American Free Enterprise
The Benefits of the Free Enterprise System
The Tradition of Free Enterprise
America, the land of opportunity, offers special opportunities that have allowed many to be
successful business people.
The key facto
Producer surplus is the difference between the lowest price a supplier will accept to produce the
good (the opportunity cost of the resources) and the price they actually get (the market price).
Producers are willing to supply
The Production Possibilities Curve
Production Possibilities Curve
for Susans grades in English and Economics with 10 hours of study
Susan is a student who only has 10 hours of study to divide between her economics and English classes.
If she spends most o
How Markets Respond to
Changes in Demand & Supply
Effects of a Change in Demand
When demand decreases
the equilibrium price and quantity will fall.
When demand increases
the equilibrium price and quantity will rise.
Market Adjustment to
an Increase in
How Market Prices
This table & graph indicate demand & supply conditions of the market for calculators.
Equilibrium will occur where the quantity demanded equals the quantity supplied. If the price in
the market differs
The Economic Way of Thinking
Guideposts to Economic Thinking
1. The use of scarce resources to produce a good or service
is always costly.
Someone must give up something if we are to have more of a scarce good.
The highest valued alternative that must be
Questions for Thought:
1. (a) What is being held constant when the supply curve for a specific good like pizza or cars is
(b) Why does the supply curve for a good slope upward and to the right?
2. What is producer surplus? Is producer surplu
The Economic Approach
What is Economics About?
Scarcity and Choice
Scarcity and choice are the two essential ingredients
of an economic topic.
Goods are scarce because desire for them far outstrips their availability from nature.
Scarcity forces us to ch
and the Market Process
Consumer Choice and
the Law of Demand
Law of Demand
Law of Demand:
the inverse relationship between the price of a good and the quantity consumers are willing to
As the price of a good rises, consumers buy
Product prices communicate up-to-date information about the consumers valuation of
additional units of each commodity.
Without the information provided by market prices it would be impossible for decision-makers
to determine how
Micro Chapter 8
Costs and the Supply of Goods
7 Learning Goals:
1) Bring out the role costs play in making economic decisions
2) Define and differentiate between a short-run time period and a long-run time period
3) Define and calculate costs used to mak
TRADITIONAL - Economic decisions are based on custom, habit or ritual.
Life and economic decisions revolve around the family.
Roles are defined by gender. Fathers teach sons, mothers teach daughters
Communities are small
The Consumers Role
A fundamental purpose of the free enterprise system is to give consumers the freedom to make
their own economic choices.
Through their economic dealings with producers, consumers make their desires known.
When buying products, they ind
The Three Economic Questions
Every society must answer three questions:
What goods and services should be produced?
How should these goods and services be produced?
Who consumes these goods and services?
What are Societys Econom
The Free Market
Why Do Markets Exist?
A market is an arrangement that allows buyers and sellers to exchange goods and
Markets exist because none of us produces all the goods and services we require to satisfy our
needs and wants.
Instead of bei
1. Profit Motive
The drive for the improvement of material well-being.
2. Open opportunity
The ability for anyone to compete in the marketplace.
3. Legal equality
Equal rights to all.
4. Private property rights
The right to control your possessions as yo
Supply and Demand
Introduction to Economic Modelling
Elasticity and its Application
Supply, Demand and Government Policies
Consumers, Producers and the Efficiency of Markets
Economics of the Public Sector
Public Goods an
Vocabulary Terms and Concepts
What is Economics?
the study of how people seek to satisfy their needs and wants by making choices
What is the difference between a want and a need?
Wants are items that we desire but are not necessary for surviva
Micro Chapter 12
The Supply of and Demand for Productive Resources
5 Learning Goals
Note the types of productive inputs
Construct a demand curve for resources
Correlate a resources marginal productivity to the firms hiring decision
Understand the behavior
Some Tools of the Economist
What Shall We Give Up?
The highest valued activity sacrificed in making a choice.
Opportunity costs are incurred when a choice is made.
They are subjective and vary across persons.
If an opti