The economy:

We have different kinds of needs:

some are basic, and we must cover them to surviveOthers are secondary: they

increase our welfare

But.... Are resources used to produce goods unlimited or is there a limit on what we can

produce?

Advertising: creating needs• Advertising stimulates us to thinkt we need a

product by creating a need for it: it will make us more beautiful, younger, powerful etc

• There are conventional advertisements on TV, newspapers...

• But advertisements evolve to new formats: internet advertisements adapt to our preferences by checking the pages we’ve visited

• There are hidden advertisements in movies and TV series: Actors use certain brands which pay to appear on screen. This is called “product placement”

• Advertising works: it’s a proven fact that the repetition of the same mesage time and again can really drive us to buy the product

What’s exactly selling this ad?

How to consume?

Choosing the best options according to price-quality ratio

Choosing products and services from companies that develop social responsibility programs

Trying to consume products which are fair with the environment

Knowing and demanding my rights as a consumer

Production, distribution, consumption• To produce something we need

several things:• 1) Capital: it’s the money we

need to buy raw materials, pay salaries…

• 2) Material resources: they cam be raw materials or any sort of fabric, metal etc

• 3) Human resources: they give their time and their know-how to do the job

• 4) Technology: having the most advanced technology will reduce the time needed to produce the good increasing its quality and lowering its price

• We need distribution networks to make the product reach the consumer

• Distribution and logistics plays a key role in the correct functioning of economy as factories and consumers are quite away from each other (people do not visit the Factory to buy a car isn’t it?)

Depending on these factors we can have a HIGH or LOW PRODUCTIVITY

• Consumption is the act by which we acquire goods and services. It’s very important, as each one of us is a consumer, and we consume on a daily basis

THE FAMILIES

THE COMPANIES

THE STATE

• Are basic units of consumption

• They work to obtain an income (salaries) that they must manage

• They pay taxes

• There are private companies (who pursue a monetary profit) and public or state-owned companies, which pursue a social benefit even if they loose money

• They offer products (goods) and services

• They create jobs• They pay taxes

• The state is a great consumer of goods and services offered by companies.

• State can also produce its own goods and services through its public companies

• It plays a role as regulating agent of the economy as it mints the currency, collects the taxes and makes the laws

• It creates jobs (teachers, police, Treasury agents...)

The three basic agents of economy

TAXESDirect taxes

• They apply on our incomes and properties

• For instance, if I own one car, one house and one parking place, each year, I have to pay because I’m the OWNER

• Each year, all citizens must declare their income so the State can

Indirect taxes

• They apply on the things and services we consume

• Each time we buy something, we’re paying taxes although we don’t realice it.

• Several products (gasoline for example) pay different taxes at the same time, but the most commonly known is the VAT (Value Added Tax)

RECUERDA: SOLO EL ESTADO COBRA IMPUESTOS

La historia del dinero comienza alrededor del siglo VII al V antes de Cristo con la primera acuñación de moneda.

The history of money begins around the seventh century BC to V with the first coinage.

El dinero es cualquier objeto que es aceptado para el pago de bienes, servicios y deudas en un mercadoConfiamos en el dinero porque lo respalda un estado. Dependiendo de la fuerza de la economía que la respalde, una moneda tendrá más o menos valor, aunque hay monedas que no emiten los estados, como el Bitcoin

Money is any object accepted for the payment of goods, services and debts in a market.We trust in money because it is supported by a State. Depending on the strength of the economy behind a currency, it will be stronger or weaker, although there are some currencies which are not backed by a State, such as it happens with Bitcoins

El dinero

Al principio se usaron objetos como conchas como dinero, pero pronto aparecieron las primeras monedas, hechas de metales preciosos como el oro o la plata .

In the early ages, objects like shells were used as money, but coins appeared soon. They were made of precious metals like gold and silver.

A lo largo del tiempo el dinero físico ha perdido valor: las monedas de hoy ya no son de metales preciosos y los billetes solo son un trozo de papel. La tarjeta de crédito y el pago por el móvil están acabando con el dinero como objeto

Through time, money has lost value as an object. Our coins are not made of precious metals and notes are just pieces of paper. Credit card and mobile phone payments are ending up with money as a physical thing

The role of banks

• Banks play a multiple role:

• They hire our savings, paying us a little interest

• They also buy money to the state paying a low Price (in our case they buy it to the Central European Bank)

• They loan the money they save charging a higher interest rate

• They also invest their money in the Stocks Exchange market, so they own great companies (for instance La Caixa owns 12% of REPSOL and 5% of Telefónica)

• With their control on big companies and money, Banks are also influential on politicians and governments.

• In some countries, there are state-owned Banks that lend money in better conditions tan private ones. These Banks have been dismantled in Spain.