Bellringer

Who decides how many shirts you buy when you go to the store?

Who decides what you eat? Or What profession you will have?

S S E F 4 B E VA LU AT E H O W W E L L E A C H T Y P E O F S Y S T E M A N S W E R S T H E T H R E E E C O N O M I C Q U E S T I O N S A N D

M E E T S T H E B R O A D S O C I A L A N D E C O N O M I C G O A L S O F F R E E D O M , S E C U R I T Y, G R O W T H , E F F I C I E N C Y, A N D

S TA B I L I T Y. S S E F 4 T H E S T U D E N T W I L L C O M PA R E A N D C O N T R A S T D I F F E R E N T E C O N O M I C S Y S T E M S A N D E X P L A I N H O W

T H E Y A N S W E R T H E T H R E E B A S I C E C O N O M I C O F W H AT T O P R O D U C E , H O W T O P R O D U C E , A N D F O R W H O M T O

P R O D U C E .

Economic Systems

Economic System

An Economic system is the method used by a society to produce and distribute goods and services.

Three Economic Questions

Because economic resources are limited, every society must answer three key economic questions: What goods and services should be produced? How should these goods and services be produced? Who consumes these goods and services?

What goods and services should be produced?

Each society must decide what to produce in order to satisfy its needs and wants.

Recall guns and butter trade-off

How should goods and services be produced?

For example, should we produce electricity with oil, solar power or nuclear power?

Regardless of the decision of how all require land, labor, capital. The factors of production can be combined in different ways.

Who consumes goods and services?

How do good get divided up?The answer to question of distribution is

determined by how societies choose to distribute income.

Factor Payments the income people receive for supplying factors of production, such as land, labor, or capital.

Economic Goals and Values

Economic Goals

Economic Efficiency Making the most out of resources

Economic Freedom Freedom from government intervention in the production and distribution of goods and services

Economic Security and predictability

Assurance that goods and services will be available, payments will be made on time, and a safety net will protect individuals in times of economic disaster

Economic Equity Fair distribution of wealth

`Economic Growth and innovation Innovation leads to economic growth, and economic growth leads to higher standard of living.

Other Goals Societies pursue additional goals, such as environmental protctions.

Market Economy

Economic system in which decisions on production and consumption of goods and services are based on voluntary exchange in markets.

Individuals the people in society answer the three economic questions.

Also called free market or capatalism

Command Economy or Centrally Planned Economy

Economic system in which the central government makes all decisions on the production and consumption of goods and services.

Mixed Economies

Market based economic system with limited government involvement.

Traditional economy

Economic system that relies on habit, custom, or ritual to decide questions or production and consumption of goods and services.

Assignment

Create a chart that has three rows (one for each of the three basic economic questions) and three columns (one for each of the type of economic systems). In each cell, explain that a producer will take into account when answering the given economic question for the given economic system.

What? How? For Whom?

Traditional

Command

Market