SS6E5 The student will analyze different economic systems.
Element A Compare how traditional, command, and market economies answer the economic questions of (1) What to produce, (2) how to produce, and (3) for whom to produce.
Traditional • Command • Market
Objectives • Identify three questions that all economic systems must answer. • Describe a traditional economy • Describe a command economy • Describe a market economy • Explain how most economies have a mixed economy located on a continuum between a market and command economy
What is Economics? Economics is not just money. It's businesses and how they work. It's lemonade stands and how many dollars they take in. It's toy collecting and baseball card collections. It's taxes and allowances. It's stocks and bonds. Economics is part of almost everything you could ever think about.
Compare how traditional, command, and market, economies answer the 3 economic questions of: What to produce? For whom to produce? How to produce?
Traditional • A traditional economy is shaped largely by customs and religion. • Economic questions are answered by what happened in the past. • Traditional economies are mainly found in rural areas.
What to produce?-Traditional • Just what is needed to take care of self
How to produce?-Traditional • How it was produced in the past
For whom to produce?-Traditional • Self and one’s household
Positives of a traditional economy • Predictable • Knowing what your job will be • Knowing the way you will live
Problems with a traditional economy • Lack many resources • Only produce enough to live on
Command • In a command economy the government answers the three basic economic question • Sometimes called communism
What to produce?-Command • What the government determines
How to produce?-Command • Government says how to produce
For whom to produce?-Command • Citizens regardless of market demand
Positives of a command economy • Because the government makes the decisions, people don’t have to worry about employment, housing, education, and healthcare
Problems with a command economy • Consumers get low priority • Little freedom of choice • All resources are owned by the government
Market • In a market economy, buyers and sellers answer the three economic questions. • All resources are privately owned
What to produce?-Market • Producers and consumers • Whatever the market demands that will produce a profit
How to produce?-Market By private producers
For whom to produce?-Market • Consumers who demand the product and are willing to pay
Positives of a market economy • People can start their own businesses • People have choice
Problems with a market economy • The desire for money may lead to poor quality of goods and services • Business owners have to risk losing money
Element B Explain how most countries have a mixed economy located on a continuum between pure market and pure command.
Vocabulary BreakContinuum • A continuous seamless series. • A link between things that gradually and seamlessly connects. It is impossible to say where one becomes the next. • Since no country has a pure command or pure market economic system, all economies combine aspects of both of these pure economic systems although at different degrees.
Explain how most countries have a mixed economy located on a continuum between pure market and pure command. There is no pure market economy, because the government regulates some things, like safety, work hours, wages, etc… The most common economy used in the world is mixed economy.
Continuum of Economies Pure Command Pure Market MostIndividual freedom NoIndividual freedom Most economies fall in between a pure market and a pure command economy on the continuum making mix economy the most used economy in the world.
Mixed Economic System • An economic system that allows for the simultaneous operation of publicly and privately owned. Economy in which both market forces and government intervention and direction are used to determine resource allocation and prices. The U.S. Economy is a mixed economy; while it relies to a great extent upon markets, government also regulates some of the private economy. • Since no country has a pure command or pure market economic system, all economies combine aspects of both.
Economics • How many basic types of economic systems are there? • Name the economic systems. • Which economic system do most textbooks say is the most common throughout the world?
Economics • How many basic types of economic systems are there?3 • Name the economic systems.Traditional, Command, Market • Which economic system do most textbooks say is the most common throughout the world? Mixed. The GCEE states that mixed is not an economic system but rather a blending of two different types of systems.
Element C Compare the basic types of economic systems found in the United Kingdom, Germany, and Russia
Compare the basic types of economic systems found in the United Kingdom, Germany, and Russia. Russia United Kingdom Germany
United Kingdom • What to produce? • The UK, similar to the US, is largely a service based economy but also has an extremely efficient agricultural sector. • (2) How to produce? • Industries have much freedom in the UK. There have been recent moves to partially-nationalize certain industries like banking. • (3) For whom to produce? • The private sector produces goods and services for domestic and international markets based on the market price system. Place on the continuum: The UK would be far to the market side of center on the continuum.
Germany • What to produce? • Germany is primarily an export-based economy focusing on manufacturing and commodities. • (2) How to produce? • German businesses are largely privately owned and independent. There are increasing amounts of government involvement in the financial sectors. There is also still an issue with updating the Eastern German economy to compete and operate on par with Western Germany. • (3) For whom to produce? • Germany survives largely based on their exports, which are determined by global markets. Western Germany still transfers billions of dollars to Eastern German states to help modernize and update factories and production lines. . Place on the continuum: Germany would fall to the market side of the continuum, but fairly far away from the United Kingdom (back towards command).
Russia Place on the continuum: Russia is practically in the dead center of the continuum. • What to produce? • The Russian government is still largely involved with many aspects of the economy and must approve any investment larger than 50 million rubles. • (2) How to produce? • Making large scale production changes in Russia is difficult due to the immense bureaucracy. There is a movement towards modernizing factories and agricultural equipment, but it is slow. • (3) For whom to produce? • Perhaps surprisingly, Russia has fairly low to moderate tax rates. Increasingly Russia is trying to allow for market interaction, but high tariffs and minimal protection of private property make this difficult.
Economic Systems Pure Market Pure Command Mixed Economy
Economic Systems Pure Market Russia 51% Germany 71% United Kingdom 79% 0 100 Pure Command Mixed Economy
References • http://www.emergenttech.ca/emergenttech/images/canada_map.gif • http://www.fadiba.dk/images/brazil_map.gif • http://www.investorglossary.com/command-economy.htm • http://www.socialstudiesforkids.com/subjects/economics.htm • http://www.harpercollege.edu/mhealy/geogres/maps/worldgif/wwcommand.gif • http://www.kidseconbooks.com/html/lemonade_for_sale.html • http://www.realtrees4kids.org/ninetwelve/supply.htm • https://www.cia.gov/library/publications/the-world-factbook/geos/ca.html • https://www.cia.gov/library/publications/the-world-factbook/geos/br.html • https://www.cia.gov/library/publications/the-world-factbook/geos/cu.html