Economics Unit 1 Fundamentals of Economics

1. Economics Unit 1Fundamentals of Economics TEKS E.1: The student understands the concepts of scarcity and opportunity costs. E.1A Explain why scarcity and choice are basic economic problems faced by every society.

2. Fundamentals of Economics • E.1A: continued • Something’s value is determined by it’s scarcity and utility. • Something that is non essential can have a high value (pearl necklace), while something that is essential can have a low value (water), thus creating the paradox of value. • E.1B: Describe how societies answer the basic economic questions. • An increase in goods and services is associated with economic growth.

3. Fundamentals of Economics • E.1B: continued • The three basic questions each nation’s economy must answer are what to produce, how to produce it, and for whom to produce it for. • When deciding how to use resources, you must evaluate the costs and benefits that meet your needs. This decision leads to trade-offs. • The former Soviet Union used opportunity costs, and trade-offs to evaluate it’s economy and decide to switch from and agricultural to an industrial economy.

4. Fundamentals of Economics • E.1C: Describe the economic factors of production. • Opportunity costs are associated with trade-offs. • The four factors of production are: land, labor, capital, and entrepreneurship. • Entrepreneurs are risk takers who take businesses to economic growth and create jobs. • E.1D: Interpret a production-possibilities curve and explain the concepts of opportunity costs and scarcity. • A production-possibilities curve identifies all possible combinations of goods and services an economy can produce.

5. Fundamentals of Economics • E.1D: continued • Opportunity cost explains the meaning of choosing one alternative over another alternative. • Evaluating the costs and benefits of using a resource creates trade-offs. • TEKS E.5: The student understands free enterprise, socialist, and communist economic systems. • E.5A: Describe the basic characteristics of economic systems, including property rights, incentives, economic freedom, competition, and the role of government.

6. Fundamentals of Economics • E.5A: continued • Karl Marx believed the beneficiaries of socialism would be the workers. • The most prevalent type of economy in the world today is mixed economy. • E.5B: Compare the free enterprise system, socialism, and communism using the basic characteristics of economic systems. • A socialist economy provides people with goods and services they otherwise could not afford.

7. Fundamentals of Economics • E.5C: Examine current examples of free enterprise, socialist, and communist economic systems. • The country that has a capitalist economic system and has the highest GDP per capita is Singapore. • China today is an example of a nation that has successfully privatized. • A high rate of taxation led Sweden to switch from socialism to a mixed economy in the 1980’s.

8. Fundamentals of Economics • TEKS E.6: The student understands the basic characteristics and benefits of a free enterprise system. • E.6A: Explain the basic characteristics of the US free enterprise system, including private property, incentives, economic freedom, competition, and the limited role of government. • One responsibility of consumers is to read the label information before making a purchase. • E.6B: Explain the benefits of the US free enterprise system, including individual freedom of consumers, and producers, variety of goods, responsive prices, investment opportunities, and the creation of wealth.

9. Fundamentals of Economics • E.6B: continued • Privatization tends to raise a nation’s standard of living because it’s citizens would be more productive if they felt it was to their benefit. • An advantage of a market economy is the high level of individual freedom it affords it’s citizens. • In a command economy, products produces are more likely to be of poor quality because the workers have no incentive to produce good work due to the lack of the incentive profit motive.

10. Fundamentals of Economics • TEKS E.8: The student understands the circular-flow model of the economy. • E.8A: Interpret the roles of resource owners and firms in a circular-flow model of the economy and provide real-world examples to illustrate elements of the model. • A decrease in demand for new products would most likely negatively impact a country’s overall level of income. • The volume of voluntary transactions that take place in a nation best explains why that nation’s GDP is an indicator of the citizen’s over all well-being.

11. Fundamentals of Economics • TEKS E.22: The student applies critical-thinking skills to organize and use information acquired from a variety of valid sources, including electronic technology. • E.22A: Analyze economic information by sequencing, categorizing, identifying cause-and-effect relationships, comparing, contrasting, finding the main idea, summarizing, making generalizations and predications, and drawing inferences and conclusions. • People who hold political power in a nation with a command economy might resist change to a free market economy because of anxiety over losing control.

12. Fundamentals of Economics • TEKS E.23: The student communicates in written, oral and visual forms. • E.23A: Use economic-related terminology correctly. • Gross Domestic Product (GDP) provides the most comprehensive measure of a nation’s wealth. • Durable goods are products designed to last at least three years, non durable goods last less than three years. • Decisions about what to produce are driven by consumers. • In a market economy, major economic decisions are made by individuals, not for them.