Journal Entry

Please complete a journal from your journal options from Unit 3

Chapter 5

Economics

EQ’s: What effects our economy?

What are the consequences of investment decisions made by individuals, businesses, and governments?

http://www.econedlink.org/interactives/index.php?iid=87

Pair Share with these 2 questions: 1.How has a famous basketball player been good for Cleveland's economy?2.We now know where LeBron chose to go…not Cleveland! Will he help his new city as much as he helped Cleveland? Why or why not?

What are economics?

Study of how societies decide what to produce, how to produce it, and how to distribute what they produce

If all consumers could consume everything they wanted, economic decisions would not be made

Scarcity

BUT…all goods and services are scarce

Scarcity: the fact that too few resources are available for everyone in the world to consume as much as he or she would like

Opportunity Cost

The loss associated with the best opportunity that is passed up

If you are a greeting card company and spend 2 million on b-day cards, you will have 2 million less to spend on other cardsThe company’s lost opportunity represents the

opportunity cost of producing b-day cards

Economic Systems

Command Economy: government decides what goods and services are producedTypes and amounts

Market Economy: private companies and individuals decide what to produce and consumeBased on competition

http://www.kplr11.com/news/kplr-riche-pujols-economic-impact-021611,0,6812504.story

Pair Share---a new Partner with these questions1.Consumer confidence is an economic indicator which measures the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. How confident people feel about stability of their incomes determines their spending activity and therefore serves as one of the key indicators for the overall shape of the economy. How would Pujols leaving St. Louis impact consumer confidence?2.Why does one individual have so much impact on an economy?

Supply and Demand

In a market economy, supply and demand determine prices and quantities of goods and services

Text book page 139 read together

Supply and Demand

Demand: quantity of good or service individuals are willing to purchase at various prices

Supply: quantity of good or service that producers are willing to produce at a given price

Determining Price

Price of a good or service adjust until the amount producers are willing to produce equals the amount consumers are willing to consume

When supply = demand we have equilibrium price

Determining Profits

Fixed Costs: cost you absorb regardless of units produces (heating, rent)

Variable Costs: rise or fall depending on how many units produced (labor and materials)

Breakeven Analysis: determines how many units of a good or service a business needs to sell before it begins earning profit

Breakeven Point: point at which revenue is sufficient to cover all costs

Study the cartoon above. Which entrepreneur is in a better position to control fixed costs if there is a decline in the demand for AJAX bats? What if there is a decline in Al’s handmade bats? What does this show about fixed and variable costs?

Chapter 5

Section 2

The Business Cycle

Journal Entry

What is recession? What is depression? Does anyone know what the Great Depression was?

Explain.

The Business Cycle

Expansion and contraction by many industries at once

Several phases

Phases of the Business Cycle

Expansion: Consumer and business spending strongUnemployment declines

BUT…when prices rise so much businesses and consumers cut back on purchases and the next phase begins

Phases of the Business Cycle

Contraction: Consumers and businesses reduce

purchasesUnemployment risesBusinesses and consumers pessimistic

about the future

What happens when growth falls for a long time?

Recession: when growth falls for two three month periods in a row

Depression: when business activity remains far below normal for years

Economic Indicators

Help to predict when changes in business cycle might occur

Data that show how the economy is performingHousing loans,

bankruptcies, new orders of consumer goods and materials by manufacturers (economy is likely to expand)

What to do…

Research Options… Stock Market Crash of 1929 vs. October

1987 Famous Economists (Adam Smith, Alfred

Marshall, John M. Keynes, Milton Friedman) How do wars affect depression and

recession? Find 3 examples to support this. Write 1.5 page paper summarizing your topic