Types of Economic Systems

Suppliers produce whatever goods and services they wish and set prices on what consumers are willing to pay.

Prices are responsive to consumer demand. Characterized by Voluntary Exchange (a

transaction where both parties feel that they benefit)

Types of Economic Systems

Key Terms: Free Enterprise System – another name for

a market economy.

Capital – another name for cash and goods a business owns.

Supply & Demand

Supply – the quantity of goods and services a business is willing to sell at a specific price.

Demand – is the quantity of goods and services consumers are willing to buy

Timing is key and important when figuring out the economy.

Supply Curves

A supply curve on a graph shows the quantity of a product or service a supplier is willing to sell across a range of prices.

Quantity is on X Axis, while Price is on Y Axis

Demand Curves

A demand curve on a graph shows the quantity or service consumers are willing to buy.

Axis on the demand graph are same as supply.

Supply & Demand Curves

When you place both curves on the same graph you can identify the equilibrium price, which is the desired spot of supply and demand in an economy.

Competition in a Market Economy

Competition Between Suppliers:

If a supplier lowers prices, consumers typically buy from that supplier.

This initiates an incentive for buyers.

The other benefit of competition is that it forces companies to be innovative and create variety.

Competition in a Market Economy

Competition Among Consumers:

When consumers compete for products, it has a different effect. It pushes prices upward.

Examples would be flowers at Valentine’s Day and toys at Christmas.

What Drives Entrepreneurs?

Profit Motive: Is an incentive that encourages entrepreneurs to

take business risks in the hopes of making a profit.

Different Type of Profit: Non-Profit Organization:

Operate solely to serve the good of society. Money comes into the non-profit through donation,

government grants, or the sale of goods. Money is then put back into the cause which started the

organization. (Red Cross)

The Global Economy

The global economy is the flow of goods and services around the whole world .

No nation’s economic flow is confined within its own borders.

Even though scarcity effects what is produced and how much, globally nations are forced to specialize in goods and services.

Exporting & Importing

Exporting Is the business activity in which goods and

services are sent from a county and sold to foreign consumers.

Importing The business activity in which goods and

services are brought into a country from foreign suppliers.

Importing & Exporting

Goods are physical objects that can be shipped by plane, train, or ship.

Services are different, they must physically move people across borders to perform their specialty.

Technology & The Global Economy

Advancements in telecommunications – phone, fax, email, and Internet have made the global trading market much easier than in the past.

Entrepreneurs & International Trade

Entrepreneurs can benefit from international trade both by importing and exporting goods.

Risks in International Trade: Must learn about economic and monetary

systems. Learn about government regulations Learn about cultural factors involved.

Trade Barriers

Governments are more protective of their natural resources within their borders so they put restrictions on trade: Nations want to help their own businesses

before foreign. Governments want to protect their consumers

from unsafe or poor quality goods.

Trade Barriers

Trade Barrier Governmental restriction placed on

international trade. Tariff

A fee, similar to a tax, that importers must pay on the goods they import.

Quota Is a limit on the quantity of a product that can

be imported into a country.

Foreign Exchange Rates

Many types of money are in use around the world, but not all amounts of money are equal in each country. United States – Dollar Japan – Yen China – Yuan Canada – Canadian Dollar UK – Pound Mexico – Peso