Ch 2 economic systems
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Ch. 2: Economic Systems. S1: Answering the 3 Economic Questions S2: The Free Market S3: Centrally Planned Economies S4: Mixed Economies. Bell Work. Get books/folders ready Copy Chart on page 23 somewhere in notes Fill this in as we go along in notes

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Ch 2 economic systems

Ch. 2: Economic Systems

S1: Answering the 3 Economic Questions

S2: The Free Market

S3: Centrally Planned Economies

S4: Mixed Economies

Bell work
Bell Work

  • Get books/folders ready

  • Copy Chart on page 23 somewhere in notes

    • Fill this in as we go along in notes

      • Will help give you an overview of section

  • Answer Chapter 2 Warm-up

    • Pg. 12 A-D

2 1 answering 3 economic questions
2.1: Answering 3 Economic Questions

  • Chapter 2 Essential Question

    • “How does a society decide who gets what Goods/Services”

  • Section 1 Guiding Question

    • “What Goals/Values affect how a society answers the key economic questions?”

  • S.1 Objectives:

    • 3 Economics questions

    • Societal values that determine how they are answered

    • Characteristics of Traditional Economy

  • Key Terms



  • Goals/values that affect how a society answers key ?s

    • Each society is guided by its economic system

      • Affects the way it does business w/in society and w/other societies

    • A societies values, such as freedom or tradition, guide the type of economic system they will have

3 economic questions
3 economic questions

  • B/C of scarce resources a society must answer 3 ?s

    • What goods/services should be produced?

    • How should these goods/services be produced?

    • Who consumes these goods/services?

  • How ?s are answered defines type of economic system society has

Question 1 2
Question 1 & 2

  • What goods/services should be produced?

    • Society must decide what to produce in order to satisfy wants/needs of its people

    • Because of scarcity (limited resources), each decision comes at an opportunity cost

  • How should goods/services be produced?

    • As a society decides, it considers……

      • How to best use its 3 factors of production

        • Land

        • Labor

        • Capital : human/physical

      • Look at Figure 2.1 on pg. 24 (read/answer TPS)

      • What does each choice involve?

        • Trade-offs

Question 3
Question 3

  • Who consumes goods/services?

    • Mostly determined by how a society distributes income

    • Through factor payments, including profits, society can determine who will be consumers of goods/services

      • How much will owners make, teachers, bankers, etc.

        • Answer can tell a great deal about societies values

Economic goals
Economic Goals

  • Efficiency

  • Freedom

  • Security

  • Equity

  • Growth

Economic efficiency
Economic Efficiency

  • Societies answer 3 ?s based on importance they attach to their economic goals

  • Scarce resources make societies try to maximize what they can produce using their resources

    • If they can accurately assess what to produce they can increase their efficiency

Economic freedom and security
Economic freedom and security

  • Some societies limit the economic freedoms of its people

    • U.S., we face some limitations, but in general, we have a lot of freedom

  • Economic systems also strive to achieve a degree of economic security

    • Basically, systems are there to reassure people that goods/services will be available and they will get paid for work as well

Economic equity and growth
Economic Equity and Growth

  • Another goal that is defined differently in different societies. Basically how they will divide their “pie”

  • Checkpoint: “What are 2 examples of economic goals?”

  • Growth: Economies need to grow

    • Need to provide jobs for new people in workforce

    • Strive to improve standards of living

    • Innovation plays a large role in economic growth and success

Economic goals in conflict
Economic goals in conflict

  • There are some additional economic goals for certain societies

    • Environmental protections

    • Full employment

    • Protecting national industries

  • Societies end up having to prioritize their economic goals (arrange them in order of importance)

    • Each choice comes with some kind of trade-off

Traditional economies
Traditional Economies

  • Oldest and simplest economic system

    • Rely on habit, custom, or ritual

    • Revolve around family

    • Little room for innovation/change

  • Found in communities that…

    • Stay small and close

    • Work to support entire community over selves

  • Success is judged by how they meet their own needs

    • Often lack modern conveniences

    • Lower standards of living

Lesson closing
Lesson Closing

  • Complete pg. 13

    • Exploration; Both A and B

  • HW and some of BW tomorrow

    • Page 55

      • Evaluating U.S. Economy

    • Read Section 2

Chapter 2 bell work
Chapter 2 Bell-Work

Get Books/Folders

Finish up pg. 55

Copy chart for S2 to top of notes or sheet

Fill in Chart from section 1 that you copied

Go over answers

Chapter 2 section 2
Chapter 2 : Section 2

  • “What are the characteristics of a free-market economy?” write on top of notes

  • Objectives

    • Explain why markets exist

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

    • Describe self-regulating nature of marketplace

    • Identify advantages of free-market economy

  • Key Terms



  • What are the characteristics of Free-market economy?

    • Characterized by…..

      • Households and firms

      • Factor and product markets

      • Self-interest

      • Competition

      • Economic freedom, efficiency, and equity

Why do markets exist
Why do markets exist?

  • Markets exist to eliminate the need for any one person to be self-sufficient

    • Examples: NYSE, Farmers markets, Scheel’s, Wal-Mart

    • They allow us to exchange the things we have for things we want

      • Money for goods/services in most cases

  • Lead to specialization

    • Rather than self-sufficiency, we specialize in a few products/services

    • Leads to efficient use of 3 factors of production

    • Allows businesses to focus on limited number of related products/services

  • Markets are needs as an arena to buy/sell products

Free market economy
Free market economy

  • 3 ?s answered by voluntary exchanges in Marketplace

  • Individuals choose

    • What gets made

    • How it is made

    • How much people can consume of good/service

  • Individuals/Private businesses own factors of production

  • Look at figure 2.2 pg. 31

    • Need to understand what each sector provides one another

    • Answer two questions…. TPS

Factor and product markets
Factor and Product markets

  • Factor Market

    • Firms purchase factors of production

      • Renting/buying land, hiring/paying workers, borrowing $$

  • Product Market

    • Arena where households buy good/services a firm produces

  • Checkpoint:

    • What is the role of firms in the free-market economy?

      • Firms buy factors of production from households, then uses them to produce goods/services

Self regulation
Self Regulation

  • Wealth of Nations

    • Adam Smith observed countless transactions in marketplace that showed….

      • Buyers/Sellers only consider their self-interests

    • Smith’s take

      • Positive incentives of lower prices causes more buying

        • B/C opportunity cost of the purchase is lowered

  • Regulations

    • Self-interest is the motivating force in the free-market

    • Consumers pursue their self-interest by looking for lower/lowest prices

Self regulation1

  • Competition

    • Firms seek to make higher profits by increasing sales

    • Competition among firms makes increasing sales not always possible

  • Self-interest and competition work together to regulate the marketplace

  • Smith called this the “Invisible Hand”

Advantages of free market
Advantages of Free Market

  • “Perfect Conditions” lead to meeting these goals

    • Read aloud…. Pg.34

    • Efficiency

      • Rapid response to changing conditions

    • Freedom

      • Large degree of economic freedom

    • Growth

      • Encouragement of economic growth

    • Lend themselves to consumer sovereignty

      • Consumers have power to decide what gets produc

Lesson closing1
Lesson Closing

  • Workbook

    • Pg. 14

    • Pg. 63

  • HW

    • Read Section 3

    • Finish up pg. 63 Activity