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Chapter 2. Economic Systems. Answering 3 Economic Questions. Section 1. In your own words define the following terms and give an example of each. Producer Consumer Product Market. Bell Ringer. Identify the three economic questions

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Chapter 2

Chapter 2

Economic Systems



Bell ringer

In your own words define the following terms and give an example of each.

Producer

Consumer

Product

Market

Bell Ringer


Learning objectives

  • Identify the three economic questions example of each.

  • Analyze the societal values that determine how a country answers the three economic questions

  • Explain the characteristics of traditional, command, and market economies and describe the societal values that influence them.

Learning Objectives


Economic System example of each.

  • The method used by a society to produce and distribute goods and services


What are the 3 questions

  • What should be produced? example of each.

    • National defense?/education?/public health?/welfare?/consumer goods?

  • How should products be produced?

    • Solar power? / nuclear power? / oil? / family farms? / corporate farms?

  • Who will consume products?

    • Who gets what? BMW v. Ford

What are the 3 Questions?


Patriotism example of each.

  • Love of one’s country; passion that inspires a person to serve his or her country


Safety Net example of each.

  • Government programs that protect people experiencing unfavorable economic conditions


Economic goals

  • Efficiency example of each.

    • Making the most of limited resources

  • Freedom

    • Patriotism

  • Security & Predictability

    • Safety net

      • Natural disasters, welfare programs, social security,

    • Goods available when needed

Economic Goals


Economic goals continued

  • Equity example of each.

    • Fair distribution of wealth =$4=work

  • Innovation & Growth

    • Innovation → Growth → higher standard of living

    • Innovation = inventing new ideas

  • Other Goals

    • Example: Environmental Protection

Economic Goals Continued


Standard of Living example of each.

  • Level of economic prosperity


Types of economies

Create a Venn Diagram comparing different systems example of each.

  • Traditional

  • Market

  • Command

  • Mixed

Types of Economies

Mixed


Traditional Economy example of each.

  • Economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services


Traditional economy

  • Based on example of each.

    • Customs

    • Habits

    • Rituals

  • Sons follow in fathers footsteps & daughters follow in mothers footsteps

  • Very little innovation/growth/change

  • Examples: Amish, American Indians, Eskimos

Traditional Economy


Market Economy example of each.

  • Economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets


Market economy

Market Economy


Command Economy example of each.

  • Economic system in which the central government makes all decisions on the production and consumption of goods and services


Command economy

Command Economy


Mixed Economy everyone

  • Market-based economic system with limited government involvement


Mixed economy

Best of All Economies!! everyone

  • Government has limited role

    • Varies from economy to economy

  • Focuses on individual

  • Examples: United Kingdom, United States, Canada

Mixed Economy


Free market
Free Market everyone

Section 2


Bell ringer january 12

Name and describe two types of economies discussed yesterday.

(without your notes if possible)

Bell Ringer January 12


Learning objectives1

  • Explain why markets exist yesterday.

  • Analyze a circular flow model of a free market economy.

  • Understand the self-regulating nature of the marketplace.

  • Identify the advantages of a free market

Learning Objectives


Market: yesterday.

An arrangement that allows buyers and sellers to exchange things


Specialization: yesterday.

Concentration of the productive efforts of individuals and firms on a limited number of activities


Why do we need markets

No one makes everything they need/want yesterday.

  • Specialization

Why do we need MARKETS?

  • Efficiency of resources


Players in free market

Page 30 in your book! yesterday.

Individuals/

Households

Businesses/

Firms

Purchase F of P

Use resources to produce products & services

  • Own F of P

  • Purchases products & services

Players in Free Market


  • Adam Smith - 1776 yesterday.

    • Scottish philosopher/entrepreneur

    • Wrote: The Wealth of Nations


Invisible hand

“An yesterday.economy is made up of countless individual transactions. In each transaction, the buyer & seller consider only their self interest or personal gain.”

  • Self-interest

    • One’s own personal gain

    • Motivating force of Free Market

Invisible Hand


  • Competition yesterday.

    • Struggle among producers for consumers’ business

    • Regulating force of Free Market

      Self-interest + Competition =

      Invisible Hand


What yesterday.keeps prices from skyrocketing?

What causes competition?

How can incentives be positive or negative?


Free market pros cons

Free Market Advantages: yesterday.

  • Economic Efficiency

  • Economic Growth

  • Economic Freedom

  • Endless Variety of Goods & Services

    Free Market Disadvantages:

  • Cannot address public needs/goods

    • Military / Roads / Libraries / Parks

  • Economic Equity

Free Market Pros & Cons


Bell ringer january 13th

  • What if you didn’t have a choice in your job profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

  • Would you like that? Why or why not? What would be some advantages and/or disadvantages?

    Please write complete sentences in a short paragraph.

Bell Ringer January 13th


Bell ringer january 17th

Create profession…you couldn’t decide what you wanted to do after high school – the government decided for you.a Web diagram centered around the word “Dictator”

Bell Ringer January 17th


Command economy centrally planned economy cpe

Command Economy profession…you couldn’t decide what you wanted to do after high school – the government decided for you.Centrally Planned Economy (CPE)

Section 3


Learning objectives2

  • Describe how a centrally planned economy is organized profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

  • Analyze the centrally planned economy of the former Soviet Union

  • Identify the problems of a centrally planned economy

Learning Objectives


Command Economy: profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

System in which the central government makes all decisions


Cpe structure

  • Central Government profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

    • Answers Economic Questions: What to produce, how to produce, & who gets what

    • Everyone answers to the central govt.

      • People have no freedoms

      • Businesses are created by govt. only to provide what is needed

CPE Structure


Cpe atmosphere

  • Govt controls all factors of production profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

    • People are told where and when to work

    • No person or business owns land

    • All physical capital is provided by the govt in rations.

    • Factories are told how much product to produce

    • There is no push for efficiency or profit

CPE Atmosphere


Socialism communism

- Democracy profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

  • What is socialism?

    • A philosophy based on beliefs that democratic means should be used to evenly distribute wealth throughout society

  • What is communism?

    • A political system in which the economy & all economic and political power rests in the hands of the central government

  • Are these the same? How are the different?

Socialism & Communism

- Authoritarian


Cpe problems

  • Discourages innovation profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

  • Poor quality of goods & services

  • Shortages of goods & services

  • Diminishing production

  • Ideals are better than the reality

CPE Problems


Mixed economies

Mixed Economies profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

Section 4


Why mixed economy

  • Why do we need mixed economies? profession…you couldn’t decide what you wanted to do after high school – the government decided for you.

    • No economic system has all the answers!

    • Government intervention has become a greater need in order to provide certain services

      • National defense; roads/highways; libraries

Why Mixed Economy?


Government s role

Government’s Role


Circular flow free market

Review contracts and patent laws

Individuals/

Households

Businesses/

Firms

Buy F of P

Produce goods & services

  • Own F of P

  • Buy goods & services

Circular Flow – Free Market


Circular flow mixed

Individuals/ contracts and patent laws

Households

Businesses/

Firms

Buy F of P

Produce goods & services

Government

  • Own F of P

  • Buy goods & services

  • Buy F of P

  • Buy goods & services

  • Provide goods & services through taxes on both Households & Firms

Circular Flow - Mixed


So how does all this fit together? contracts and patent laws

  • Traditional - Command

  • Free Market - Mixed

  • How do these systems differ?

  • How are they similar?

  • Which goals do these economies achieve?


  • Which economies meet which economic goals
    Which Economies Meet contracts and patent lawsWhich Economic Goals?


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