C. Resources - are factors of production that are used in the production of goods and services. Types of resources are:

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1 I. CE.11a A. People make choices about how to use limited resources, decide the ownership of resources, and structure markets for the distribution of goods and services. B. Scarcity there is never enough to match the total of what everyone wants! Scarcity forces everyone to make choices about everything from groceries, houses, and gasoline to the luxury items we purchase. C. Resources - are factors of production that are used in the production of goods and services. Types of resources are: 1. Natural - the renewable and nonrenewable gifts of nature like land, water, animals, minerals, trees, climate, soil, fire, seeds, grain and fruits. 2. Human - the knowledge, skills and abilities possessed by people. 3. Capital tools and equipment like factories, warehouses, roads, bridges, machinery, ports, dams, and tools; also called capital goods. (Investment money is also a capital resource.) 4. Entrepreneurship person who has the ideas for new businesses D. Choice - is selecting an item or action from a set of possible alternatives. Individuals must choose/make decisions about desired goods and services because these goods and services are limited. E. Opportunity Cost - is what is given up when a choice is made - the highest valued alternative is forgone (in the past). Individuals must consider the value of what is given up when making a choice. 1. Example: If you decide your best choice is attending college to increase your future earning power, the opportunity cost is the value to you of the full time job you could take instead during those same years. That would probably include not only the job s salary, but the experience you would gain in the job during those years. 2. Before making any decision, it is important to consider the opportunity cost. F. Price is the amount of money exchanged for a good or service. Interaction of supply and demand determines price. Price determines who acquires goods and services. G. Incentives are things that incite or motivate. Incentives are used to change economic behavior. 1. Coupons and sales are incentives to encourage people to shop and spend money at businesses. 2. Profits are an incentive for businesses to make better products. 3. Pay raises and bonuses motivate employees to do their best. 4. Scholarships encourage students to study and get good grades. H. Supply and demand Interaction of supply and demand determines price. 1. Demand is the amount of a good or service that consumers are willing and able to buy at a certain price.

2 2. Supply is the amount of a good or service that producers are willing and able to sell at a certain price. I. Production is the combining of human, natural, capital, and entrepreneurship resources to make goods or provide services. Resources available and consumer preferences determine what is produced. J. Consumption is using goods and services. Consumer preferences and price determine what is purchased. II. CE.11b A. Every country must develop an economic system to determine how to use its limited resources. B. The key factor in determining the type of economy a country has is the extent of government involvement. C. The three basic questions of economics: 1. What will be produced? 2. Who will produce it? 3. For whom will it be produced? D. The four types of economies: 1. Traditional Economy a. Economic decisions are based mainly on whatever was done in the past. b. People often do the same type of work as their parents and grandparents, regardless of ability or potential. 2. Free Market Economy a. Private ownership of property/resources people own and control their own personal/business property and land b. Profit motive businesses base most decisions on what will create the largest profit c. Competition when sellers try to attract buyers away from other sellers by producing better products at lower prices d. Consumer sovereignty businesses make and sell what customers want and are willing to buy e. Individual choice people have the freedom to make their own economic choices f. Minimal government involvement 3. Command Economy a. Central (government) ownership of property/resources i. Farms ii. Natural resources iii. Businesses

3 b. Centrally-planned economy i. Government sets prices ii. Government decides what gets produced iii. Government decides who to sell products to c. Lack of consumer choice 4. Mixed Economy a. Individuals and businesses are owners and decision makers for the private sector. b. Government is owner and decision maker for the public sector. c. Government s role is greater than in a free market economy but less than in a command economy. d. Most economies today are mixed economies, including the United States. Mixed Economy - combination of a free market private sector and government controlled public sector Public Sector Private Sector Public Sector (Government) Federal, state, and local governments make the decisions. Examples: public schools, roads, defense, parks, police, fire, etc. Private Sector (Free Market) Individuals and businesses make the decisions. Examples: factories, farms, stores, houses, apartments, etc. III. CE.11c Characteristics of the U.S. Economy A. Mixed economy the U.S. is primarily a free market economy, but because there is some government involvement it is characterized as a mixed economy. B. Undue governmental interference markets are generally allowed to operate without undue interference from the government. Prices are determined by supply and demand as buyers and sellers interact in the marketplace. C. Government involvement government intervenes in a market economy when the perceived benefits of a government policy outweigh the anticipated costs. D. Private property individuals and businesses have the right to own real estate and personal property as well as the means of production without undue interference from the government. E. Profit earnings after all expenses have been paid businesses base most decisions on what will create the largest profit. (Earnings Expenses = Profit)

4 F. Competition rivalry between producers and/or between sellers of a good or service usually results in better quality goods and services at lower prices. G. Consumer sovereignty consumers determine through purchases what goods and services will be produced. Government involvement in the economy is limited. Most decisions regarding the production of goods and services are made in the private sector. IV. CE.12a A. There are three basic ways that businesses organize to earn profits. The three basic business types are: 1. Proprietorship one owner a. The owner the proprietor takes all the risks and gets all the profit. b. The owner is personally liable (responsible) for any debts the business has. 2. Partnership two or more owners a. The partners all share the risks and share the profit. b. Each partner is personally liable for any debts the business has. 3. Corporation usually has many owners a. The owners of a corporation are its stockholders. b. The stockholders share the profit. Under law, however, a corporation has a separate legal identity from the owners. So the stockholders liability (risk) is limited to their individual investment. They are not personally liable for the debts of the company. B. Entrepreneurs play an important role in all three types of business organizations. 1. Entrepreneur - A person who takes a risk to produce and sell goods and services in search of a profit. 2. An entrepreneur may establish a business according to any of the three types of organizational structures. Donald Trump

5 V. CE.12b Economic Flow (Circular Flow) Chart A. Resources, goods and services, and money flow continuously among households, businesses, and markets in the U.S. economy. B. Individual and business saving and investment provide financial capital that can be borrowed for business expansion and increased consumption. C. Individuals (households) 1. own the resources used in production 2. sell the resources 3. use the income to purchase products D. Businesses (producers) 1. buy resources 2. make products that are sold to individuals, other businesses, and the government 3. use the profits to buy more resources E. Governments 1. use tax revenue from individuals and businesses to provide public goods and services

6 VI. CE.12c A. Private financial institutions act as intermediaries between savers and borrowers that include households and business investors. B. Most common types of private financial institutions: 1. Banks offer a full range of saving and checking accounts, and make loans 2. Savings and Loan Associations (S&Ls) most offer general banking services 3. Credit Unions a type of bank open only to members of the sponsoring group. They are often set up by large companies for their employees to use. C. Private financial institutions receive deposits and make loans. D. Private financial institutions encourage saving and investing by paying interest on deposits. VII. CE.12 d A. Virginia and the United States pursue international trade in order to increase wealth. B. Global economy = worldwide markets in which the buying and selling of goods and services by all nations takes place C. Reasons That States and Nations Trade: 1. To obtain goods and services they cannot produce or cannot produce efficiently themselves 2. To buy goods and services at a lower cost or lower opportunity cost 3. To sell goods and services to other countries 4. To create jobs D. Virginia and the United States specialize in the production of certain goods and services, which promotes efficiency and growth. E. Impact of Technological Innovations: 1. Innovations in technology (like the Internet) contribute to the global flow of information, capital, goods, and services. 2. The use of such technology also lowers the cost of production.

7 VIII. CE.13a A. Ways the Government Promotes Marketplace Competition: 1. Enforcing antitrust legislation to discourage the development of monopolies a. Monopoly = one business controls all or almost all of the sales of a product. In most cases monopolies are illegal, because without competition, the business has an unfair advantage over buyers. In certain cases, such as electric services or cable TV, monopolies may be allowed with government regulations of prices. b. Examples of Antitrust Legislation: i. Sherman Antitrust Act of 1890 ii. The Clayton Act of Engaging in global trade 3. Supporting business start-ups a. SBA The Small Business Administration b. Giving advice c. Offering low interest loans B. Government Agencies that Regulate Business and Oversee the Way Individuals and Companies Do Business: 1. FTC Federal Trade Commission a. investigates unfair business practices b. investigates cases of undue restrictions on markets 2. EPA Environmental Protection Agency a. sets rules to protect the environment b. regulates ground water contamination and air pollution 3. FCC Federal Communications Commission a. regulates radio and TV broadcasting b. TV and movie ratings c. Labeling of music lyrics IX. CE.13b A. Characteristics of Most Goods and Services Provided by the Government: 1. Provide benefits to many simultaneously (at the same time) 2. Would not likely be available if individuals had to provide them

8 3. Examples of public goods and services: a. public parks b. public libraries c. 911 d. Interstate highways e. postal service f. national defense B. Ways Governments Pay for Public Goods and Services: X. CE.13c 1. Through tax revenue a. Sales tax: state and local government collected on the sale of most items sold in stores. b. Real estate tax: local government collected each year on land, houses, and other buildings. It is based on the value of the land and buildings. c. Personal property tax: local government collected each year on cars and other vehicles. The tax is a percentage of the value of the vehicle. d. Income tax: federal and state government automatically taken out of each pay check. In April, tax forms are filed with calculations that show a person s total income and tax for the previous year. They may find that they owe a bit more or that they are owed a refund. 2. Through borrowed funds 3. Through fees like park entrance fees A. The government taxes, borrows, and spends to influence economic activity. B. If the Government: 1. Raises taxes there will be less money for individuals and businesses to spend. 2. Lowers taxes there will be more money for individuals and businesses to spend. 3. Borrows more money less money will be available for individuals and businesses to borrow. 4. Borrows less money more money will be available for individuals and businesses to borrow. 5. Spends more money a. Demand will increase, which may increase employment and production. b. May result in higher taxes. 6. Spends less money a. Demand will decrease, which may result in a slowing of the economy. b. May result in lower taxes. C. The 16 th Amendment to the U.S. Constitution authorizes Congress to tax personal and business income.

9 XI. XII. CE.13d The Federal Reserve System A. Is our nation s central bank. B. Acts as the federal government s bank. C. Has the duty to maintain the value of the national currency (dollar). D. Regulates banks to ensure the soundness of the banking system and the safety of deposits. E. Manages the amount of money in the economy to try to keep inflation low and stable. 1. If too much money is circulating, the value of money will start to fall. 2. When the value of money falls, prices start rising. That is called INFLATION. CE.13e A. The U.S. government passes laws and creates agencies to protect consumer rights and property rights. B. Individuals have the right of private ownership. 1. Consumers are protected by negotiated contracts and laws. 2. The courts enforce consumer contracts and laws. C. Government agencies establish guidelines that protect public health and safety. 1. Consumer Product Safety Commission 2. Food and Drug Administration (FDA) 3. National Highway Traffic Safety Administration D. Consumers may take legal actions against violations of consumer rights. XIII. CE.13f A. Money is defined as anything that is generally accepted as a method of payment. B. When the U.S. government issues coins and currency, people accept it in exchange for goods and services because they have confidence in the government. C. Governments everywhere issue money to make such exchanges safe and easy to accomplish. D. In the U.S. the three types of money are: 1. Coins 2. Federal Reserve notes (the technical term for U.S. paper currency) 3. Deposits in bank accounts that can be accessed by: a. Checks b. Debit Cards

10 XIV. CE.14 A. What is the role of self-assessment in career planning? 1. Career planning starts with self-assessment. 2. An awareness of personal talents, interests, and aspirations is needed to select a career. 3. aspirations = a person s hopes and goals for the future B. What is the role of work ethic in determining career success? 1. Attitudes and behaviors that support a strong work ethic enhance career success. 2. Employers seek employees who demonstrate the attitudes and behaviors of a strong work ethic. 3. People with a strong work ethic are respected by people they work with. 4. work ethic = attitudes and behaviors that show one s desire to do a job well and to take pride in a job well done C. What is the relationship between skills, education, and income? 1. Higher skills and/or education levels generally lead to higher incomes. a. High school diploma/ged b. Associate s degree usually two additional years of study after high school c. Bachelor s degree usually four additional years of study after high school d. Master s degree usually two or more additional years after a Bachelor s e. Doctorate s degree usually three or more additional years after a Master s 2. Supply and demand also influence job income. a. Demand is usually high for skilled and educated employees. b. Employers who need skilled and educated people are willing to pay what it takes to get them. i. wage = money paid to an employee per hour worked ii. salary = money regularly paid to an employee - not based on hours worked D. What influence do advances in technology have on the workplace? 1. Changes in technology influence the abilities, skills, and education needed in the workforce. 2. Employers seek individuals who have kept pace with technological changes by updating their skills. 3. Technological advancements create new jobs in the workplace. 4. Technology and information flows permit people to work across international borders. a. Creates competition from foreign works for U.S. jobs b. Creates opportunities for U.S. workers to work for companies based in other countries E. What does it mean to be fiscally responsible? 1. Making careful spending decisions 2. Saving and investing for the future 3. Having insurance 4. Keeping a budget and sticking to it 5. Using credit wisely 6. Understanding contracts, warranties, and guarantees on products and services that you purchase so that you are financially protected