Economic Concepts

  • Market Economy: economic activity such as determining prices is determined by markets (buyers and sellers)
  • Private Enterprise: all resources in the economy, all means of production, labor, equipment, stores, land, all are owned by private individuals or groups of private individuals
    • Private Ownership:
  • Market economy is an ideal, no government intervention
    • But most have government intervention
  • In a free market economy ones income dependsĀ  on
    • Quantity of resources you own (labor, real estate, stocks and bonds)
    • Value market places on resources you own
  • For most: Labor is most important resource you own
  • School enhances value of your labor
  • Wealth vs Income:
    • Wealth includes savings and gifts and inheritance/things you own that are not just money
      • Savings is basis for wealth
  • Net worth: assets minus liabilities
  • Labor market decides income
  • Law of Demand
    • As price increases, demand will decrease/amount customers are willing and able to buy
  • Supply-how much sellers are willing and able to sell
  • Profit is a measure of how valuable a product is
  • Law of Supply
    • Firms supply more if the price and demand are higher
  • Prices come from buyers and sellers
  • Surplus-usually causes prices to drop
  • Shortages-prices rise
  • Equilibrium: only point where plans of buyers and sellers meet

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