economic system components private ownership l control of productive resources land labor capital...

ECONOMIC SYSTEM

COMPONENTS

Private Ownership

Control of productive resources• land• labor• capital

• that are used to produce goods and services

Supply and Demand

Consumers are the demand

Producers are the supply

• When demand is high prices go up• When production is higher than

demand prices go down

Profit Motive

Desire to make money for goods and services consumers want.

Most powerful force that drives our economy

Competition

Have to offer the best product or service for the lowest price.

Requires efficient management of productive resources

Free Economic Choice

Individuals & businesses have the right to make choices about• spending• earning• saving• investing• producing

Government Involvement

Regulates taxes, spending and monetary policies

Gross Domestic Product

The most frequently used method for measuring economic performance

Current value of all goods and services produced in a country in a year

GDP

Consumer Price Index

A common method for measuring inflation

Measures monthly changes in the price of about 400 goods and services that people buy regularly

LAW OF SCARCITY

All economic systems are based on the fact that resources are limited while needs and wants are unlimited !

Applies to:

Individuals Businesses Government

ANTI-TRUST LAWS

Prevents• monopolies

• restraints of trade

MONOPOLY

A single company controls the entire supply of a product or service

PROGRESSIVE TAX

0

20

40

60

80

100

1st

Qtr

3rd

Qtr

East

West

North

Income Tax is an example

People with the higher incomes pay the higher tax