Economic Systems and Allocation of Resources

1. LEQ: • Traditional Economy • Command Economy • Market Economy What three questions must all economic systems answer? Every society has an economic system that organizes how goods and services are allocated and answers the questions of WHAT, HOW, and FOR WHOM goods are produced.

2. There is no absolute correct way of allocating scarce resources. A particular method might prove to be ideal in one situation but less satisfactory in other situations. Each nation must select an economic system to allocate resources. • The needs and wants of individuals, families, businesses, and nations for goods and services are unlimited. The resources to satisfy these needs and wants are limited; therefore, every nation is faced with answering these questions. • What goods and services will be produced? • Who will be responsible for producing the goods and services? • How will the goods and services be distributed to consumers? Three Basic Economic Questions

3. Types of Economic Systems • Economic decisions are based on customs and beliefs. • Change is discouraged and sometimes even punished. • Methods of production are often inefficient. • Family and community ties are strong. TraditionalAfricaAsia Latin America the Middle East Haiti's traditional economy made it vulnerable to natural disasters.

4. Types of Economic Systems • Economic decisions are made by individuals. • Individuals own the factors of production and choose what to produce based on the information provided by market prices. • Consumer choice is large. • Little incentive to engage in unprofitable ventures like caring for the sick. MarketUnited States The stock market is an underpinning of the U.S. market economy.

5. Types of Economic Systems • Economic decisions are made by government leaders. • The government owns the factors of production. • Prices are set by the government. • Consumer choice is often limited. • Resources can be quickly rerouted. • Income distribution can be controlled by the government. CommandCubaNorth Korea ChinaRussiaIran There was a command economy in the U.S. to mobilize for WWII.

7. C Economic Systems and the American economy M “In my country…… • _____ the government controls the economy. It assigns jobs, sets production goals, and decides wages.” • ____business is based on competition. Success comes from doing something better and cheaper than your competitors.” • _____producers decide what and how much to based on what people want to buy.” • ____ we have no need for money. By custom, some of us hunt, some fish, others farm, and we are all taken care of.” • _____central planners decide when we should expand old factories or build new ones.” • _____the government makes economic decisions.” • _____the government has a very small role.” M T C C M

9. Five things politicians will never tell you about the economy!

10. Closure Let’s read what really happen in Andersonville Prison. Is it appropriate to label the Andersonville system as a market economy? No because, this economic system, like many contemporary economic systems, was a mixture of market and command economic systems. • This activity focuses on how prisoners at Andersonville, a Civil War prison for Union troops, developed an economic system to deal with the problems of scarcity. • Read the History of Andersonville Prison • Develop either a Command or Market economic system for this Civil War prison camp. The economic system should best provide the prisoners with food, clothing and shelter, and other basic human wants. • Each need will indicate a want that the prisoners had at the prison camp. In the space provided propose a method for providing this want using the economic system indicated. • Next find a partner that has the opposite economic system and compare the solutions. • With your partner answer the following questions on the bottom of the Andersonville Economic Wants worksheet. • How are basic economic questions answered? • How will the prison administration utilize the human resources available? • What can be done to support prisoners by creating new wealth and increasing production? ANDERSONVILLE PRISON: A CIVIL WAR ECONOMIC Activity