: People or businesses that make and sell products • Consumers: People or businesses that buy, or consume, products. • Incentive: A factor that encourages people to act in a certain way

Economic Basics • 3 questions in economics: • 1. what goods and services should be produced? • 2. How should goods and services be produced? • 3. Who uses or consumers those goods and services?

Economic basics • Resources people use to make goods and services are called factors of production • Three main factors: land, labor, capital.

Economic basics • People have limited money and time, they have to choose what they want most; making a choice involves opportunity cost • Demand Supply are connected to price. • Producers: try to win consumers’ business by offering better products for lower prices than other producers. • Marginal cost is the cost of making one more unit of the product. • Businesses: make products because of economic incentives.

Economic Process • Vocabulary: • Market: An organized way for producers and consumers to trade goods and services • Profit: the money a company has left after subtracting the costs of doing business • Revenue: The money earned by selling goods and services • Specialization: the act of concentrating on a limited number of goods or activities. • Competition: The struggle among producers and consumers’ money. • Inflation: In a growing economy, prices may increase over time. • Recession: A decline in economic growth for six or more months in a row.

Economic Process • Producers and consumers exchange goods in a market • Businesses want to make a profit: To do this businesses try to reduce expenses and increase revenue • The price of resources affects revenue and profit. • Specialization allows people and companies to use resources more efficiently and to increase production and consumption. • Competition: If one company raises the price of its products, another company may sell similar goods for a lower price to win more business. • Healthy economy sells more goods and services.

Economic Systems • Traditional Economy: • An economy in which people make economic decisions based on their customs and habits. • Usually satisfy their needs and wants through hunting or farming • Usually do no want to change their basic way of life

Economic Systems • Market Economies: • An economy in which individual consumers and producers make economic decisions. • This type of economy is called capitalism, or a free market • Encourage entrepreneurs to establish new businesses by giving them economic freedom

Economic Systems • Command economy: • An economy in which the central government makes all economic decisions. • Called a centrally planned economy • Individual consumers and producers do not make basic economic decisions

Economic Systems • Mixed economy: is an economy that combines elements of traditional, market, and command economic systems

Trade • Vocabulary: • Trade: Is the exchange of goods and services in a market • Exports: are goods and services produced within a country and sold outside the country’s borders • Imports: are goods and services sold in a country that are produced in other countries • Tariff: A tax on imports or exports • Trade Barrier: a government policy or restriction that limits international trade • Free Trade: The removal of trade barriers

Trade • To get the products we need and want we engage in trade • Geographic location can give a country or region advantages in trade • All the buying and selling that takes place within a country is known as domestic trade • Domestic producers and consumers can also engage in international trade • If imported goods are cheaper than domestic goods, consumers will usually buy more of them.