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Chapter 1.3 Economic Systems. Principles of Business. Chapter 1.3: Economic Systems. Goals Identify the three economic questions. Differentiate among the main types of economic systems. Describe the economic system of the United States. 3 Key Economic Questions.

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chapter 1 3 economic systems

Chapter 1.3 Economic Systems

Principles ofBusiness

chapter 1 3 economic systems1
Chapter 1.3: Economic Systems
  • Goals
    • Identify the three economic questions.
    • Differentiate among the main types of economic systems.
    • Describe the economic system of the United States.
3 key economic questions
3 Key Economic Questions
  • What goods and services are to be produced?
  • How should the goods and services be produced?
  • What needs and wants will be satisfied with the goods and services produced?
1 what to produce
1) What to Produce?
  • What goods and service are to be produced?
  • Every nation is different
  • We must learn how to best use our resources.
2 how to produce
2) How to Produce?
  • How should the goods and services be produced?
  • What resources will be used?
    • Human?
    • Machinery/Technology?
3 what needs and wants to satisfy
3) What needs and wants to satisfy?
  • Needs/Wants are Unlimited
  • Which will be met?
  • Who’s needs and wants are most critical?
    • How will goods and services be distributed?
    • Goods and services shared equally?
    • If you contribute more should you get more?
types of economic systems
Types of Economic Systems
  • What is an Economic System?
    • The method a country uses to answer the three economic questions.
    • How much is the Government involved?
  • 3 Main Types:
    • Command
    • Market
    • Traditional
command economy
Command Economy
  • Resources are owned and controlled by the government.
    • Economic questions answered by owners of the resources.
    • Government decides:
      • what and how goods will be produced
      • how they will be shared.
    • Personal economic choices are limited.
command economy1
Command Economy
  • Leaders use military force to carry out plans.
  • Freedom of the people is always limited in this system.
  • Examples: Saudi Arabia, Vietnam, Cuba, & North Korea
market economy
Market Economy
  • Resources are owned and controlled by the people of the country.
  • Generally found in democratic forms of government.
  • No one tells consumers what to buy or businesses what to sell.
market economy1
Market Economy
  • Buyers and Sellers answer the 3 ?’s by what they buy and sell in the marketplace.
  • Marketplace: anywhere that goods and services exchange hands.
      • Examples: the supermarket, the internet, a flea market, etc.
market economy2
Market Economy
  • “What to produce?”
    • What are the people buying?
  • “How to produce?”
    • Resources are combined to produce the goods people want and buy.
  • “What needs and wants to satisfy?”
    • People buy what they want and can afford.
traditional economy
Traditional Economy
  • Goods are produced the way they always have been produced.
    • Operate according to tradition or custom.
    • Children taught to use methods of their ancestors.
    • Goods produced by hand with simple tools
      • People or animals used for energy.
    • Change and growth occur slowly in this economy.
mixed economy
Mixed Economy
  • Most nations of the world can be classified as a mixed economy.
    • Use both command and market ideas.
    • Russia & China
      • Command economies changing into mixed economies.
what is the united states
What is the United States
  • We are a Market Economy
  • Our economic system also has other names.
    • Capitalism
    • Free (Private) Enterprise System
  • All 3 are essentially the same thing!
what is capitalism
What is Capitalism?
  • The private ownership of economic resources by individuals.
  • Owners are free to decide what they will produce with the resources.
our american economic principles
Our American Economic Principles
  • Capitalism is based on 4 important principles:
  • Private Property
  • Freedom of Choice
  • Profit
  • Competition
1 private property
1) Private Property
  • You can own, use, or dispose of things of value.
    • As long as it doesn’t break the law.
    • Examples?
2 freedom of choice
2) Freedom of Choice
  • You have the right to:
    • Buy where and what you please.
    • Organize with other workers (union).
    • Travel when and where you please.
    • Express your opinions.
  • Capitalism provides greater freedom of choice to the individual.
3 profit
3) Profit
  • Sales – Expenses = Profit
  • The primary reason that businesses supply goods/services!
4 competition
4) Competition
  • Rivalry among businesses to sell their goods and services to buyers.
  • Competition = Choices for Consumers
  • Businesses must:
    • Improve products
    • Offer better services
    • Keep prices reasonable
    • Produce new things.
chapter 1 3 economic systems2
Chapter 1.3: Economic Systems
  • Goals
    • Identify the three economic questions.
    • Differentiate among the main types of economic systems.
    • Describe the economic system of the United States.
chapter 1 3 economic systems3
Chapter 1.3: Economic Systems
  • Objective: Identify four principles of our market economy.
  • Assignment: Write in complete sentences.
    • What does a right to earn a profit influence a business owner to do?
    • Give three ways in which consumers benefit from competition among businesses?