Government and the State: Understanding Public Policies and Economic Systems

1. Bell Work: • What do you think the United States would be like if there was no government? (explain why!) -Make Sure you fill this in the Wednesday section of you bell work sheet. - Please fill in the date.

2. Government and the State: Chapter 1.1

3. What is Government? • Government: Is an institution in which a society makes and enforces its public policies. • Public Policies: Are the things a government decides to do. Raise taxes, fund education, and environmental policies. • In order for governments to make and carry out public policies, governments must have power.

4. Government Power: • Every government has and exercises three basic kind of power. • Legislative- make laws, form public policies. • Executive- execute and enforce laws and policies. • Judicial- power to interpret laws, determine their meaning, and settle disputes. • Powers of a government are outlined in a country’s constitution.

5. What is a Constitution?: • A constitution is the body of laws that set out the principles, structures, and processes of a government. Ex: - election process - death of a President

6. Dictatorship vs. Democracy: • Dictatorship- executive, legislative, and judicial power is held by a single person or small group. - People have very little power and/ or say in how the government is run. • Democracy- supreme authority over the government rest with the people. - Majority rules, and people vote to have their voices heard.

7. The State: • State = nation or country 4 Characteristics of the State: • Population- a state must have people living within its borders. • Territory- must have land with recognized borders. • Sovereignty- has supreme and absolute power within its territories. • Government- every state has a government

8. Theories on how the state came about: • The Force Theory: one person or a small group claimed control over an area and forced all within it to submit to that person’s or groups rule. • Evolutionary Theory: Developed naturally over time. • Divine Right Theory: God created the state, gave those of royal birth a “divine right” to rule. • Social Contract Theory: state arose out of a voluntary act of free people.

9. Bell Work • What is government? • What 3 basic powers do all governments have? (List and explain)

10. Forms of Government: 1.2

11. Classifying Governments: • Governments may be classified in 3 ways. 1. Who can participate. 2. Geographic distribution of power. 3. Relationship between legislative and executive branches.

12. Who Can Participate: • Democracy- supreme authority rest with the people -Direct (pure)-will of the people is directly translated into laws by the people themselves. (Only works in small communities). -Indirect (representative)-elected officials who are chosen by the people

13. Dictatorship-ruler holds absolute authority over the people. -Autocracy- one person holds unlimited power. -Oligarchy- small elite group holds the power to rule.

14. Geographic Distribution of Power: • Unitary- a single central agency holds all government powers. • Federal Government- government power is shared between the central government, state governments, and city governments. (U.S. Gov’t) • Confederation- an alliance of independent states. Government has very little power and handles only the problems the member states assign to it. - (U.S. during revolutionary war, U.S. during civil war)

15. Relationship Between Legislative and Executive Branches: • Presidential Government- divides power between the 3 branches of government. (legislative, judicial, and executive) • Parliamentary Government- focuses power in the legislative branch, executive branch is chosen by and subject to the legislative branch.

16. Bell Work: 9/12/11 • What is the difference between a direct and indirect democracy? • What is the difference between an autocracy, and an oligarchy?

17. Types of Economic Systems: How do the different forms of government help determine a countries economic system?

18. Economic Systems: • Different economic systems have evolved in response to the problem of scarcity. • Economic system: A method used by a society to produce and distribute goods and services. • Which economic system a society employs depends on that society’s goals and values.

19. 3 Basic Questions: • When determining which type of economic system to employ, a country must answer these three basic questions. 1. What goods and services should be produced? 2. How should these goods and services be produced? (electricity produced by oil or water) 3.Who will consume these goods and services?

20. Traditional Economic System: • Traditional economies: Relies on habit, custom, or rituals to decide what to produce, how to produce it, and whom to distribute it to. • (ex: Australian bush tribes and Amish communities.)

21. Market Economic System: • Market economies: economic decisions are made by individuals and are based on exchange or trade. (Also called free markets, or capitalism.) • Market: voluntary exchange of goods and services between buyers and sellers.

22. Command Economic System: • Command economies: (centrally planned economy) The central government alone decides how to answer all three key economic questions. • Ex: North Korea and China are considered command economies.

23. Problems with Command System: • Performance almost always falls short. • Generally cannot meet consumer’s needs or wants. • Since government controls all factors of production, workers lack incentive to work hard. • Fears change.

24. Mixed Economic System: • Mixed Economies: a combination of traditional, market, and centrally planned economies. • Most modern economies are considered mixed economies.

25. 5 Basic Concepts of Democracy: 1.

26. Bell Work: • In what economic system does the central government answer the 3 basic economic questions? • Equality of all persons only refers to what 2 things. (Look in your notes from yesterday.) 1. 2.

27. Understanding Demand:

28. Understanding Demand: • Demand: The desire to own something, and the ability to pay for it. • The Law of Demand: The law of demand states that when a goods price is lower, consumers will buy more of it. (the opposite is also true). $ QD

29. Substitution Effect: • The law of demand is the result of 2 separate behavior patterns. 1. Substitution effect: If the price for a good increases, people may purchase less of that good, or find an adequate substitute good

30. Real Income Effect: 2. Real income effect: If price for a good goes up, your limited budget won’t buy as much as it used to. If price goes down you feel richer, and will purchase more goods.

31. Utility: • Utility:The power that a good or service has to satisfy a want. • Marginal utility: additional amount of satisfaction each time you purchase a good. • Law of diminishing marginal Utility: Rule that states each additional unit of a good you purchase, the less satisfaction you’ll receive.

32. Elasticity of Demand: • There are always some goods that you will always find money to buy, even if the price were to rise drastically. • There are also some goods that you would cut back on or stop buying altogether if the price were to rise just slightly. • Economists describe the way that consumers respond to prices changes as elasticity of demand.

33. Elastic vs. Inelastic Demand: • Elastic Demand: when you buy less of a good even after a small price increase. (ex: sporting event tickets) • inelastic Demand: demand for a good that you will keep buying despite price changes. (ex: gasoline)

34. Demand Schedule: • Demand Schedule: A table that lists the quantity of a good that people will purchase at each price in the market.

35. Demand Curve: • Demand Curve: is a graphic representation of a demand schedule • Shows the relationship between the price of a certain good, and the quantity a person will purchase. • Demand curve slopes downward, showing that as price decreases, quantity consumed increases.

36. Demand Curve: 5- 4- 3- $ Per Slice of Pizza 2- 1 - 20- 30- 40- 50- 10- Quantity Demanded

37. Shifts in the Demand Curve: Population Income 5- Preference Change Availability of Substitutes 4- Complimentary Goods 3- $ per slice of pizza 2- 1 - 20- 30- 40- 10- 50- Quantity Demanded

38. Bell Work: 9/16 • Explain the difference between elastic and inelastic demand. • What does the law of demand state?

39. Understanding Supply

40. Law of Supply: • Supply: Amount of a good or service that businesses are willing and able to sell at various prices. • Law of Supply: As the price for a good increases, the quantity supplied also increases. $ QS

41. Profit Incentive: • The reason a company will produce more when prices are high, is the hope of greater profits.

42. Supply Schedule: • Supply Schedule: Shows the relationship between price and the quantity supplied for a specific good. (similar to demand schedule)

43. Supply Curve: 5- 4- 3- $ Per Slice of Pizza 2- 1 - 20- 30- 40- 50- 10- Quantity Supplied

44. Shifts of the Supply Curve: • 4 things that cause the supply curve to shift: - Cost of inputs (materials to make goods) - Number of firms (competition faced) - Taxes (may increase, or decreased production) -Technology (technology can speed up production) * Remember: shifts to the right show an increase in supply, to left shows a decrease in supply.

45. Law of Diminishing Returns: Law of diminishing returns: level of production decreases as more workers are hired. • Why does this happen?? -Workers are working with limited capital. -(Ex: there are only so many machines in a factory.)

46. Bell Work: • Explain the law of supply. • What are the 4 things that can cause the supply curve to shift? • Explain the law of diminishing returns.

47. Combining Supply and Demand:

48. Equilibrium Price: • Equilibrium price: the point at which demand and supply come together. • It is at this point, where there is balance between price and quantity demanded/ supplied • This is where businesses want to be.

49. Graphing Supply and Demand: S 5- 4- 3- $ Per Slice of Pizza -- Equilibrium price 2- 1 - D 20- 30- 40- 50- 10- Quantity Demand

50. Disequilibrium: • Disequilibrium: If the market price or quantity demanded is anywhere except the equilibrium, the market is in a state of disequilibrium. • Disequilibrium can produce 1 of 2 outcomes. 1.Excess demand- quantity demanded is greater than quantity supplied. (when price is below equilibrium) 2.Excess supply- quantity supplied is greater than quantity demanded. (when price is above the equilibrium point)