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24. 25. Production Process Land Goods Labor Production/Manufacturing Factory Consumers Capital
ServicesEntrepreneurship
25. 26. Capital Goods and Consumer GoodsCapital Goods: areused to make othergoodsConsumer
Goods:final products that arepurchased directly bythe consumer
26. 27. CHANGES IN PRODUCTIONSpecialization dividing up productionso that Goods areproduced
efficiently Hardees makes hamburgers, not shoes!!Nike makes shoes, nothamburgers
27. 28. CHANGES IN PRODUCTIONDivision of Labor different peopleperform different jobs You do
yourto achieve greater job, and I willefficiency (assembly do my Job and we will be moreline).
EFFICIENT
28. 29. CHANGES IN PRODUCTIONConsumption howmuch we buy(ConsumerSovereignty) The DELL
store is empty because. Everyone is at the APPLE STORE!!!
29. 30. CHANGES IN PRODUCTIONIf we INCREASE land, labor, capital weINCREASE production
Many entrepreneurs invest profit back into productionIf we DECREASE land, labor, capital
weDECREASE productionBUT WHY would we ever DECREASEproduction?
30. 31. The Circular Flow Model
31. 32. PRODUCTION, cont. again A measure of the production of an entire country in one year is
GDPThe total peso value of ALL final Goods and Servicesproduced in a country in a year. (GROSS
DOMESTIC PRODUCT)
32. 33. World GDP Total GDP 2005 11 Korea, Rep. 787,624(millions of US dollars) 12 India 785,468 1
United States 12,455,068 13 Mexico 768,438 2 Japan 4,505,912 14 Russian Federation 3 Germany
2,781,900 763,720 4 China 2,228,862 15 Australia 700,672 5 United Kingdom 2,192,553 16
Netherlands 594,755 6 France 2,110,185 a 17 Switzerland 365,937 7 Italy 1,723,044 18 Belgium
364,735 8 Spain 1,123,691 19 Turkey 363,300 9 Canada 1,115,192 20 Sweden 354,115 10 Brazil
794,098 21 Saudi Arabia 309,778
33. 34. Part 2: Costs and Revenues
34. 35. Costs and RevenuesCost the totalamount of money ittakes to produce anitem (to pay for
ALLFactors ofProduction).
35. 36. Costs and RevenuesRevenues the totalamount of peso acompany or thegovernment takes in.
36. 37. Costs and RevenuesFixed Costs theamount of money abusiness MUST pay eachmonth or year
(like rentand Capital expenses).
37. 38. Costs and RevenuesVariable Costs theamount of money abusiness pays thatchanges over time
(Laborand Raw Materials).
38. 39. Costs and RevenuesTotal Costs = Fixed +Variable Costs.
39. 40. Costs and Revenues - ChartMarginal Costs theadditional Cost of theNEXT UNIT produced.
Margin=Extra Space
40. 41. Costs and RevenuesProfit the differencebetween Total Costsand Revenues. Thisis WHY youre
inBUSINESS (ProfitMotive!) Profit=Revenues-Total cost Profit Motive=why you are in business---to
make MONEY (principles of Capitalism)
41. 42. Costs and RevenuesCost Benefit Analysis weighing theMarginal Costs vs.the Marginal Benefitsof
producing an item Marginalor making any Marginal Costseconomic decision. If Benefitsthe Benefit
isGREATER than theCost, then businessdoes it.
42. 43. Cost-Benefit AnalysisImmediate or short term satisfaction canlead to missing the long-term
benefits.#7 For ExampleImmediate spending on cheap stuffinstead of long-term savings will lead
tolower economic prosperity.
43. 44. Part 3: Comparative Economics
44. 45. Traditional EconomiesDef: EconomicQuestions answered bycustomPredominatelyAgricultural
Developing or 3rdWorldTrade and barterorientedLow GDP & PCI (percapita income = avg.inc.)
63. 64. How does Labor protect itself?Labor Unions: organization of workerswho have banded together to
achievecommon goals Wage protection Workplace safety Benefits Job protection
65. Collective Bargaining and StrikesCollectiveBargaining Representatives of the Union and the company
negotiate a contract for the workers; usually they rely on compromiseStrikes When an agreement cant be
reached, workers stop working to try to force the hand of the company