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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