Civics Core 100, Goal 8Civics Core 100, Goal 8The learner will analyze The learner will analyze features of the economic features of the economic

system of the United States. system of the United States.

Decisions are made in free markets Decisions are made in free markets based on the interaction of supply based on the interaction of supply and demandand demand

AKA : capitalismAKA : capitalism Private citizens own the factors of Private citizens own the factors of

productionproduction

Individuals carry on their economic Individuals carry on their economic affairs freely, but are subject to some affairs freely, but are subject to some government REGULATION.government REGULATION.

Opposite of Market EconomyOpposite of Market Economy The individual has little, if any The individual has little, if any

influence over how the basic influence over how the basic economy functionseconomy functions

The government tells produces what The government tells produces what to doto do

Belief that the means of production Belief that the means of production should be owned and controlled by should be owned and controlled by society society

Government owns the major factors Government owns the major factors of production but PRIVATE ownership of production but PRIVATE ownership of small businessesof small businesses

Economies based on custom or habitEconomies based on custom or habit Traditional methods and materials Traditional methods and materials

are used to make items in this are used to make items in this economyeconomy

The money a The money a business business receives for its receives for its products or products or services above services above its costsits costs

Primary purpose Primary purpose of businessof business

The struggle that goes on between The struggle that goes on between buyers and sellers to buyers and sellers to get the best get the best products at the lowest pricesproducts at the lowest prices

WHAT to produce?WHAT to produce? HOW to produce?HOW to produce? FOR WHOM to produce?FOR WHOM to produce?

Coins and paper moneyCoins and paper money Money doesn’t have value by itselfMoney doesn’t have value by itself

– The have value only because we accept The have value only because we accept that they have valuethat they have value

Various quantities of a good or Various quantities of a good or service that producers are willing to service that producers are willing to sell at all possible market pricessell at all possible market prices

Opposite of demandOpposite of demand The higher the price, the more The higher the price, the more

producers will be willing to make. producers will be willing to make. The lower the price, the fewer items The lower the price, the fewer items they want to makethey want to make

Desire, willingness, and ability to buy Desire, willingness, and ability to buy a good or servicea good or service

The higher the price the fewer The higher the price the fewer consumers with purchase. The lower consumers with purchase. The lower the price, the more consumers will the price, the more consumers will buy.buy.

Substitutes:Substitutes: Competing Competing products b/c consumers products b/c consumers can choose one over can choose one over the otherthe other– Change in price in one Change in price in one

good, causes the demand good, causes the demand of other to change in of other to change in same directionsame direction

– Price in good A goes up, Price in good A goes up, the demand for good B the demand for good B goes upgoes up

– Price in good A goes Price in good A goes down, demand for B goes down, demand for B goes down.down.

Complementary:Complementary: products that are products that are used togetherused together– Demand for one Demand for one

good moves in good moves in opposite direction opposite direction as the price for the as the price for the otherother

– Price of Good A goes Price of Good A goes up, Demand for up, Demand for Good B goes downGood B goes down

Amount by which the quantity Amount by which the quantity supplied is higher than the quantity supplied is higher than the quantity demandeddemanded

Price is too highPrice is too high Consumers are unwilling to pay the Consumers are unwilling to pay the

priceprice Will lead to needing to lower Will lead to needing to lower

prices(sales)prices(sales)

Amount by which quantity demanded Amount by which quantity demanded is higher than quantity suppliedis higher than quantity supplied

Price is too lowPrice is too low Suppliers are unwilling to sell their Suppliers are unwilling to sell their

goods or services in large enough goods or services in large enough numbers to meet demandnumbers to meet demand

Supply and demand are balanced at Supply and demand are balanced at this pointthis point

There is neither surplus nor a There is neither surplus nor a shortageshortage

Sole ProprietorshipsSole Proprietorships: most common type; : most common type; business owned and operated by a single business owned and operated by a single personperson

Partnerships:Partnerships: business that 2 or more business that 2 or more people own and operatepeople own and operate

Corporation:Corporation: organized business organized business recognized under law that has many of the recognized under law that has many of the rights and responsibilities as citizensrights and responsibilities as citizens– own property, pay taxes, sue or be suedown property, pay taxes, sue or be sued

When one purchases stock in a When one purchases stock in a company, that is all they can lose if company, that is all they can lose if the company goes out of business.the company goes out of business.

An advantage for corporations in An advantage for corporations in gaining investments from individuals.gaining investments from individuals.

Less risk for investors than owning Less risk for investors than owning own businessown business