Table of Contents

Page 1
Terms of economics
Page 2
Supply and Demand Chart
Factors of Production
Types of economic systems
Page 3
Labor Unions
Page 4
GDP

Scarcity - demand for a good or service is greater than the availability of the good or service.

Opportunity Cost: “what we lose when we choose” – the value of what we give up
If I choose x, I must give up y

Supply: the amount sellers are willing and able to offer for sale at a set of prices.

Demand: a consumer's desire to purchase goods and services and willingness to pay a price for
a specific good or service. (People want to buy what you are selling)
-Holding all other factors constant, an increase in the price of a good or service will
decrease the quantity demanded, and vice versa.
law of demand: the quantity purchased varies inversely with price
In other words, the higher the price, the lower the quantity demanded .
Deflation: prices go down
Inflation: prices go up
 Law of Demand Relationship be- Law of Supply Relationship between
tween demand and supply and price
price
Consumers will only de- Prices go UP; Demand Producers will only Supply goes UP; prices go
mand/buy a product that goes DOWN pro- duce a DOWN
they want/need at a price good/service that will
they can afford yield a profit

Factors of Production
1. Land – natural resources
2. Labor – workers
3. Capital – tools
4. Entrepreneurship – owners & - managers
- Producers- makers of the good/service
- Consumers- users of the good/service

Types of Economic Systems

3 questions every economy must answer
What to produce(make)?
2. How to produce (make) it?
3. For whom to produce it?
• How these questions are answered determines a country’s economic system
Command – govt controls resources &
makes decisions
• Lack of incentives
• Less customer satisfaction
• Less efficient use of resources
Market – individuals own resources &
make decisions according to the laws of
supply & demand
• More incentives (profit)
• More innovation
• More customer satisfaction
• Bigger gap between rich & poor
Mixed – combo of command & market;
US is a mixed economy
• US Economy
• Mixed (mostly market)
• Also known as capitalism & free
enterprise
• Fundamentals of capitalism
1. competition
2. private property
3. freedom of choice
4. voluntary exchange
5. free enterprise

Labor Unions
- groups of workers who band together to
get higher pay & better working conditions

GDP
Gross Domestic Product (GDP) measures the total dollar value of all final goods and services produced
within a country in a given time period.

 ‘Final goods and services’:

o a final good is a good sold to the end user of a product
 a company buys a machine
 an individual buys a video game
o an intermediate good is a good that is used in the production of another
 the tires Ford would purchase from a tire company to put in a Ford Mustang

 ‘Within a country’: GDP measures production within a particular geographic boundary
 ‘Given time period’: GDP is measured every quarter (3 months); it is most often used to compare
both yearly and quarterly growth rates