Factors of Production

Limited Government

- Governments laws and agencies regulate, but don't operate, U.S. businesses. Example: Government doesn't compete or control with firms. Doesn't tell manufacturers what kind of car to make.

Profit Motive

- The desire for profit drives the free enterprise system. Our incentive to work and create new businesses. Example: People work harder to make more money. When someone works overtime to clean up a restaurant to earn extra cash.

Property Rights

- We have the right to buy, sell, and control the use of our property, including intellectual property. Example: You have the right to sell property that you own, such as a house or a car.

Binding Contracts

- We have the right to enter into contracts to buy and sell goods and services. Gives us the confidence that others will abide by their agreements. Example: When you sign a contract to buy a car or house.

What is the production resource -Capital?

- goods that are used to make other goods Ex: Lumber, Bulldozer

Competition

- sellers compete for customer's business. Provides an incentive for businesses to create new and better products and ways of serving customers. Example: AT&T and Verizon compete for customers in the cell phone market.

What is the production resource - Entrepreneurship

- the starting and managing a business Ex: Owner of a Bakery, Developer of an App.

Equal Opportunity

-We all have the same legal rights to seek an education and compete in the marketplace. Example: Men and Women and Minorities can all get an education and compete for jobs.

Law of Diminishing Utility

-eventually the level of satisfaction will diminish. We often see this when eating - the first slice of pizza is amazing, but the 4th is not nearly as satisfying.

Maximizing utility (satisfaction)

-know that we make choices based on level of satisfaction - usually when the benefits outweigh the costs

Economic Growth -

A condition in which an economy is expanding and producing more and better goods and services.

Market Society Values:

Economic Freedom and Efficiency

Traditional Economy Values:

Economic Stability and Security

Capital

goods that are used to make other goods Lumber, Bulldozer

Utility

is a measure of personal satisfaction.

Labor

resource of work (usually done by people) Carpenter, Taxi Driver

What is the production resource -Labor?

resource of work (usually done by people) Ex: Carpenter, Taxi Driver

What is the production resource -Land?

resources given to us by nature (not processed) Ex: Trees, Water, Air

Land

resources given to us by nature (not processed) Trees, Water, Air

Entrepreneurship

the starting and managing a business Owner of a Bakery, Developer of an App.

principle of diminishing marginal utility

each successive unit of a good or service consumed adds less to total utility than does the previous unit.

Factors of Production

Land, Labor, Capital, Entrepreneurship

Command Economy

Powerful Ruler or Some Other Authority decides What to produce, How to produce it and for whom goods are produced. Example: CUBA or South Korea

The Role of Government in Society

Protection, Regulation and Public Benefits

Economic Security -

Providing the less fortunate members of society with the support they need in terms of food, shelter and health care to live decently.

Economic Freedom -

The ability of people to make their own economic decisions without interference from the government.

Economic Freedom -

The ability of people to make their own economic decisions without interference from the government. Example: If we don't like the coffee one store is selling (Starbucks), we can go to a different store (Dunkin Donuts)

Economic Equity -

The fairness with which an economy distributes its resources and wealth.

Economic Stability -

The goods and services we count on (electricity, food ,clothing) are there when we want them. Our jobs are there when we go to work each day. Prices are predictable allowing us to plan ahead.

Economic Efficiency -

The result of using resources in a way that produces the max amount of goods and services.

2 Countries with Mixed Economies

US and Canada

Opportunity costs and tradeoffs

tradeoffs are all of the choices we could have. For example, I have a dollar and could have bought a snickers, peanut butter cup or a milky way, but I decided to buy a baby ruth. All the other choices are tradeoffs. Opportunity cost is my second best choice. Had i not bought a baby ruth, i would have bought a snickers, therefore, a snickers is the opportunity cost.-