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Economic Systems Conclusion

Economic Systems Conclusion. Obj : Understand strengths and weaknesses of economic systems ES: C-4 Explicitly assess information and draw conclusions. Agenda: Economic System Spectrum Marginal Analysis Demonstration. Command vs. Market.

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Economic Systems Conclusion

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  1. Economic Systems Conclusion Obj: Understand strengths and weaknesses of economic systems ES: C-4 Explicitly assess information and draw conclusions Agenda: Economic System Spectrum Marginal Analysis Demonstration

  2. Command vs. Market Remember, an economy is simply the mechanisms by which a central body enforces decisions about the allocation of their factor of production (WHO? WHAT? HOW?) • Command-publically owned industry and a central authority is making decisions about production and consumption • Market—production/consumption are a result of decentralized decisions from firms and individuals ***Who is answering the 3 key questions…

  3. Failures: Command • Public taste’s are difficult to predetermine • Soviet Union routinely made incorrect predictions about what the people would want/need, thus, • Their allocation of crucial raw materials was wasteful…shortages and inflations ran rampant • Lack incentives!!! (rewards or punishments for certain choices) • Imagine if you were a manager of a restaurant… • No property rights---these drive people to produce things of value and put resources to their best possible use

  4. Failures: Market • Based on infinite growth, production, consumption • All private individuals NEED to uphold morality and make responsible decisions (pollution and waste) • Requires NO oversight from any government agency • Markets can fail! When they do, how do they recover without complete devastation first?

  5. The Economic System Spectrum 0 Command 10 Market • These markets are imperfect, completely theoretical, and could never exist in the real world • The strongest economic systems simply have the best mechanisms in place to achieve the goals society deems most essential

  6. The Economic System Spectrum 0 Command 10 Market United States???

  7. The Economic System Spectrum 0 Command 10 Market China???

  8. The Economic System Spectrum 0 Command 10 Market France???

  9. The Economic System Spectrum 0 Command 10 Market North Korea???

  10. Economic Freedom Index

  11. In Summation • People within these central bodies are the decisions makers!!! • No “correct” system…based on meeting societies needs in ways that they value • PEOPLE’S RESPONSES TO DECISIONS ROOTED IN SCARCE FACTORS OF PRODUCTION.

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