Economics 12/6/10 mrmilewski

1. Economics 12/6/10 http://mrmilewski.com • OBJECTIVE: Demonstrate mastery of Chapter #1 and begin examination of world economic systems. • I. Administrative Stuff -attendance -explanation of test procedure • II. Chapter#1 Test • III. Journal #4 pt. A -Read “The Global Economy” p.35 -Answer questions (1-2) p.35 • IV. Journal #4 pt. B -notes on economic systems

2. All societies face scarcity and must answer the 3 basic questions: • What to produce? • How to produce? • For whom to produce? http://www.swan.ac.uk/engd/production%20line.JPG http://en.wikipedia.org/wiki/Image:Bakweri_cocoyam_farmer_from_Cameroon.jpg

3. Types of Economic Systems • Traditional – tribal law • Market – democratic societies • Command – dictators, communist gov’t http://www.horizonsunlimited.com/forwood/images/uzbepho5.jpg

4. Types of Economic Systems

5. Goals of the American Economy • Economic freedom • Economic efficiency • Economic equity • Economic security • Full employment • Price stability • Economic growth • (Future Goals)

6. Economic freedom • In the United States, people place a high value on the freedom to make their own economic decisions. • People like to choose their own occupations, employers, and uses for their money. • Business owners like the freedom to choose where and how they produce. • The belief in economic freedom, like political freedom, is one of the cornerstones of American society

7. Economic efficiency • Productive resources (land, labor, capital & entrepreneurs) are scarce and must be used in a way that the benefits of their use are greater than their costs.

8. Economic equity • Americans have a strong sense of justice, impartiality, and fairness. • Examples: -equal pay for equal work -illegal to discriminate -advertisers are not allowed to make false claims -lemon laws (hold producers responsible for faulty products)

9. Economic security • Americans desire protection from such adverse economic events as layoffs and illnesses. • Examples: -unemployment insurance -workman’s comp. -social security

10. Full employment • When people work, they earn income for themselves while they produce goods and services for others.

11. Economics 12/7/10 http://mrmilewski.com • OBJECTIVE: Examine the Goals of the American Economy. • I. Journal #5 pt. A -Read “Critical Thinking Skill” p.40 -Answer questions (1-3) p.40 • II. Quiz#3 • III. Return of Chapter#1 Test • IV. Journal #5 pt. B -finish notes on goals • V. Journal#5 pt. C -questions on Econ U.S.A. episode#7

12. Price stability • Price stability adds a degree of certainty to the future. • If inflation–a rise in the general level of prices–occurs, workers need more money to pay for food, clothing, and shelter. • How inflation works: -Wendy’s Jr. Cheese Deluxe -Cost $.99

13. If you make $5.00 • How many Jr. Cheese’s can you buy per hour? • 5, so your purchasing power is 5 burgers per hour • Next year you get a raise of $1, is your purchasing power higher this year than it was last year or lower?

14. You can’t answer the question until you know the price of the Jr. Cheese. • If the price of the Jr. Cheese goes to $1.50, what is the change in your purchasing power? • Decreased by 1 burger

15. Inflation Example

16. Fixed Income • People who live on a fixed income–an income that does not increase even though prices go up–find that bills are harder to pay and that planning for the future is more difficult.

17. Economic growth • Growth is needed so that people can have more goods and services. • Because the nation’s population is likely to grow, economic growth is necessary to meet everyone’s needs.

18. Econ U.S.A. episode#7 • 1.) What did Kennedy do in 1963? What was the goal of it? Did it work? • 2.) What happened in 1965? How did the White House make it worse? • 3.) What happened when consumers and government continued to buy? • 4.) How can inflation help some people? • 5.) What is inflationary psychology? How did it hurt businesses? • 6.) How are senior citizens affected by inflation? • 7.) Why did workers go on strike? How did it effect inflation? • 8.) How did President Nixon try to control inflation?Did it work? • 9.) What happened to inflation by the late 1970’s?

19. Economics 12/8/10 http://mrmilewski.com • OBJECTIVE: Examine the characteristics of capitalism and the Consumer Price Index. • I. Journal #6 pt. A -Examine Figure 2.1 p.38 -Answer the caption question p.38 • II. Quiz #4 • III. Journal #6 pt. B -notes on capitalism & CPI • IV. Math Practice with CPI -constructing a CPI

20. The Characteristics of Capitalism • In capitalism private citizens own the factors of production. • Free enterprise means that competition is allowed to flourish with minimum government interference.

21. Competition & Free Enterprise • Economic freedom – -people can choose their jobs, employers, and how to spend their money. -businesses may choose what to sell and how much to charge. • Voluntary exchange – -buyers and sellers freely engage in market transactions.

22. Private property rights – -people may control their possessions as they wish • Profit motive – -people and organizations may improve their material well-being by making money • Competition – -producers and sellers compete with each other for consumers while lowering costs. -consumers compete with each other to obtain the best products at the lowest prices.

23. Roles • Entrepreneur – -organizes land, labor, and capital in order to make a profit • Consumer – -determines what is made “the customer is always right”

24. Government – -protector of private property, enforcer of contracts, and definer of fairness -provider of services like defense, education, and public welfare -consumer of goods -regulator charged with preserving competition -promoter of national goals

25. CPI • Consumer Price Index – an index used to measure price changes for a basket of frequently used common items. • The CPI reports on price changes for 90,000 items in 364 categories from 85 geographic areas of the country and are compared to their 1982-84 base year prices. • Produce Price Index – measure price changes paid by domestic consumers for their inputs and is based on a sample of about 100,000 commodities and uses 1982 as the base year.

26. CPI & PPI • Higher prices for inputs normally results in higher prices for consumer. http://money.cnn.com/2005/07/14/news/economy/cpi/cpi_corecpi_july05.gif

27. Midwest urban CPI • Source: • U.S. Department of Labor Bureau of Labor Statistics • Base Year • 1982-84=100 http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=dropmap&series_id=CUUR0200SA0,CUUS0200SA0

28. Midwest Urban CPI 1967-2005 http://data.bls.gov/PDQ/servlet/SurveyOutputServlet

29. Midwest Urban CPI 1988-2005 http://data.bls.gov/PDQ/servlet/SurveyOutputServlet

30. Economics 12/9/10 http://mrmilewski.com • OBJECTIVE: Examine the effect of inflation on the economy. • I. Journal #7 pt.A -Read “Profiles in Economics” p.266 -Answer question#1 p.266 • II. Journal#7 pt.B -notes on ideas • III. Finish Math Practice with CPI • IV. The Commanding Heights -Film about Economic Systems

31. Market – democratic societies Command – dictators, communist gov’t Traditional – tribal law Market – Capitalist (Socialist) Command - Communist Types of Economic Systems

32. The Battle of Ideas • The 20th Century began with a Communist Revolution, and ended with a Capitalist Revolution. • In the West the battle of ideas was between Keynes v. von Hyeck.

33. Economics 12/10/10 http://mrmilewski.com • OBJECTIVE: Examine the effect of government planning on the 20th century. • I. Administrative Stuff -attendance -test reminders • II. Commanding Heights -questions on film about globalization • III. Mindjogger -video quiz on Chapter#2