2.3: Unit 2- Basic Understandings, Vocabulary, and Objectives
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Unit 2 - Basic Understandings
- Economies develop to manage limited resources.
- In a free enterprise system, the individual has choices as a producer and consumer.
- In a competitive market, the interaction between supply and demand affects the price and quantity of goods and services.
- Market structures are based on the degree of competition and impact a firm's ability to control the price of a product.
- Absolute and comparative advantage results in specialization in the production of goods and facilitates trade.
- The development of global trade markets has resulted in the elimination of some trade barriers.
Unit 2 - Vocabulary
market - an arrangement that brings sellers and buyers together for economic transactions
supply - the total amount of goods and services offered for sale at various prices
demand - the total amount of goods and services consumers are willing to buy at various prices
equilibrium price - the price at which the quantity supplied in the market matches the quantity demanded in the market
absolute advantage - condition that occurs when someone can produce goods and services cheaper than other producers
comparative advantage - condition that occurs when someone can produce at a lower opportunity cost than other producers
specialization - the development of skills and knowledge associated with one job or one area of expertise
pure competition - a market structure characterized by many producers supplying the same product and very few barriers to entry to the market
monopolistic competition - a market structure characterized by many producers supplying similar but varied products with few barriers to entry to the market
oligopoly - a market structure characterized by very few producers supplying similar products with high barriers to entry in the market
monopoly - a market structure characterized by one producer with a unique product and very high barriers to entry in the market
Unit 2 - Related Vocabulary
- quantity demanded / quantity supplied
- imports / exports
- free trade
- trade barriers
- production possibilities curve
- supply schedule
- demand schedule
- market structure
How Markets Work
Unit 2 TEKS
(2) Economics. The student understands the interaction of supply, demand, and price. The student is expected to:
(A) understand the effect of changes in price on the quantity demanded and quantity supplied;
(B) identify the non-price determinants that create changes in supply and demand, which result in a new equilibrium price; and
(C) interpret a supply-and-demand graph using supply-and-demand schedules.
(3) Economics. The student understands the reasons for international trade and its importance to the United States and the global economy. The student is expect to:
(A) apply the concepts of absolute and comparative advantages;
(B) compare the effects of free trade and trade barriers on economic activities, including the benefits and costs of participating in international trade; and
(C) analyze the effects of changes in exchange rates on imports and exports.
(8) Economics. The student understands types of market structures. The student is expected to:
(A) describe the characteristics and give examples of pure competitions, monopolistic competition, oligopoly, and monopoly; and
(B) identify regulations that apply to the establishment and operation of various types of market structures.
(10) Economics. The student understands key components of economic growth. The student is expected to:
(A) analyze how productivity relates to growth;
(B) analyze how technology relates to growth; and
(C) analyze how trade relates to growth.