Agenda

Go over last night’s HW

Market Economy Notes

HomeworkTomorrow we will start

our project for this 6 weeks.

Identify 2 complimentary goods.

Identify 2 substitute goods.

Two trade-offs and identify the opportunity cost of each.

WEDNESDAY MARCH 25, 2015

CIVICS AND ECONOMICS DAY 127

Traditional

Command

Mixed Market

Large Businesses

Small Business

G= Government I = Individuals B= BothV=Village.

Traditional

Command

Mixed

Market

Large Busines

ses

G B I

Small Busines

s

V G I I

G= Government I = Individuals B= BothV=Village.

SPECTRUM

Government Control

Free Economy

Put in Order from most Government control to least (Market, Mixed, Command)

SPECTRUM

Government Control

Free Economy

Put in Order from most Government control to least (Market, Mixed, Command)

Command

Mixed

Market

MARKET ECONOMY NOTES

Three things control everything in the market:ProfitCompetitionPrice

MARKET ECONOMY

The amount of money you make from selling a good or service

The desire to make money is called profit motive!

PROFIT

Competition acts as a regulatorThat means that it controls the price and quality of an item!

Gas Station 1

Gas Station 2

ROLE OF COMPETITION

Price helps you make decisions!

Bow Tie 1=$20Bow Tie 2 =$38

ROLE OF PRICE

WHAT AFFECTS PRICE?:

SUPPLY AND DEMAND

Definition: Willingness of consumers to buy goods and services.

Law of Demand consumers are more willing to buy more goods at lower prices than at higher prices.

DEMAND

• Your Tastes• Income• Complimentary Goods• Substitute Goods

WHAT AFFECTS DEMAND?

Supplementary/Complimentary Goods Substitute

COMPLIMENTARY V. SUPPLEMENTARY GOODS

WHAT IS ANOTHER EXAMPLE OF EACH?

Supply- a business’ willingness to sell products

Law of supply- businesses will supply more goods at higher prices than they will at lower prices.

SUPPLY

Cost of productionChanges in taxes and government policy

Technology

WHAT AFFECTS SUPPLY?

Fixed Costs- the same no matter how many units of a good are made. (Rent)

Variable Costs- costs that change with the number of products produced (Electricity)

Total Costs- = Fixed + Variable.

COSTS

Surplus

When a business makes too much of a product

Shortage

Insufficient amount of materials

SURPLUS V. SHORTAGE

Marginal benefit- additional or extra benefit associated with an action

Marginal Costs- extra or additional costs of producing one more unit

Example: Happiness from Eating

Krispy Kreme Donuts. Each donut makes you fuller and sicker

Example: Buying a factory to

make one pair of shoes is expensive. It is less expensive with each pair made.

MARGINAL BENEFIT

Trade-off- choosing one thing for another

Opportunity Cost- the value of the thing you gave up when making a trade-off

HOW DO WE MAKE THESE CHOICES?

Identify 2 complimentary goods.

Identify 2 substitute goods.

Two trade-offs and identify the opportunity cost of each.

HOMEWORK