EE 314: PRAXIS Economics Review

IV. Economics

What is it? Economics is the study of resources. Economics is the study of choices. Economics is
the study of production, consumption, and the transfer of wealth.

Macro: large, entire systems

Micro: small, independent businesses or individuals

A. Understands How Human Needs Are Met

1. The ways in which human needs are met through production, purchasing, and
trading/exchange of goods and services.
i. Wants: Something that brings you happiness
ii. Needs - something you need to have to for survival
iii. Four Factors of Production
1. Labour
2. Land
3. Capital
4. Entrepreneurship
2. How and why people consider costs and benefits when making economic choices.
i. Opportunity Cost: Benefit vs. Loss
1. Cost : What you give up to get something
2. Benefit (HAPPINESS)
3. How scarcity influences economic decisions.
i. Scarcity: Looks at the supply compared to the demand; hard to find
ii. Surplus:When the supply is greater than the demand
iii. Shortage: Demand is greater than the supply
B. Understands the concepts of goods and services and the roles of producers and consumers.
1. Resources: Goods and services; something humans use; resources are limited
2. Cost
3. Opportunity Cost (see above)
4. Goods versus Services
i. Goods - stuff
ii. Services- acts
iii. Consumer: people who consume goods; such as every individual
iv. Producer: people who make/produce goods
v. Raw Goods: Something that hasn't been processed (mining, farming)
vi. Finished Goods: something that has been processed (factories)
5. Supply and Demand: Market economy; price depends on quantity
6. Trade and Barter
i. Trade: $$$ Money is being exchanged
ii. Barter: Exchange of goods and services for goods and services. Not $$
7. Specialization
i. Specialization: Advanced service jobs require specialized training
ii. Division of Labor: to make sure people are specializing in something
iii. Sectors of the Economy
EE 314: PRAXIS Economics Review

1. Primary - 1st - all about collecting raw goods, raw resources, mining,
farming, logging, fishing
2. Secondary - 2nd - taking raw goods and processing them into finished
goods
3. Tertiary - 3rd - services - post-industrial
C. Understands the Purposes of Earning, Spending, and Saving Money
1. Money is earned through work.
i. Be able to identify characteristics of various jobs.
ii. Explain the relationship between work and goods and services.
2. Understand and explain the relationship between and consequences of saving and
spending money.
3. Opportunity costs of spending.
4. Understand and describe the basic services that banks and financial institutions provide.
i. Interest
ii. APR
5. Understand that different currencies exist globally.
D. Understands How Businesses Operate
1. Supply and demand and how they affect profits.
2. Explain and describe the role of an entrepreneur.
i. Entrepreneurship: Starting your own business
3. Explain and describe the interactions between an individual, a business, and the
government.
i. Regulation
ii. Economic Systems
iii. Market Forces
iv. Command Economy: Communist; production is controlled and owned by
everybody. Government controls the production
v. Capitalism: private owned, supply and demand = pierce, driven by competition
innovation → Monopoly
1. Laissez Faire: french term, “Hands off” government,
vi. Socialism: A mix of free market & government controlled economy. Controls
human needs
vii. Communism: Does not= authoritarianism. Government controlling the economy
E. Understands the Patterns of Economic Activities in the United States and the World
1. Reasons governments levy taxes.
i. Taxes
2. Government’s role in maintaining the country’s currency.
i. Currency
ii. Inflation: Prices rise when the government prints too much money
iii. Unemployment: Inverse from inflation. Inflation goes up, unemployment goes
down & vice versa.
3. National debt.
i. National Debt:
4. Federal Reserve System.
EE 314: PRAXIS Economics Review

i. Controls the supply of money & interest rate. Separate from government

Principle #1 - Resources are limited.

Principle #2 - The cost of something is what you give up to get it.

Principle #3 - Trade can make everyone better off.

Principle #4 - A country’s standard of living depends on its ability to produce goods and services.

Principle #5 - Prices rise when the government prints too much money.

Principle #6 - Society faces a short-run tradeoff between inflation and unemployment.