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ECONOMIC SYSTEMS. ECONOMIC SYSTEMS. Is the way a society uses its scarce resources to satisfy its peoples unlimited wants. Traditional Economy.

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Economic systems1
ECONOMIC SYSTEMS

Is the way a society uses its scarce resources to satisfy its peoples unlimited wants


Traditional economy
Traditional Economy

Where families, clans, or tribes make economic decisions based on customs & beliefs that have been handed down from generation to generation

Goal is survival

Everyone has a set role

Men are hunters & herders

Women cook, tend crops, raise children

Youngest help parents & learn skills

Good of group/society is greater than individual


Traditional economy1
Traditional Economy

  • They resist change

  • b/c they are based

  • on tradition & custom

  • Prevent people from

  • doing what they want

  • Lower standard of

  • living

  • Clearly answers

  • the 3 economic

  • questions

  • Little disagreement

  • over economic

  • goals & roles


Command economy
Command Economy

Government decides what goods and services will be produced, how they will be produced, and how they will be distributed

Government officials (Central planners) consider the resources & needsof the country; distribute those resources according to their judgment

Gov’t usually owns the means of production


Pros cons of command economies
Pros & Cons of Command Economies

PROS:

Seek to provide for everyone

Leaders use the nation’s resources to produce items that may not make money in a market economy


CONS:

Workers have little motive to work

Individual rights are under the needs of state

Central planners have little understanding of local conditions (great suffering of lower class)

Shortages are common


Why are consumer goods often in short supply in a command economy
Why are consumer goods often in short supply in a command economy?

Because they often set prices well below that of a market economy.


Why do these economies often fail
Why do these economies often fail economy??

Because of the human suffering that often goes hand in hand with command economies.


In a Communist economic system, the ____________________ owns the means of production.

GOVERNMENT

Workers get their ________________ from the state, which tend to be low because the state is not worried about making a _________________, just ensuring the basic needs of its people

The government sets the prices of ___________________. They typically set them _________ so that the masses can afford them.

WAGES

GOODS & SERVICES

LOW

PROFIT


Due to low prices of goods and services and low worker productivity, ______________ of goods/services tend to low, therefore resulting in _______________________.

Due to _________ wages and getting paid regardless of worker _________________________, there is little _______________________ to work hard.

LOW

SUPPLY

PRODUCTIVITY

INCENTIVE

SHORTAGES


LOW productivity,

Also, due to _________ wages, there is little incentive for people to go on to ________________ for advanced degrees. This leads to a shortage of ________________, ______________, _______________, etc.

These shortages contribute to human suffering. There is a shortage of ___________, ___________________, toiletries, etc.

COLLEGE

FOOD

MEDICINE

DOCTORS

LAWYERS

TEACHERS



Market economy
Market Economy productivity,

Based on supply and demand, not government directives

Consumers drive the economy

Producers decide what goods/services they will offer


Government Involvement productivity,

Private Property

Fundamentals of a Market Economy

Voluntary Exchange

Specialization

Profit

Consumer Sovereignty

Competition


Private property
Private Property productivity,

Buyers and sellers are free to own and use private property


Limited government involvement
Limited Government Involvement productivity,

  • Buyers and sellers must be free to operate with minimal government intervention

    • Laissez faire  “leave things alone”

    • Capitalism  economic system that is based on private ownership


Voluntary exchange in markets
Voluntary Exchange in Markets productivity,

  • When a buyer and seller agree to do business together, each believes that the benefits outweigh the costs

    • Based on an exchange of a product for money

    • Self-interest guides voluntary exchange


Profit
Profit productivity,

A financial gain from a business transaction

Sellers are free to attempt to maximize their profits


Competition
Competition productivity,

VS.

Sellers are free to attempt to get the business of others by offering the best deal


Consumer sovereignty
Consumer Sovereignty productivity,

Consumers are free to purchase what they want and to refuse products they do not want


Specialization
Specialization productivity,

Buyers and sellers are able to concentrate their efforts in areas where they have an advantage


Circular flow model
Circular Flow Model productivity,

www.classzone.com

Page 53


Adam smith vs karl marx
Adam Smith vs. Karl Marx productivity,

Capitalism

1723 – 1790

The Wealth of Nations

Laying the foundation for modern economics

Alexander Hamilton

Karl Marx

Defenders/critics of capitalism

Nation would be wealthier w/free trade

“Invisible hand guides the market place”

Communism/Socialism

1818 – 1883

The Communist Manifesto (1848)

Das Kapital

Laid the foundation for socialist economic theory

Russian Revolution 1917

Chinese Revolution 1949

Tension between worker & owner would lead to revolt & create a new classless society “Onion Theory”


Mixed economy
Mixed Economy productivity,

An economic system that has elements of traditional, command, and market economies

Most common


Trend 1 change in ownership
Trend 1: Change in Ownership productivity,

  • Nationalize

    • Means to change from private ownership to government or public ownership

  • Privatize

    • Means to change from government or public ownership to private ownership


Public sector
PUBLIC SECTOR productivity,

The public sector, sometimes referred to as the state or the government sector, is the part of the economy that deals with the production, ownership, delivery and allocation of goods and services (also known as PUBLIC GOODS) by the government, paid for by taxesfor citizens, whether national, state, or local


Private sector
PRIVATE SECTOR productivity,

The private sector is that part of the economy, sometimes referred to as the citizen sector, which is run by private individuals, usually as a means of enterprise for PROFIT, and is not controlled by the state.


You have the following to do
You Have the following to do! productivity,

Anyone not going to be here tomorrow, you have to take test today or you will get a zero.

Turn in Spirals #1 & #2

Turn in Globalization in you Life

Work on vocab and review sheet and if time permits Spiral #3


Trend 2 increasing global ties
Trend 2: Increasing Global Ties productivity,

  • Global Economy

    • All the economic interactions that cross international boundaries

  • Why the surge?

    • Opening up of the world’s markets to trade

    • Development of faster, safer, & cheaper transportation

    • Cross-border business partnerships


Russia from communism to capitalism
Russia: From Communism to Capitalism productivity,

http://www.pbs.org/frontlineworld/stories/moscow/


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