Objectives: Students will be able to describe the types of economic systems.
ECOMICS UNIT • An economic system describes how a society determines what to produce, how to produce, and for whom to distribute goods and services.
ECOMICS UNIT Types of Economic Systems The primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.
ECOMICS UNIT Unlimited Scarcity Limited Wants Choices Resources
WHAT G/S HOW will the WHO will receive to produce? G/S be produced? the G/S produced? Businesses
Most needy or most money BASIC ECONOMIC PROBLEMS Answers to the above determine: ECONOMIC SYSTEMS [Eskimo/pygmy]
TRADITIONAL COMMAND FREE MARKET • Basic economic questions answered by Ritual, Habit, and Custom • Life in these economies tends to be stable, predictable, and continuous.
ECOMICS UNIT • Individual roles and choices are defined by the customs of elders and ancestors • These economies are usually based in societies of hunter/gatherers • Sharing is a big part of these economies
ECOMICS UNIT • Australian Aborigines
ECOMICS UNIT ECOMICS UNIT ECOMICS UNIT • 1) What to produce? Whatever ritual, habit or custom dictates • 2) How to produce? However ritual, habit or custom dictate • 3) For whom to produce? For whomever ritual, habit or custom dictate
ECOMICS UNIT • There is little or no uncertainty…everyone knows what role to play. • Life is generally stable, predictable, and continuous
ECOMICS UNIT • Tend to discourage new ideas and new ways of doing things • Lack of progress lowers standard of living • Technology is not used; difficult to improve
ECOMICS UNIT http://www.youtube.com/watch?v=_iSHqUmzfKM How to build a yurt:
ECOMICS UNIT Command Economy- Typically begin with revolutions.
ECOMICS UNIT • The government controls all aspects of the economy • Private property is illegal • Supply and demand are determined by the government, not by consumers and producers. • Everyone is paid equally no matter what job they do. • Industry and businesses are owned and controlled by the government, not private individuals.
ECOMICS UNIT In Cuba all residents are given rations of foods. Instead of purchasing food in a market Cubans go to government food supply centers.
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Cuba’s Fidel Castro and Che Guevarra established a command economy by expelling Cuba’s small business and land owners. Many of those who lost their business and freedom now live in Miami.
ECOMICS UNIT ECOMICS UNIT ECOMICS UNIT • Because the government has total control over production and its factors, these economies can change rapidly. Whatever is needed most will be produced. • There is no uncertainty (people are told when and how to work) • Free education, health care, and other public services
ECOMICS UNIT • 1) What to produce? Whatever the government says to produce
• 2) How to produce? However the government tells you to produce
• 3) For whom to produce? For whomever the government tells you to produce (ideally the entire society)
ECOMICS UNIT • Economy designed to meet needs not wants • No incentive to work hard…people don’t often lose their jobs, so they do the bare minimum to get by • Large bureaucracy means slow decision making, raises cost of production, lacks flexibility • No reward for initiative slows progress Another disadvantage to the command economy is that there is no incentive for entrepreneurship when you can’t run your own business.
ECOMICS UNIT Command Economies
Moscow 1988
Why would people stand in line all day for one roll of toilet paper? Karl Marx provided the ideological foundation for this system - most commonly known as communism.
Stressed an economy controlled by the government
ECOMICS UNIT In a command economy consumers have very little, or no choice in what they can purchase…
You will buy Gov’t Inc Pizza and you will like But it’s always it!!!! burnt!! I hate their pizza!
Government Inc. Pizza Or even their occupation...
I really enjoy workin' on Not anymore you won't. We need to the good ol' farm industrialize quickly. You must move to the city and work in the steel factory!! • Basic economic questions answered by consumers • An economic system in which individuals own and operate the factors of production.
Adam Smith claimed that people who trade with each other don’t go to war with each other.
ECOMICS UNIT Market economies are based on the open and free trade of goods.
ECOMICS UNIT • USA, Canada, UK, France, etc. etc.
ECOMICS UNIT • Adjusts to change based on consumer wants • High degree of individual freedom • Low levels of government interference • Because individuals (with money) make the decisions, everyone (with money) has a voice in the way the economy runs • Wide variety of available goods & services • Many choices=high degree of consumer satisfaction
ECOMICS UNIT • Poverty: only those with money can participate • Market does not provide for people’s basic needs. Governments must attempt to do this (think Katrina, the tornado in Bridgeport, etc.) • High degree of uncertainty - people lose jobs, businesses fail • System at times puts profit before people
ECOMICS UNIT In a pure market economy there is no government involvement in economic decisions. The government lets the market answer the following three basic economic questions: 1. What? Consumers decide what should be produced in a market economy through the purchases they make.
ECOMICS UNIT 2. How? Production is left entirely up to businesses. Businesses must be competitive in such an economy and produce quality products at lower prices than their competitors. 3. For whom? In a market economy, the people who have more money are able to buy more goods and services.
ECOMICS UNIT ECOMICS UNIT “It’s Your money, not the government’s”- President Ronald Reagan
ECOMICS UNIT PRIVATE FREEDOM OF ENTERPRISE PROPERTY & CHOICE
ROLE OF COMPETITION SELF-INTEREST
MARKETS ACTIVE, BUT LIMITED, & PRICES GOVERNMENT • Are they truly Free Market Economies? • Does the government regulate businesses? • Does the government control any businesses?
ECOMICS UNIT Mixed economies combine both the private interests with the government’s interests. There’s a balance to it. • Individuals and businesses make decisions for the private sector • Government makes some decisions for the public sector (ex. regulation of monopolies) • Government's role is greater than in a free-market economy, but less than in a command economy • Most economies in the world today are mixed economies
ECOMICS UNIT In a Mixed Economy the government regulates what goes into the goods we purchase in order to protect us
Questional Peperoni Pizza Questional Cheese Pizza And you can buy your pizza wherever you want to… • Traditional economies only make up a small part of a country’s economy. • There are NO PURE Market economies in the world • There are NO PURE Command economies in the world. All economies in the world have aspects of both command and market.
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All modern economies in the world are MIXED economies. But the mix is different in every nation.
ECOMICS UNIT ECOMICS UNIT