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ECONOMIC SYSTEM
COMPONENTS
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Private Ownership
Control of productive resources• land• labor• capital
• that are used to produce goods and services
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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
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Profit Motive
Desire to make money for goods and services consumers want.
Most powerful force that drives our economy
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Competition
Have to offer the best product or service for the lowest price.
Requires efficient management of productive resources
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Free Economic Choice
Individuals & businesses have the right to make choices about• spending• earning• saving• investing• producing
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Government Involvement
Regulates taxes, spending and monetary policies
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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
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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
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LAW OF SCARCITY
All economic systems are based on the fact that resources are limited while needs and wants are unlimited !
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Applies to:
Individuals Businesses Government
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ANTI-TRUST LAWS
Prevents• monopolies
• restraints of trade
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MONOPOLY
A single company controls the entire supply of a product or service
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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