Money is no object

what one thing would you most want to have??

Tesla Roadster: Electric Car that goes 0-60 mph in 3.7 seconds NEVER BUY GAS AGAIN!!!

Even if money not an object, only 500 made every year.

Demand is Unlimited = EVERYBODY wants one

Supply is LIMITED = Not Everyone can have one!

Scarcity means we must make choices Making a choice means giving up the second alternative.

We call this an Opportunity Cost. (#12)

Scarcity demands that we find a way to use our LIMITED RESOURCES wisely (#2) Making efficient use of our resources produces a higher standard of living. (#10)

STUDY ECONOMICS!!
Definition (#1 on handout):
The study of how a society uses its limited resources to satisfy the unlimited wants of its members.

What goods and services will be produced?

How will they be produced? For whom will they be produced?

(Distribution) (#5)

How answer 3 economic questions = type of economic system used.

1). Traditional generation after generation 2). Command govt decides 3). Market individual choices

Economic activity is based on social customs (#7) Examples: Hunting tribes in Africa and northern Canada

Question #1 - What is going to be produced?

Same as ancestors in previous generations.

 Question

#2: How Will Goods and Services be Produced?: determined by previous generations.
If Grandfather was a farmer then Dad was a farmer, so are you!

Roles

 Question

#3: For Whom Will Goods be Produced?

Distribution to same people who received them in past generations.

 Everyone

knows what their role is. is predictable and stable.

Life

 Discourages

new ideas and new ways of doing things.

of progress leads to a lower standard of living.

Lack

Economic activity is planned out by the government GOVT DECIDES! (#6)

People have few choices.

Examples:
Cuba North Korea Former Soviet Union

 What

good and services will be produced?

Whatever the Govt tells you to make!!

 How

will goods and services be produced?

However the Govt tells you to make them!!

 For

Whom will goods and services be produced?

Distribute however the Govt Tells You!!

Little uncertainty as to who will do what.

No unemployment because the government gives everyone a job (whether it is needed or not).

Not designed to meet the wants of consumers.

Large bureaucracy = inefficient Provides strange incentives No rewards for individual performances. Do just enough to meet quotas.

People and businesses act in their own best interests to answer the three basic economic questions. KEY IS CHOICE!!

Consumers and businesses interact voluntarily. (#8) Each person acts in own best interests

 What

goods and services will be produced?

Whatever products or services producers choose to make (customers want to buy).

 How

will goods and services be produced?

In whatever way a provider chooses usually the way that will maximize profits.

For

whom will goods and services be produced?

For whomever chooses to buy the product.

1.Competition

2.

Limited Government (Involvement)

3.

Economic Freedom (of Choice)

4.

Economic Incentives

5. Private

Property

Competition 2. Limited Government 3. Economic Freedom 4. Economic Incentives 5. Private Property

1.

C L E E P

 High

degree of individual freedom. of Consumers dictate what is produced.

Preferences

Economic decisions are made by all, not limited to government officials. Seemingly unlimited variety of goods and services available.

Does not provide for the basic needs of everyone.

Some young, elderly, disabled and other

persons would be unable to survive in a market economy without governmental assistance.

Does not provide certain services that people value.

National Defense &

High degree of uncertainty

Jobs going overseas Market Failures

Education.

Mixed Economy Combination of Market and Command.

Trying to Get the Best of Both Worlds!!

What are some features of the U.S. economy that come from:
Market

economic systems? Command economic systems?