1.1. Write 3 things that you Write 3 things that you know about the word know about the word “Economy”“Economy”

2.2. Write 2 things that you Write 2 things that you know about the word know about the word “System”“System”

3.3. Write 1 thing that you know Write 1 thing that you know about the word about the word “Resources”“Resources”

On the Index CardOn the Index Card

Economic SystemsEconomic Systems

SS6E5 The student will analyze different economic SS6E5 The student will analyze different economic systems. systems. a.a.Compare different types of economic systems: Compare different types of economic systems: traditional, market, command and mixed.1 – what to traditional, market, command and mixed.1 – what to produce, 2 – how to produce, and 3- for whom to produce, 2 – how to produce, and 3- for whom to produce. produce. b.b.b. Explain how most countries have a mixed b. Explain how most countries have a mixed economy located on a continuum between pure and economy located on a continuum between pure and market and pure command. market and pure command. c.c.c. Compare the basic types of economic systems c. Compare the basic types of economic systems found in United Kingdom, Germany, and Russia. found in United Kingdom, Germany, and Russia.

Essential QuestionEssential Question

Write down this Essential Write down this Essential Question:Question: How do traditional, command, How do traditional, command,

and market economies answer and market economies answer the economic questions of what the economic questions of what to produce, how to produce, and to produce, how to produce, and for whom to produce? for whom to produce?

What is Economics?What is Economics?

Economics:Economics: Studies the choices of Studies the choices of people trying to satisfy their people trying to satisfy their wants in a world of scarcitywants in a world of scarcity

Oil & fuel

Land

Doctors

Technology

WHAT ARE SOME THINGS YOU WHAT ARE SOME THINGS YOU WANTWANT THAT ARE SCARCE? THAT ARE SCARCE?

Economic QuestionsEconomic QuestionsEconomic Systems determine three Economic Systems determine three

questions:questions: WHATWHAT goods will be produced? goods will be produced? HOWHOW will the goods be produced? will the goods be produced? FORFOR whom will the goods be produced? whom will the goods be produced?

The way a society answers these The way a society answers these questions determines the questions determines the economic systemeconomic system

What is an What is an ECONOMIC SYSTEM?ECONOMIC SYSTEM?

The way a society answers The way a society answers WHATWHAT goods will be goods will be produced, produced, HOWHOW will the goods will the goods be produced, and be produced, and FORFOR whom whom will the goods be producedwill the goods be produced

Economic Systems determine Economic Systems determine three questions:three questions:

WHAT TO PRODUCE? WHAT TO PRODUCE? (What kinds of (What kinds of goods and services should be produced?)goods and services should be produced?)

HOW TO PRODUCE? HOW TO PRODUCE? (What productive (What productive resources are used to produce goods and resources are used to produce goods and services?)services?)

FOR WHOM TO PRODUCE? FOR WHOM TO PRODUCE? (Who gets (Who gets to have the goods and services?to have the goods and services?

Influences of Economy Influences of Economy GrowthGrowth

Economic ResourcesEconomic Resources Natural ResourcesNatural Resources – raw materials – raw materials

found in nature that are used to found in nature that are used to produce goodsproduce goods What are examples of some NATURAL What are examples of some NATURAL

RESOURCES?RESOURCES? Human ResourcesHuman Resources – people’s – people’s

knowledge, efforts, and skills used in knowledge, efforts, and skills used in their worktheir work What are examples of some HUMAN What are examples of some HUMAN

RESOURCES?RESOURCES?

Influences of Economy Influences of Economy GrowthGrowth

Economic ResourcesEconomic Resources Capital ResourcesCapital Resources – used to produce goods – used to produce goods

and services (buildings, materials, and and services (buildings, materials, and equipment)equipment)

What are examples of some CAPTIAL RESOURCES?What are examples of some CAPTIAL RESOURCES?

Entrepreneurial ResourcesEntrepreneurial Resources - recognize the - recognize the need for new goods or serviceneed for new goods or service

What are examples of some ENTREPRENEURIAL What are examples of some ENTREPRENEURIAL RESOURCES?RESOURCES?

ScarcityScarcity – shortage of resources – shortage of resources

Why Economic Systems?Why Economic Systems? Nations use economic systems to Nations use economic systems to

determine how to use their limited determine how to use their limited resources effectively.resources effectively.

Primary goal of an economic system is to Primary goal of an economic system is to provide people with a minimum standard provide people with a minimum standard of living, or quality of life.of living, or quality of life.

33 Basic types of Economic Systems Basic types of Economic Systems

1. 1. Traditional EconomyTraditional Economy2. 2. Market Economy (free Market Economy (free enterprise)enterprise)

3. 3. Command EconomyCommand EconomyMixed EconomyMixed Economy - - not considered an not considered an

economy by itself; just a blending of two different economy by itself; just a blending of two different types of systems types of systems

Traditional Economy Traditional Economy The Old Way!The Old Way!

Found in rural, under-developed Found in rural, under-developed countries–countries– Inuits of CanadaInuits of Canada Pygmies of CongoPygmies of Congo Eskimos & Indian tribes Eskimos & Indian tribes BelarusBelarus

Traditional EconomyTraditional Economy Who decides what to produce?Who decides what to produce?

People follow their customs and make what People follow their customs and make what their ancestors madetheir ancestors made

Who decides how to produce goods & Who decides how to produce goods & services?services? People grow & make things the same way that People grow & make things the same way that

their ancestors didtheir ancestors did Who are the goods & services Who are the goods & services

produced for?produced for? People in the village who need themPeople in the village who need them

Traditional Economy Traditional Economy The Old Way!The Old Way!

AdvantagesAdvantages: : people have people have specific roles; specific roles; security in the way security in the way things are donethings are done

DisadvantagesDisadvantages: : Technology is not Technology is not used; difficult to used; difficult to improveimprove

People will make what they always made & will do the

same work their parents did

Market Economy (Free Enterprise) Market Economy (Free Enterprise) – – The Get Rich Way!The Get Rich Way!

Who decides what to produce?Who decides what to produce? Businesses base decisions on supply and Businesses base decisions on supply and

demand and free enterprise (PRICE)demand and free enterprise (PRICE) Who decides how to produce Who decides how to produce

goods and services?goods and services? Businesses decide how to produce goodsBusinesses decide how to produce goods

Who are the goods and services Who are the goods and services produced for?produced for? consumersconsumers

Market Economy (Free Enterprise) – Market Economy (Free Enterprise) – The Get Rich Way!The Get Rich Way!

Also called aAlso called a Free Free Market EconomyMarket Economy oror Free Enterprise Free Enterprise EconomyEconomy

Businesses and Businesses and consumers decide consumers decide what they will produce what they will produce and purchase and in and purchase and in what quantities what quantities

Decisions are made Decisions are made according to according to law of law of supply & demandsupply & demand

Supply and demand of Supply and demand of goods and services goods and services determine what is determine what is produced and the produced and the price that will be price that will be chargedcharged..

Market Economy (Free Enterprise) – Market Economy (Free Enterprise) – The Get Rich Way!The Get Rich Way!

AdvantageAdvantage——competition to have competition to have the best products and the best products and servicesservices

DisadvantageDisadvantage—huge —huge rift between wealthy rift between wealthy and poorand poor

There are no truly pure Market economies, but the United States is

close.

Command Economy – Command Economy – The Government Way!The Government Way!

Who decides what to produce?Who decides what to produce? Government (central authority) makes all Government (central authority) makes all

economic decisionseconomic decisions Who decides how to produce goods Who decides how to produce goods

and services?and services? Government decides how to make Government decides how to make

goods/servicesgoods/services Who are the goods and services Who are the goods and services

produced for?produced for? Whoever the government decides to give them Whoever the government decides to give them

toto

Command Economy – Command Economy – The Government Way!The Government Way!

Strong Command Strong Command – where – where government government makes all makes all decisions decisions (communism – (communism – China, Cuba) China, Cuba)

Moderate Command Moderate Command – where some form – where some form of private enterprise of private enterprise exists but the state exists but the state owns major owns major resources resources (socialism – (socialism – France and France and Sweden)Sweden)

Two types: Two types:

This system has not been very successful.

More and more countries are abandoning it.

Command Economy – Command Economy – The Government Way!The Government Way!

Governmental planning groups Governmental planning groups determine such things as the prices determine such things as the prices of goods and services as well as the of goods and services as well as the wages of workerswages of workers

Command Economy – Command Economy – The Government Way!The Government Way!

AdvantagesAdvantages Guarantees Guarantees

equal standard equal standard of living for of living for everyone everyone

Less crime and Less crime and povertypoverty

Needs are Needs are provided for provided for through the through the governmentgovernment

DisadvantagesDisadvantages Minimal choicesMinimal choices Fewer choices of Fewer choices of

items items No incentive to No incentive to

produce better produce better product or product or engage in engage in entrepreneurshipentrepreneurship

Also known as aAlso known as a Planned or Planned or Managed EconomyManaged Economy

Mixed Economy – Mixed Economy – The Combined Way!The Combined Way! Combination of a Combination of a

market and a market and a command command economy economy

Most nations Most nations have a mixed have a mixed economy:economy: United United States, England, States, England, AustraliaAustralia

Government Government takes care of takes care of people’s needspeople’s needs

Marketplace takes Marketplace takes care of people’s care of people’s wantswants

Mixed Economy – Mixed Economy – The Combined Way!The Combined Way!

AdvantageAdvantage——balance of balance of needs and needs and wants met by wants met by government government and in and in marketplacemarketplace

DisadvantageDisadvantage——citizens have to citizens have to pay taxespay taxes

Economic ContinuumEconomic Continuum A line going from one extreme to the other extreme. % is based on how much of the economic system is market

vs command. The higher the percentage = more economic freedom and

the lower the percentage = less economic freedom Where are countries on the economic continuum? U.K Germany 79% 71%

RussiaO% 51%

100% PURE ______________________________________________ PURECOMMAND

MARKET Canada 81%

Brazil57%

Cuba28%

Economic ContinuumEconomic Continuum A line going from one extreme to the other extreme. % is based on how much of the economic system is market

vs command. The higher the percentage = more economic freedom and

the lower the percentage = less economic freedom Where are countries on the economic continuum? U.K Germany 79% 71%

RussiaO% 51%

100% PURE ______________________________________________ PURECOMMAND

MARKET Canada 81%

Brazil57%

Cuba28%

Index CardIndex Card

NAME!!NAME!!

3- Basic Types of Economies3- Basic Types of Economies

2- Examples of Mixed 2- Examples of Mixed EconomyEconomy

1-Define Economics1-Define Economics

Ticket Out the DoorTicket Out the Door