is the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals.

is the study of how to increase resources and to create the conditions that will make better use of those resources

Economics is the "dismal science"

Believe there are too many people in the world and that the solution to poverty is radical birth control

advocated creating wealth through entrepreneurship.

Rather than divide fixed resources, Smith envisioned creating more resources so that everyone could be wealthier.

                      FREEDOM was vital to the survival of any economy.

people will work hard if they have INCENTIVES for doing so.

Adam Smith

an economic system in which all or most of the means of production and distribution are privately owned and operated for profit.

Private Property

right to own a Business

Freedom of Competition

Freedom of Choice

to the quantity of products that manufacturers or owners are willing to sell at different prices at a specific time

to the quantity of products that people are willing to buy at different prices at a specific time.

Equilibrium Theory

 because supply and demand interactions determine prices, there is no need for the government to set prices.

quantity supplied>quantity demanded then surplus cause
sellers to lower the price.

quantity supplied<quantity demanded, shortage cause sellers to increase the price.

Perfect Comptetition

Monopolistic Competition

Oligopoly

Monopoly

a large number of sellers produce very
similar products that buyers nevertheless perceive as different, such as hot dogs, sodas, personal computers, and T-shirts.

Define: Product differentiation

What is it key to?

the attempt to make buyers think similar products are different in some way

such as hamburger advertisments

Key to monopolistic competition

What happens to prices in an Oligopoly?

What is used to differentiate products?

In an oligopoly, products from different companies tend to be priced about the same.

Intense price competition would lower profits for everyone, since a price cut by one producer would most likely be matched by the others.

product differentiation, rather
than price, is usually the major factor in market success in an oligopoly

Best opportunity for poor people

Inequality in that some can't or won't work

greed leads to scandals

Some government regulations are necessary

an economic system based on the premise that some, if not most, basic businesses should be owned by the government so that wealth can be distributed evenly among the people

1.Income is taken from the wealthier people and redistributed to the poorer members of the population.

                  2.   Workers in socialist countries are given free education, free health care, free child care, and more employee benefits.

 1.     Socialism may create more equality than capitalism, but it TAKES AWAY SOME WORK INCENTIVES

2.   Very high tax rates

3.   Professionals who earn a lot of money leave for countries were they can keep their money.

4.   Socialist systems tend to discourage the best from working as hard as they can and result in FEWER INVENTIONS AND LESS INNOVATION.

1.The government has no way of knowing what to produce because prices don’t reflect SUPPLY and DEMAND

2.   Due to Govt. guessing shortages of many items may develop.

                  3.   Communism doesn’t inspire business people to work hard, and is slowly disappearing as an alternative economic form.

Free-Market Economies

Command Economies

Define: Free-Market Economy

What are it's negatives?

exist when the market largely determines what goods and services get produced, who gets them, and how the economy grows.

doesn't seem to respond enough to the needs of the poor, the old, the disabled, or protect the environment.

Define: Command Economy

What are it's negatives

exist when the government largely decides what goods and services will be produced, who gets them, and how the economy will grow.

don't create enough jobs or wealth to keep economies
growing fast enough. Thus, governments are disappearing or cutting back on social programs
and lowering taxes on businesses and workers to
generate more business growth and more revenue.

(1) the gross domestic product (GDP)

(2) the unemployment rate

(3) price indexes

A major influence on the growth of GDP is?

frictional, structural, cyclical, and seasonal

those people who have quit work because they didn’t like and haven’t yet found a new job.

 and

the people who are entering the labor force for the first time or are returning to the labor force after significant time away

unemployment caused by the restructuring of firms or by a mismatch between the skills of job seekers and the requirements of available jobs

(e.g., coal miners in an area where mines have been closed).

Service industries grow much slower because they can not compete with the productivity in the manufacturing sector

New tech tends to increase quality not quantity

the periodic rises and falls that occur in economies over time.

ECONOMIC BOOM

RECESSION 

DEPRESSION

RECOVERY

What are the two tools of fiscal policy

Taxation

Govt. Spending

high tax rates slow the economy
because they draw money away from the private sector and put it into the government and discourage small-business due to decrease the profits businesses 

low tax rates will give the economy a boost.

economy is booming, the Fed tends to raise interest
rates. This makes money more expensive to bor-
row. Businesses thus borrow less, the economy
slows as they spend less money

Economy is bad, lower interest rates. Businesses tend to borrow more, and the economy is expected to grow.

Controlled by The Federal Reserve 

The more money the Fed makes available to businesspeople, the faster the economy grows.

To slow the economy, the Feds lowers the money supply.

The rate at which the fed will loan money to other banks.

Essentially, the wholesale price of money