BUS Chap 2 notes

Major Branches of economics
Economics- the study of how society employs resources to produce goods and services for consumption among various groups and individuals.
Macroeconomics- Concentrates on the operation of a nation's economy as a whole.
Microeconomics- Concentrates on the behavior of people and organization in markets for particular products or services.

Resource Development- The study of how to increase resources and create conditions that will make better use of them.
Examples of ways to increase resources-
New energy sources
New ways of growing foods

Thomas Malthus and the Dismal Science
If the rich had most of the wealth and the poor had most of the population, resources would run out.
This belief led the writer Thomas Carlyle to call economics "The Dismal Science."
Neo-Malthusians believe there are too many people in the world and believe the answer is radical birth control.
Contrary to Malthus, some economists believe a large population can be a resource.
-Educated population is highly valuable
-Business owners provide jobs and economic growth for their employees and communities as well as for themselves

Adam Smith believed that
Freedom was vital to any economy's survival
Freedom to own land, right o keep the profits of a business is essential
People will work hard if given the freedom

The Invisible Hand Theory
As people improve their own situation in life, they help the economy prosper through the production of goods, services, and ideas.
Invisible hand- when self-directed gain leads to social and economic benefits for the whole community.

Capitalism- All or most of the land, factories and stores are owned by individuals, not the government, and operated for profit.

State Capitalism- when the state, rather than private owners, run some businesses.
These countries have experienced some success using capitalistic principles, but the future is still uncertain.

Capitalism's Four Basic Rights
1. The right to own private property.
2. The right to own a business and keep all that business's profits.
3. The right to freedom of competition.
4. The right to freedom of choice.
Roosevelt's four additional rights
1. Freedom of speech and expression.
2. Freedom to worship in your own way.
3. Freedom from want.
4. Freedom from fear.

Free Market- Decisions about what and how much to produce are made by the market.
Consumers send signals about what they like and how they like it.
Price tells companies how much of a product they should produce.
If something is wanted but hard to get, the price will rise until more products are available.

1. Perfect Competition
2. Monopolistic Competition
3. Oligopoly
4. Monopoly

Free Market benefits and Limitations
Benefits
Allows for open competition among companies.
Provides opportunities poor people to work their way out of poverty.
Limitations
Greed

Socialism- An economic system based on the premise that some basic businesses, like utilities, should be owned by the  government in order to more evenly distribute profits among the people.

Benefits of Socialism
Social equality
Free education
Free healthcare
Free childcare
Longer vacations
Shorter work weeks
generous sick leave

Negatives
Fewer Incentives
Fewer Risk-takers

Communism- An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production
Prices don't reflect demand which may lead to shortage of items, including food and clothing.