1

HEAVENS HARVEST

MINISTRIES – FINANCE NIGHT

Economics 101

Presented by: Jennoa R. Graham, Ph.D.

Friday, April 4, 2014

2

KEY TERMINOLOGY Economics – A social science that

focuses on the process of producing and exchanging goods/services

Microeconomics – Focus on a single/small portion of the whole economy; one company or one city

Macroeconomics – Focus on the whole economy; entire country or entire world

3

KEY TERMINOLOGY (CONT.) Tangible – Product that you can touch

ClothingCarFood

Intangible – Services that you cannot touchElectricity Indoor PlumbingKnowledge/Skills

4

KEY TERMINOLOGY (CONT.) The Economic System – Macroeconomic

decisions of Products

What should be produced? How much should be produced? How/Where the products will be distributed?

Services What services are needed? How will these services be performed? Where will these services be available?

5

KEY TERMINOLOGY (CONT.) Supply – Quantity of goods/services

available for sale

Demand – Quantity of buyers wanting to purchase goods/services available for sale

The Market – manipulation of supply and demand to meet micro and macro needs of the Economic System; must be managed 24/7 and impacts the world economy

6

OVERVIEW Supply and Demand Graph

The Economic System

The Competitive Market System

The Financial Market System

Other Economies

7

SUPPLY & DEMAND GRAPH

P = Price; Q = Quantity; D = Demand; S = Supply

As Demand goes down; quantity available for sale stays high (fewer sales).

D Shift left = decreaseD Shift right = increaseS Shift none = constant

As Supply goes up; quantity available for sale stays high (inventory on hand).

Best Price

8

THE ECONOMIC SYSTEM Traditional

Based on Family and Community Interaction

Heavy dependence on customs and rituals

Market (Pure) Based on the

selection AND consumption of goods and services from Individual Consumers

Command (Planned) The government

decides ALL aspects of Consumer selection and consumption

Mixed The government

decides SOME aspects of Consumer selection and consumption

http://www.slideshare.net/Geckos/the-four-types-of-economic-systems-presentation

9

THE COMPETITIVE MARKET SYSTEM

Form when many Producers/Manufacturers compete with one another to offer products to a large group of Consumers for PROFIT

10

THE FINANCIAL MARKET SYSTEM

Primary Starting line for

financial products Origination Details Contracts Drawn

Securities issued

1st Buyer gets 1st Dibs

Secondary Buyers and Sellers

resell financial products to 3rd Party

Stock Exchange

3rd Party assumes all contract risk/liability

“Financial products, including the supply of credit, mortgages, company shares and insurance, are bought and sold in primary and secondary financial markets.” (Economics Online)

11

THE FINANCIAL MARKET SYSTEM (CONT.) Money Markets

Purchase and sale of short term debt (<1yr) Loans Treasury bills

Purchases are made to help other banks short on cash

Sales are made to increase available cash on hand

Capital Markets Purchase and sale of

long term debt (>1yr) Stocks (stock exchange) Bonds Company shares

Purchases are made in hopes to sell at a profit

Sales are made to make a profit or avoid large losses

12

THE FINANCIAL MARKET SYSTEM (CONT.) Mortgage Markets

Making long term loans for buying property and earning interest profits

Sales are made to increase available cash on hand

Or avoid large losses on high risk loans

Insurance Markets Transferring risk

from one party to another

Transfer is made in hopes that premium income is greater than claims paid – profit earned

13

OTHER ECONOMIES Contemporary – A comparative analysis of the

changes in the global economy over 50 years

Capitalism – Private owners control the Market Economy (see slide # 8)

Participatory – Production and distribution of goods are provided by the public

Gift – Goods and services are distributed with out expectation of return or profit

Barter – Goods and services are exchange for other goods and services with no monetary/currencyhttp://en.wikipedia.org/wiki/

Economic_system

14

SUMMARY Economics is social science that focuses on

the process of producing and exchanging goods/services on two levels Micro = Small Macro = Large

Supply and Demand determines price of goods and services for Consumers

Stock Exchange is a finance product that is part of the Secondary Financial Market

There are many different type of ecomonies

15

16

REFERENCES The American Heritage® Dictionary of

the English Language (2009), Fourth Edition, Houghton Mifflin Company. Retrieved September 9, 2013, from http://www.thefreedictionary.com

The Four Types of Economic Systems (2008), by Brian Coil, High School Teacher at Armstrong School District. Retrieved March 27, 2014, from http://www. slideshare.net

17

REFERENCES (CONT.) Alison: A New World of Free Certified

Learning (2014). Retrieved March 26, 2014, from http://www.alison.com

Economics Online (Unknown). Retrieved March 27, 2014, from http://www.economicsonline.co.uk

Wikipedia: Economic System (2014). Retrieved March 27, 2014, from http://www.wikipedia.org