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Chapter 2 Section 1 – pgs. 23-27

Chapter 2 Section 1 – pgs. 23-27. Define economic system. List and describe the Three Key Economic Questions. List and describe the four types of economic systems. Using the Chart Below, describe each of the Economic Goals and Societal Values. Then provide a real-life example of each.

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Chapter 2 Section 1 – pgs. 23-27

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  1. Chapter 2 Section 1 – pgs. 23-27 • Define economic system. • List and describe the Three Key Economic Questions. • List and describe the four types of economic systems. • Using the Chart Below, describe each of the Economic Goals and Societal Values. Then provide a real-life example of each.

  2. Economic System • Economic System – method used by society to produce goods and services

  3. Four Economic Questions • What and how much should be produced? • Who should produce it? • How should it be produced? • Who should share in its use?

  4. Four Economic Systems • Traditional economy – relies on habit, custom, or ritual to decided the 3 economic questions • Market economy – economic decisions are made by individuals and are based on exchange, or trade. • Command Economies – in a centrally planned economy, the central government alone decides how to answer the three economic questions. • Mixed Economies – market-based economic systems in which government plays a limited role.

  5. Economic Goals and Societal Values - pgs. 23-27 Manufacturer knowing the best way to use resources wisley (Assembly Line) Making the most of scarce resources Freedom from government intervention in the production and distribution of goods/services Working where you want, spending money the way that you want, owning a business, etc. Knowing that goods and services will be available, payments made on time, government will provide a safety net in times of economic downturns Security – Unemployment Checks, Social Security Predictability – gas at gas pumps, food at store Lawyers earn more than nurses, computer programmers more than truck drivers Fairness, being paid according to your skill level, not being discriminated against Agricultural age to industrial age to information age. Innovations in computers, communication. Economic growth refers to improving standard of living and GDP. Innovation, improving existing technology. Environmental protection, full employment, universal medical care. Future goal for society.

  6. Review Economic Goals 1. Economic Freedom 2. Economic Security 3. Economic Innovation (Efficiency) 4. Economic Efficiency (Innovation) 5. Economic Growth (Innovation) 6. Economic Predictability 7. Additional (Future) Goals (Equity) 8. Economic Equity (Growth)

  7. Economic Goals and Societal Values Poster Project – pgs. 26-27 • Poster Requirements: • Title - Economic Goals and Societal Values • Summary Statement – “The Economic Goals and Societal Values provide a basic framework for each society and their attempts to provide for their people.” • 8 pictures to represent each of the economic and social goals. • Label, describe and summarize each picture • Economic Efficiency • Economic Freedom • Economic Security • Economic Predictability • Economic Equity • Economic Growth • Economic Innovation • Additional Goals Economic Efficiency Description: Using the factors of production in the most productive way possible, as to maximize profit Picture Summary: This picture represents assembly line production at an automobile manufacturing plant. This shows how the division of labor and specialization can increase efficiency.

  8. Economic Goals and Societal Values Economics Goals and Societal Values Poster Project pg. 23 - 27 Summary Statement: The Economic Goals and Societal Values provide a basicframework for each society and their attempts to provide for their people. Economic Predictability Economic Security Economic Efficiency Definition: societies try to maximize the factors of production Picture:This picture represents an efficient use of resources through assembly line production Economic Innovation Economic Growth Additional Goals Economic Freedom Economic Equity • Poster Requirements: • Title - Economic Goals and Societal Values • Summary Statement – Purpose of economic and Societal Values • At least 8 pictures to represent each of the Economic Goals and Social Values • Label, definition and picture description for each of the 8 Economic Goals and Societal Values

  9. Daily Assignment Chapter 2 Section 1 – pgs. 23-27 • Bead Game Simulation

  10. Chapter 2 Section 1 – Daily Assignment Questions pgs. 26 -27 How does a traditional economy answer the three economic questions? Describe traditional economies and their communities. What is a disadvantage to a traditional economy? How are the three economic questions answered in a market economy? What are other names for market economies? How are the three economic questions answered in a command economy? Why are they referred to as command economies? Why are most modern economies referred to as mixed economies?

  11. Chapter 2 Section 2 • Imagine that you are walking into Walmart. List 3 items that you could purchase and the departments that you would find them in.

  12. Chapter 2 Section 2 – The Free Market • Market – buyers and sellers meet to exchange goods and services • Market Economy – economic decisions(what to produce, how to produce, for whom to produce) are made by consumers and businesses based on exchange of goods and services • Capitalism (free market) – Individuals and businesses own the factors of production and can profit on them • Voluntary Exchange - is the act of buyers and sellers freely and willingly engaging in market transactions

  13. Specialization • Specialization – the separation of tasks within a system; people focus on a specific purpose/task • Division of Labor – Workers perform fewer tasks in order to operate more efficiently

  14. Households and Firms • Household – Person or group of people living in a residence • Consumers - use the goods and services (outputs) to satisfy wants and needs • Firm – business, organization that uses resources to produce a product, which it then sells • Suppliers – transform “inputs” (F.O.P.) into “outputs” (products)

  15. Product Markets • Product Markets – Houses and firms interact; producers sell their goods and services to consumers • Households are buyers of goods and services • Firms are sellers of goods and services (outputs)

  16. Factor Markets • Factor Markets – the markets where productive resources (F.O.P)/Inputs are bought and sold • Labor - Firms (businesses) hire workers and pay them salaries • Land - Purchased/rented land • Capital - Use money from households, purchase capital goods

  17. Circular Flow Model of Economic Activity – shows the flow of money and goods/services from and to businesses and households Consumer Spending Business Income/Revenue Product Market • Product Market • Market for Goods and Services • Firms sellHouseholds Buy Consumer Goods and Services Final Goods and Services Sold • Households • Buy and Consume • Goods and Services • Own and sell the F.O.P Households • Firms(Business) • Produce and sellGoods and Services • Hire and use F.O.P. • Firms Land, Labor, Capital - provided by household Inputs for Production (F.O.P.) Factor Market • Factor MarketMarket for F.O.P • Households sell • Firms buy Income to Households/Individuals Payment for F.O.P. – Rent (Land) Wages (Labor), Interest (Capital), Profit (Entrepreneurs)

  18. Application Questions • In the factor market, what do businesses provide households? • The flow of goods and services in the product market is represented by which firm and products on the model below? • When you apply for a job at the local Starbucks which market are you in? • Which color arrows represent the flow of money; what color arrows represent the flow of inputs and outputs. Income/payment the F.O.P Starbucks/Coffee Factor Blue/Tan

  19. Circular Flow Model of Economic Activity Consumer Spending/Investing Business Income/Revenue Product Market Goods and Services Purchased: Caramel Frappuccino Goods and Services Sold Households • Firms Land, Labor, Capital, Entrepreneurs Inputs for Production (F.O.P.) Factor Market Income to Households/Individuals Payment for F.O.P. – Wages, rent, capital goods

  20. Daily Assignment - Circular Flow Model of Economic Activity Consumer Spending1. _________________________ • Business Income • _________________________ Product Market Goods Purchased 1. ______________________________ 2. _______________________________ Goods Offered1. ___________________________ 2. ___________________________ • Household • ________________________ FirmFirm 1. _____________________________ Firm 2. _____________________________ Input for Production 1. ___________________________ Factor of Production Offered1. ___________________________ Factor Market Weekly Income1. __________________ Payments for F.O.P 1. _________________

  21. Vince Lombardi “What it Takes To Be Number 1” "Winning is not a sometime thing; it's an all the time thing. You don't win once in a while; you don't do things right once in a while; you do them right all the time. Winning is a habit. Unfortunately, so is losing. There is no room for second place. There is only one place in my game, and that's first place. I have finished second twice in my time at Green Bay, and I don't ever want to finish second again. There is a second place bowl game, but it is a game for losers played by losers. It is and always has been an American zeal to be first in anything we do, and to win, and to win, and to win. Every time a football player goes to play his trade he's got to play from the ground up-from the soles of his feet right up to his head. Every inch of him has to play. Some guys play with their heads. That's O.K.You've got to be smart to be number one in any business. But more importantly, you've got to play with your heart, with every fiber of your body. If you're lucky enough to find a guy with a lot of head and a lot of heart, he's never going to come off the field second.

  22. Vince Lombardi “What it Takes To Be Number 1” • Running a football team is no different than running any other kind of organization-an army, a political party or a business. The principles are the same. The object is to win-to beat the other guy. Maybe that sounds hard or cruel. I don't think it is. It is a reality of life that men are competitive and the most competitive games draw the most competitive men. That's why they are there-to compete. To know the rules and objectives when they get in the game. The object is to win fairly, squarely, by the rules-but to win. And in truth, I've never known a man worth his salt who in the long run, deep down in his heart, didn't appreciate the grind, the discipline. There is something in good men that really yearns for discipline and the harsh reality of head to head combat. I don't say these things because I believe in the "brute" nature of man or that men must be brutalized to be combative. I believe in God, and I believe in human decency. But I firmly believe that any man's finest hour, the greatest fulfillment of all that he holds dear, is that moment when he has worked his heart out in a good cause and lies exhausted on the field of battle - victorious." • ...Vince Lombardi

  23. Do you agree with Vincent Lombardi’s assertion that people are born with the desire to compete why or why not? What areas do you see competition in the economy of the United States ? How is competition beneficial to our economy/society? How is it harmful to our economy/society? Competition Article

  24. Competition • Competition – efforts among sellers/producers to attract consumers at various prices • At the heart of market economic philosophy • Incentive – an expectation that encourages people to behave in a certain way (positive and negative) • Businesses respond to profits • Consumers respond to price change (high/low)

  25. Chapter 2 Section 2 – Daily Assignment Economic Profile Adam Smith pgs. 33 What was Adam Smith’s ethnic and professional background? What was the name of the book that he published; when was it published? What did Smith identify in the book? What did he assert about specialization and division of labor? What did he believe about the role of government in the economy? Define the French term Laissez Faire; why did Smith believe in Laissez-Faire economics? What is meant by his metaphor of the Invisible Hand? How do both consumers and businesses benefit from this philosophy?

  26. Chapter 2 Section 3 – Centrally Planned Economies • Command – central authority owns and operates the Factors of Production • Centrally Planned Economy – central government answers the three economic questions; WHAT to produce, HOW to produce, and FOR WHOM to produce • Oppose private property, free market pricing, economic freedom

  27. Socialism and Communism • Karl Marx – German social philosopher that studied economic systems in Europe • Communist Manifesto – written by Marx and Frederick Engels became basis for modern-day command economies • Thought capitalism would fail because it put to much wealth in the hands of few and left everyone else poor • Believed in a “no-class” system, where all share in wealth/power • Socialism – distribution of wealth and F.O.P. equally amongst society • Communism – political and economic system with centralized economic decision-making • Authoritarian Government – exact strict obedience from their citizens; do not allow individual freedom

  28. Chapter 2 Section 3 – Daily Assignment Questions “The Former Soviet Union” pgs. 36-38 How did the Soviet Union arise? Where did Soviet planners allocate the factors of production? How did the Soviet Union control agriculture? What three industries did Soviet Planners favor? How did the Soviet Union view entrepreneurial endeavors? What was the quote used by Soviet consumers as a joke? Why were Soviet Consumers’ left unsatisfied? Page 39 – Russia in Crisis How did many Russians initially respond to the Communist collapse? What happened over the next decade? How did Russia deal with corruption? What were some characteristics of Russia’s financial problems? What evidence can be seen that success is in sight?

  29. Do Now Ch 2 Section 3 • Scenario 1 You have two cows. You trade one to your neighbour for a bull. You only produce what you need to survive. • Scenario 2 You have two cows. The State takes both and gives you just enough milk to live • Scenario 3 You have two cows. You sell one and buy a bull. Your herd multiplies, and your wealth grows. You sell your herd and retire on the income. • What economic system matches each scenario? • Which scenario do you think is the most ideal and why? • Which scenario do you think sounds the most like the United States? Why? • What countries do you know of that could fall into scenario 2.

  30. Chapter 2 Section 4 – Modern Economies • Free Enterprise – competition in the marketplace is allowed to flourish with no interference from government • Modified Free Enterprise (mixed economy) – businesses are free to compete with some government regulation/intervention Centrally Planned Free Market Mexico France South Africa Poland Japan • United Kingdom Hong Kong • Canada Singapore • United States Iran China North Korea Cuba

  31. Laissez Faire in a Modern Economy • Laissez Faire – no government intervention in the economy • Some government intervention is necessary in the economy; some needs are difficult to answer in the marketplace • National defense, roads and highways, education, etc… • Government acts a protector, regulator and overseer of economy

  32. Government Money • Taxes from both households and businesses • Income, state, social security, Medicare/Medicaid, unemployment insurance, etc.

  33. Government in the Factor Market • Government purchases land, labor, and capital from households • United States gov’t pays 2.8 million employees $9.7 billion for labor

  34. Government in the Product Market • Government purchases goods and services from firms (businesses) • Buildings, office supplies, telephones, computers, etc.

  35. Daily Assignment – Economic Goals

  36. Daily Assignment – Economic Goals Using the Chart Below, identify how each of the economic goals are addressed.

  37. Daily Assignment – Economic Goals Using the Chart Below, identify how each of the economic goals are addressed.

  38. Daily Assignment – Economic Goals Using the Chart Below, identify how each of the economic goals are addressed.

  39. Daily Assignment – Economic Goals Using the Chart Below, identify how each of the economic goals are addressed.

  40. Daily Assignment – Economic Goals Using the Chart Below, identify how each of the economic goals are addressed.

  41. Daily Assignment – Economic Goals Using the Chart Below, identify how each of the economic goals are addressed.

  42. Daily Assignment – Economic Goals Using the Chart Below, identify how each of the economic goals are addressed.

  43. Daily Assignment – Comparing Economic Systems Examples Advantages Disadvantages

  44. Chapter 2 – VIS Terms • Traditional Economy • Command Economy • Market Economy • Market • Free Market • Specialization • Division of Labor • Household • Consumer • Firm • Supplier • Product Market • Factor Market • Centrally Planned Economy 15. Socialism 16. Communism 17. Authoritarian 18. Laissez-Faire Junk!!!

  45. Due Wednesday 9 - 8 • DAQ's pg. 26-27, Ch. 2 Sec. 1 • Video Questions - North Korea • Comparing Economic Systems, Advantages + Disadvantages Economic Systems + Reflection Questions • D.A. Circular Flow Model • Circular Flow (Elisa and Marcella) • Online Assignment - Scarcity • Ch. 2 Sec. 2 D.A. Adam Smith • Ch. 2 Sec. 3 D.A. "The Former Soviet Union" • Economic Goals and Am. Free Enterprise Flow Chart • Chapter 2/3 Study Guide • Ch. 2 CW Puzzle • Ch. 3 CW Puzzle • Ch. 2 Notes • Daily Tens (12) • Vocab Terms Junk!!!

  46. Circular Flow Model of a Mixed Economy Consumer Spending/Investing Business Income/Revenue Product Market Goods and Services Sold Taxes Goods and Services Purchased: Taxes Households Expenditures Expenditures • Firms Land, Labor, Capital, Entrepreneur Inputs for Production (F.O.P.) Taxes Taxes Factor Market Income to Households/Individuals Payment for F.O.P. – Wages, rent, capital goods

  47. Daily Assignment Group Presentations Using the Chart Below, identify each groups Economic Goals and Societal Values and the picture they used to represent each goal.

  48. Study Guide Chapter 2/3 • Economic System • What to produce, Who to produce them for, How to produce them • Economic: efficiency, freedom, security, predictability, equity, growth, innovation, additional goals • Tradition, custom, ritual, habit • Central planners dictate the what, how, for whom • Households and firms through production and consumption • Market • Market economy • Capitalism • Households and Firms • Input is something used to produce and output, which is a final good or service • Product • Factor • Adam Smith, Wealth of Nations

  49. Study Guide Chapter 2/3 • Be limited in its role in the economy, “Let them do as they please”. • Invisible Hand • See Circular Flow • a) Product • when it changed hands from the household to the firm • Factor, labor • Grills, hostesses, cashiers • Factor • Karl Marx, Communist Manifesto • That it would fail because it put too much money in the hands of the rich and not in the hands of the poor • Communism, Socialism • Authoritarian • Economic Freedom • Property Rights • Profit Motive • Voluntary Exchange • Competition

  50. Study Guide Chapter 2/3 • Their purchases signal to producers what to produce (consumer sovereignty) • Overseer, protector, regulator, informer • Technology • Public Good • Public • Private • Free Rider • Market Failure • Externality

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