U.S. Private and Public Sectors

Transcription

1 CHAPTER 3 U.S. Private and Public Sectors 3.1 The U.S. Private Sector 3.2 Regulating the Private Sector 3.3 Public Goods and Externalities 3.4 Providing a Safety Net 1 CONTEMPORARY ECONOMICS: LESSON 3.1

2 CHAPTER 3 Consider U.S. Private and Public Sectors Why did households go from self-sufficiency to relying on markets? How did firms evolve to take advantage of large-scale production? Why do countries trade? If the invisible hand of competitive markets is so great, why do governments get into the act? Why are some people poor even in the world s most productive economy? 2 CONTEMPORARY ECONOMICS: LESSON 3.1

3 Objectives LESSON 3.1 The U.S. Private Sector Describe the evolution of households. Explain the evolution of the firm with respect to the changes in production processes. Demonstrate your understanding of why international trade occurs. 3 CONTEMPORARY ECONOMICS: LESSON 3.1

4 Key Terms LESSON 3.1 The U.S. Private Sector household utility firm Industrial Revolution 4 CONTEMPORARY ECONOMICS: LESSON 3.1

5 Households All those who live under one roof are considered part of the same household. Households make economic choices. What to buy How much to save Where to live Where to work 5 CONTEMPORARY ECONOMICS: LESSON 3.1

6 Evolution of the Household In 1850, the economy was primarily agricultural. Now only about 2 percent of the U.S. labor force works on farms. In 1950, only about 15 percent of married women with children under 18 years old were in the labor force. Today more than half of married women with young children are in the labor force. 6 CONTEMPORARY ECONOMICS: LESSON 3.1

7 Households Maximize Utility Utility is a level of satisfaction or sense of well-being. Households try to act in their best interests by selecting products and services that are intended to make them better off. 7 CONTEMPORARY ECONOMICS: LESSON 3.1

8 Firms A firm is an economic unit formed by a profit-seeking entrepreneur who combines resources to produce goods and services and accepts the risk of profit and loss. 8 CONTEMPORARY ECONOMICS: LESSON 3.1

9 Evolution of the firm Specialization and comparative advantage help explain why households are no longer self-sufficient. Transaction costs could easily cancel out the efficiency gained from specialization. The cottage industry system an entrepreneur hired households to turn raw material into finished products. 9 CONTEMPORARY ECONOMICS: LESSON 3.1

10 Centrally Powered Factories Promoted more efficient division of labor Allowed for direct supervision of production Reduced transportation costs Facilitated the use of specialized machines 10 CONTEMPORARY ECONOMICS: LESSON 3.1

11 The Industrial Revolution Began in Great Britain around 1750 Development of large-scale factory production 11 CONTEMPORARY ECONOMICS: LESSON 3.1

12 The Rest of the World International trade Trade in raw materials 12 CONTEMPORARY ECONOMICS: LESSON 3.1

13 U.S. Production as a Percentage of U.S. Consumption [Insert Figure 3.2 U.S. Production as a Percentage of U.S. Consumption] 13 CONTEMPORARY ECONOMICS: LESSON 3.1

14 Objectives LESSON 3.2 Regulating the Private Sector Explain how government, by establishing laws and regulations, can improve operation of the private sector. Distinguish between regulations that promote competition and those that control natural monopolies. Describe how fiscal policy and monetary policy reduce the ups and down of the business cycle. 14 CONTEMPORARY ECONOMICS: LESSON 3.2

15 Key Terms LESSON 3.2 Regulating the Private Sector private property rights antitrust laws natural monopoly fiscal policy monetary policy 15 CONTEMPORARY ECONOMICS: LESSON 3.2

16 Rules for a Market Economy Establish property rights Intellectual property rights Measurement and safety 16 CONTEMPORARY ECONOMICS: LESSON 3.2

17 Private Property Rights Private property rights guarantee individuals the right to use their resources as they choose or to charge others for the use. 17 CONTEMPORARY ECONOMICS: LESSON 3.2

18 Intellectual Property Rights Patent Copyright Trademark 18 CONTEMPORARY ECONOMICS: LESSON 3.2

19 Measurement and Safety U.S. Bureau of Weights and Measures The U.S. Food and Drug Administration (FDA) The U.S. Department of Agriculture The Consumer Product Safety Commission 19 CONTEMPORARY ECONOMICS: LESSON 3.2

20 Market Competition and Natural Monopolies Promoting market competition Antitrust laws attempt to promote competition and reduce anticompetitive behavior. Regulating natural monopolies When it is cheaper for one firm to serve the market than for two or more firms to do so, that firm is called a natural monopoly. 20 CONTEMPORARY ECONOMICS: LESSON 3.2

21 Growth and Stability of the U.S. Economy Fiscal policy uses taxing and public spending to influence national economic variables. Monetary policy tries to supply the appropriate amount of money to help stabilize the business cycle and promote healthy economic growth. 21 CONTEMPORARY ECONOMICS: LESSON 3.2

22 LESSON 3.3 Objectives Public Goods and Externalities Describe and provide examples of four types of goods. Define negative externalities and positive externalities, and discuss why government intervenes in such markets. 22 CONTEMPORARY ECONOMICS: LESSON 3.3

23 LESSON 3.3 Key Terms Public Goods and Externalities private goods public goods quasi-public goods open-access goods negative externalities positive externalities 23 CONTEMPORARY ECONOMICS: LESSON 3.3

24 Private Goods Private goods goods with two features 1. the amount consumed by one person is unavailable to others 2. nonpayers can easily be excluded Rival Exclusive 24 CONTEMPORARY ECONOMICS: LESSON 3.3

25 Public Goods Public goods goods that, once produced, are available to all, but nonpayers are not easily excluded. Both nonrival and nonexclusive. Available for all to consume, regardless of who pays and who doesn t. 25 CONTEMPORARY ECONOMICS: LESSON 3.3

26 Quasi-public Goods Goods that are nonrival but exclusive are called quasi-public goods. 26 CONTEMPORARY ECONOMICS: LESSON 3.3

27 Open-access Goods Goods that are rival but nonexclusive are called open-access goods. By imposing restrictions on open-access resource use, governments try to keep renewable resources from becoming depleted. 27 CONTEMPORARY ECONOMICS: LESSON 3.3

28 Negative Externalities Negative externalities generally are byproducts of production or consumption that impose costs on third parties. 28 CONTEMPORARY ECONOMICS: LESSON 3.3

29 Correcting for Negative Externalities Government restrictions can improve the allocation of open-access resources. Antipollution laws Water quality restrictions Noise restrictions Local zoning laws 29 CONTEMPORARY ECONOMICS: LESSON 3.3

30 Positive Externalities Positive externalities occur when the by-products of consumption or production benefit third parties. Education generates positive externalities. 30 CONTEMPORARY ECONOMICS: LESSON 3.3

31 Objectives LESSON 3.4 Providing a Safety Net Determine why incomes differ across households, and identify the main source of poverty in the United States. Describe government programs that provide a safety net for poor people. 31 CONTEMPORARY ECONOMICS: LESSON 3.4

32 Key Terms LESSON 3.4 Providing a Safety Net median income social insurance income-assistance programs 32 CONTEMPORARY ECONOMICS: LESSON 3.4

33 Income and Poverty In a market economy, income depends primarily on earnings, which depend on the value of each person s contribution to production 33 CONTEMPORARY ECONOMICS: LESSON 3.4

34 Why Household Incomes Differ The median income of households is the middle income when incomes are ranked from lowest to highest. The main reason household incomes differ is that the number of household members who are working differs. 34 CONTEMPORARY ECONOMICS: LESSON 3.4

35 Official Poverty Rate The federal government determines the official poverty level and adjusts this benchmark over time to account for inflation. The U.S. official property level of income is many times greater than the average income for most of the world s population. 35 CONTEMPORARY ECONOMICS: LESSON 3.4

36 Number and Percentage of U.S. Population in Poverty: CONTEMPORARY ECONOMICS: LESSON 3.4

37 Poverty and Marital Status Poverty rates among female-headed families are five to six times greater than rates among married couples. Poverty rates among female-headed families are two to three times greater than those for male-headed families. Since the mid-1990s poverty rates have trended down for all types of families, before rising slightly in the recession year of CONTEMPORARY ECONOMICS: LESSON 3.4

38 U.S. Poverty Rates and Types of Households 38 CONTEMPORARY ECONOMICS: LESSON 3.4

39 Programs to Help the Poor Social insurance Income-assistance programs Earned-income tax credit Welfare reform 39 CONTEMPORARY ECONOMICS: LESSON 3.4

40 Social Insurance Social insurance programs are designed to help make up for the lost income of people who worked but are now Retired Temporarily unemployed Unable to work because of disability or work-related injury 40 CONTEMPORARY ECONOMICS: LESSON 3.4

41 Social Insurance Programs Social Security Medicare Unemployment insurance Worker s compensation 41 CONTEMPORARY ECONOMICS: LESSON 3.4

42 Income-Assistance Programs Income-assistance programs provide money and in-kind assistance to poor people. Cash transfer programs In-kind transfer programs 42 CONTEMPORARY ECONOMICS: LESSON 3.4

43 Earned-income tax credit Supplements wages of the working poor 43 CONTEMPORARY ECONOMICS: LESSON 3.4

44 Welfare Reform Temporary Assistance for Needy Families (TANF) Welfare reform has reduced welfare rolls and increased employment. 44 CONTEMPORARY ECONOMICS: LESSON 3.4

45 Income Redistribution Composition of Federal Outlays 45 CONTEMPORARY ECONOMICS: LESSON 3.4