Economics 2705 www'msu'edumilewsk6

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Economics 2/7/05 www.msu.edu/milewsk6

• OBJECTIVE Examine the types of economic systems.
• I. Journal 7 pt. A
• -read The Global Economy p.35
• -answer questions (1-2) p.35
• II. Journal 7 pt. B
• -notes on economic systems
• III. Homework due Friday 2/11/05
• 1.) Read Chapter 2 section2 p.41-44
• -Answer questions (3-6) p.44
• 2.) Read Chapter2 section3 p.46-51
• -Answer questions (3-6) p.51

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All societies face scarcity and must answer the 3
basic questions

• What to produce?
• How to produce?
• For whom to produce?

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Types of Economic Systems

• Traditional tribal law
• Market democratic societies
• Command dictators, communist govt

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Types of Economic Systems
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Economics 2/8/05 www.msu.edu/milewsk6

• OBJECTIVE Examine the goals of the American
  Economy.
• I. Journal 8 pt. A
• -read Business Week Newsclip p.45
• -answer questions (1-2) p.45
• II. Journal 8 pt. B
• -the goals of the American Economy
• III. Homework due Friday 2/11/05
• 1.) Read Chapter 2 section2 p.41-44
• -Answer questions (3-6) p.44
• 2.) Read Chapter2 section3 p.46-51
• -Answer questions (3-6) p.51

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Goals of the American Economy

• Economic freedom
• Economic efficiency
• Economic equity
• Economic security
• Full employment
• Price stability
• Economic growth
• (Future Goals)

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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

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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.

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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)

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Economic security

• Americans desire protection from such adverse
  economic events as layoffs and illnesses.
• Examples
• -unemployment insurance
• -workmans comp.
• -social security

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Full employment

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

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Price stability

• Price stability adds a degree of certainty to the
  future.
• If inflationa rise in the general level of
  pricesoccurs, workers need more money to pay for
  food, clothing, and shelter.
• How inflation works
• -Wendys Jr. Cheese Deluxe
• -Cost .99

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If you make 5.00

• How many Jr. Cheeses 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?

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• You cant 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

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Inflation Example
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Fixed Income

• People who live on a fixed incomean income that
  does not increase even though prices go upfind
  that bills are harder to pay and that planning
  for the future is more difficult.

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Economic growth

• Growth is needed so that people can have more
  goods and services.
• Because the nations population is likely to
  grow, economic growth is necessary to meet
  everyones needs.

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Economics 2/9/05www.msu.edu/milewsk6

• OBJECTIVE Examine the characteristics of
  capitalism.
• I. Journal 9 pt. A
• -read Profiles in Economics p.52
• -answer questions (1-2) p.52
• II. Journal 9 pt. B
• -notes on capitalism
• III. Homework due Friday 2/11/05
• 1.) Read Chapter 2 section2 p.41-44
• -Answer questions (3-6) p.44
• 2.) Read Chapter2 section3 p.46-51
• -Answer questions (3-6) p.51

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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.

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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.

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• 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.

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Roles

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

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• 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

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Economics 2/10/05www.msu.edu/milewsk6

• OBJECTIVE Examine the characteristics of
  inflation.
• I. Journal 10
• -questions on Econ U.S.A. episode17
• II. Working with Inflation
• -math practice
• III. Homework due tomorrow
• 1.) Read Chapter 2 section2 p.41-44
• -Answer questions (3-6) p.44
• 2.) Read Chapter2 section3 p.46-51
• -Answer questions (3-6) p.51

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Econ U.S.A. episode17

• 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 effected 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 1970s?

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Economics 2/11/05www.msu.edu/milewsk6

• OBJECTIVE Examine the Consumer Price Index
  (CPI).
• I. Journal 11 pt.A
• -Complete Using Line Graphs p. xvii
• -Answer questions Practicing the Skill (1-2)
  Applying the skill (1-2) p. xvii
• II. Journal 11 pt.B
• -notes on CPI
• III. Working with CPI
• -math practice

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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.