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MICROECONOMICS

MICROECONOMICS. SSEMI1 The student will describe how households, businesses, and governments are interdependent and interact through flows of goods, services, and money.

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MICROECONOMICS

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  1. MICROECONOMICS

  2. SSEMI1 The student will describe how households, businesses, and governments are interdependent and interact through flows of goods, services, and money. • a. Illustrate by means of a circular flow diagram, the Product market; the Resource market; the real flow of goods and services between and among businesses, households, and government; and the flow of money. • b. Explain the role of money and how it facilitates exchange.

  3. a. Illustrate by means of a circular flow diagram, the Product market; the Resource market; the real flow of goods and services between and among businesses, households, and government; and the flow of money Click ME!!!

  4. Circular Flow Market Economy Mixed Economy

  5. b. Explain the role of money and how it facilitates exchange. • MONEY IS: • A medium of exchange • A unit of account • A store of value • In our economy, money is the most effective medium of exchange when purchasing goods. Click ME!!!

  6. SSEMI2 The student will explain how the Law of Demand, the Law of Supply, prices, and profits work to determine production and distribution in a market economy. • a. Define the Law of Supply and the Law of Demand. • b. Describe the role of buyers and sellers in determining market clearing price. • c. Illustrate on a graph how supply and demand determine equilibrium price and quantity. • d. Explain how prices serve as incentives in a market economy.

  7. a. Define the Law of Supply and the Law of Demand. • LAW OF SUPPLY: Higher Price = Higher Quantity Supplied (direct relationship) • LAW OF DEMAND: Lower Price = Higher Quantity Demanded (inverse relationship)

  8. b. Describe the role of buyers and sellers in determining market clearing price. • c. Illustrate on a graph how supply and demand determine equilibrium price and quantity.

  9. d. Explain how prices serve as incentives in a market economy. • The price is the amount of money needed to buy a particular good or service. • In a market, the price and quantity exchanged are determined by the interaction of demand and supply. • Changes in demand or supply alter the price as well as the quantity bought and sold at that price.

  10. SSEMI3 The student will explain how markets, prices, and competition influence economic behavior. • a. Identify and illustrate on a graph factors that cause changes in market supply and demand. • b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages. • c. Define price elasticity of demand and supply.

  11. a. Identify and illustrate on a graph factors that cause changes in market supply and demand. • Changes in SUPPLY or DEMAND (not quantity supplied or quantity demanded) cause the supply or demand curve to shift. • Increase in Supply or Demand: Curve shifts right • Decrease in Supply or Demand: Curve shifts left

  12. Factors that change demand Factors that change supply Cost of inputs Technology Government Regulation Taxes Subsidies Expectations of a change in price • Population • Income • Consumer tastes • Price of complements • Price of substitutes • Expectations of a change in price

  13. b. Explain and illustrate on a graph how price floors create surpluses and price ceilings create shortages.

  14. SURPLUS • Price above equilibrium • Qd < Qs • SHORTAGE • Price below equilibrium • Qd > Qs

  15. Price Ceiling • legally established maximum price. • Governments enact price ceilings when they fear that the price might be higher than they desire it to be. • Creates a shortage • Example: rent-control • Price Floor • is a legally established minimum price. • Governments enact price floors when they fear that the price might be lower than they desire it to be. • Creates a surplus • Examples: farm products and the minimum wage.

  16. c. Define price elasticity of demand and supply. • elasticity of demand is the way of measuring how much quantity demanded will change in response to a change in price.

  17. SSEMI4 The student will explain the organization and role of business and analyze the four types of market structures in the U.S. economy. • a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation. • b. Explain the role of profit as an incentive for entrepreneurs. • c. Identify the basic characteristics of monopoly, oligopoly, monopolistic competition, and pure competition.

  18. a. Compare and contrast three forms of business organization—sole proprietorship, partnership, and corporation.

  19. b. Explain the role of profit as an incentive for entrepreneurs. • Profit (making money) is the incentive for entrepreneurs to start new businesses and invent newer and more cost-effective ways of producing goods. Click ME!!!

  20. c. Identify the basic characteristics of monopoly, oligopoly, monopolistic competition, and pure competition.

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