Starter1. What degree of latitude is Tropic of

Capricorn?2. What degree of latitude is Tropic of Cancer?3. What degree of latitude is Arctic Circle?4. What degree of latitude is Antarctic Circle?5. What degree of latitude is North Pole?6. What degree of latitude is South Pole?7. What degree of longitude is the

International Dateline?8. What do we call the process for the

formation and development of huge cities?

World Economics 101

How people around the world Earn and Spend their money…

What is Economics?Economics studies the production,

distribution, and consumption of goods and services

Goods ServicesA physical item in which

ownership can change hands

An intangible act that is done; no ownership involved

Economy Basics: What is exchanged for goods and services?

Two Systems of Trading:1. Barter system-- goods or services are exchanged for

other goods and/or services

b. Advantage: the worth of a good or service is decided strictly by those involved in the trade

c. Disadvantage: there must be a coincidence of wants

Economy Basics: What is exchanged for goods and services?Two Systems of Trading:

2. Monetary system -- goods and services are exchanged for money

a. Money– any token or object used as a medium of exchange

b. Advantage: Money is “the most marketable commodity”

c. Disadvantage: Money is relative, and thus, its

worth fluctuates

#2: WHAT IS THIS?

The Problem with Money…What have your parents already told you about this picture?

The Value of a Dollar…My grandmother and a gallon of milk…

2 Ways the Worth of Money/Prices Change over Time:1. Inflation– the sustained increase in price levels

2. Deflation– the sustained decline in price levels

YOUR TURN:How might inflation inside an economy hurt certain

people’s ability to buy what they need to survive?

Need Proof? Time for a lil’ FF Action!1: a postage stamp in the 1950s cost 3 cents; today's cost is 41 cents - 1,266% inflation;

2: a gallon of 90 Octane full-service gasoline cost 18 cents before; today it is $3.05 for self-service - 1,870 % inflation;

3: a house in 1959 cost $14,100; today's median price is $213,000 - 1,400% inflation;

4: a dental crown used to cost $40; today it's $1,100 - 2,750% inflation;

5: an ice cream cone in 1950 cost 5 cents; today its $2.50 - 4,900% inflation;

6: monthly government Medicare insurance premiums paid by seniors was $5.30 in 1970; its now $93.50 - 1,664% inflation; (and up 70% past 5 years)

What Makes an Economy Run?

1. Supply-- the amount of any particular good or service made by producers for consumers

2. Demand-- the amount needed of any good or service according to the wants/needs of consumers

IMPORTANT!!!!!For a healthy economy, supplyand demand should be balanced.

Laws of Supply and Demand

Law of Supply1. When large supplies of an item are made, the item's cost will go down. 2. When very few supplies of the item are made, the price will go up.

Law of Demand1. When the demand of an item is high, the price rises. 2. When the demand of an item is low, the price will go down.

Law of Supply and Demand:(explained with pretty pictures)

Your Turn to THINK!!!!!!!

1. Answer the following questions by filling in the blanks:a. If supply is high, then demand will be _____________.b. If supply is low, then the demand will be ____________.

2. When the supply of a good is not equal to the demand for that good, this uneven relationship can cause disastrous effects on an economy. This is caused by prices that become either too high or too low to properly support the economy.

a. Briefly (in 2-3 sentences) describe an example of how unequal relationship between supply and demand (real historical event or made-up) can harm an economy’s consumers.

•GDP--Gross Domestic Productthe standard measurement of success/failure of world economies

y

Share of World GDP in 2005 (US$ billion)

I taly 4%

Japan 9%

Rest of the World21%

Germany 6%

India 2%

Korea2%

Russian Federation

2%

Spain 3%

Mexico 2%

France 5%

China 5%

Australia 2%

Canada 3%

Brazil 2%

UK 5%

United States 27%

Source: World Bank

3 Types of Global Markets

1. Developed Market– Stable economy with developed industrial, technological, and international sectors.Ex: USA, Great Britain, Sweden

2. Emerging Market– Rapidly developing economies which are transitioning to developed markets. Growing level of international trade. Tend to have unstable economies.Ex: China, Saudi Arabia, Chile

3. Closed Market-- A completely self-sustained economy which has little to no international trade intended to build up internal markets.Ex: America after Revolutionary War

GDP growth rates in selected regions, 1995-2005

- 4

- 2

0

2

4

6

8

10

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

GD

P g

row

th r

ate

(%

)

Africa: Sub-Sahara European UnionNewly industrialized Asian economies World (All WEO countries)

Red = Developed Market Blue = Emerging Market

C750%

Rest of World35%

India3%

China3%

Other Major Emerging

9%

C742%

Rest of

World27%

India6%

China15%

Other Major

Emerging9%

Downward Market Trends1.Recession -- a significant decline

in economic activity spread across the economy, lasting more than a few months.

2.Depression -- A severe or long recession

Sidney Harris once said, “A recession is when you lose your job; a depression is when I lose mine.”