Unit 1: Basic Economic Concepts and the Supply and Demand Model. Chapters: 1 and 2
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1 Unit 1: Basic Economic Concepts and the Supply and Demand Model Chapters: 1 and 2
2 The Factors of Production Entrepreneurs +Land + Labor + Capital = goods and services Entrepreneurs = risk takers who combine land, labor and capital into new products. Land = gifts of nature /natural resources Soil, minerals, water, forest, wind, plants, animals, solar energy, etc. Labor = physical effort Physical Capital = tools, equipment, machinery, and factories used in the production of goods and services. Human Capital = people with their skills, knowledge and experience.
3 Basic Economic Questions What to produce? What should be made using available resources? How to produce? What combination of resources should be used? Who will consume? Who will get those goods and services? How do we distribute goods and services? Economic System a system managing the factors of production answers the three basic questions of WHAT, HOW, and FOR WHOM.
4 Command/Centrally Planned Economy A central authority makes the most of the WHAT, HOW, and FOR WHOM decisions. The government determines the needs, sets quotas for major industries and usually provides for the basic needs of the people. Examples: Cuba North Korea Soviet Union China under Mao Zedong
5 Market Economy People and firms act in their own best interest to decide the WHAT, HOW, and FOR WHOM. Buyers and sellers come together in order to exchange goods and services. Good and services are determined by supply and demand. Hong Kong Singapore
6 Mixed Economy Market-based system in which the government plays a limited role. United States
7 Economic Systems Pure command economy Pure market economy NO economic freedom Socialism Capitalism TOTAL economic freedom Mixed economies
8 Economic Systems
9 Is America Number One? Command vs Market vs Mixed Economies - watch up t0 24:00
10 Is America Number One Video Argument?
11 How do you explain why the GDP per capita is $1,800 in North Korea, while just across the DMZ, the GDP per capita is $34,600? S. Korea vs N. Korea GDP $1.744 trillion (2013 est.) $40 billion (2013 est.) GDP per capita $34,600 (2013 est.) $1,800 (2013 est.) Real GDP Growth 2.9% (2013 est.) 1% (2013 est.) Unemployment 3.5% (2014 est.) 25.6% (2013 est.)
12 What are the key determinants of economic growth? Read Why Nations Fail, pages Why did the South Korean economy prosper and the North Korean economy falter after the Korean War? There will be a reading quiz you can use handwritten notes. Why Nations Fail book excerpt.pdf
13 Given what you learned from the video, Why Nations Fail and your personal opinion, how would you prioritize the following economic and social goals?
14
15 Why is it important for countries to have economic growth?
16 Economic growth increases the standard of living. Correlation between GDP per capita and life expectancy and literacy The rate of economic growth depends largely on increasing productivity. ata/reports.aspx?source=worlddevelopment-indicators# 2014 Educational Educational attainment, attainment, at Adult at least least literacy Bachelor's or completed GDP per GDP per Life rate, equivalent, postsecondary, Labor force capita capita expectancy Mortality population population with (constant growth at birth, rate, infant 15+ years, 25+, total population secondary 2010 (annual total (per 1,000 both sexes (%) 25+, total (%) education Country Name US$) %) (y ears) live births) (%) (cumulative) (cumulative) (% of total) Macao SAR, China $71, A u stralia $54, Sweden $53, Si n gapore $51, Un i ted States $50, Can ada $49, Germ any $44, Japan $44, Fran ce $41, N ew Zealand $36, Hon g Kon g SAR, China $35, Korea, Rep. $24, Greece $22, Saudi Arabia $21, Venezuela, RB $13, Tu rkey $11, Mexi co $9, Sou th Africa $7, China $6, Iran, Islamic Rep. $5, Philippines $2, India $1, Zimbabwe $ Malawi $ Korea, Dem. People s Rep
17 AP Microeconomics Essential Questions How do we achieve economic efficiency and economic growth? What role should government play in promoting economic efficiency and economic growth?
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