Economic Systems in Southwest Asia Standard 7E5 a,b,c Economics Handbook in Textbook Many of the economic concepts discussed in the following slides can be found in the Economics Handbook at the back of the textbook. Many of the economic concepts discussed in the following slides can be found in the Economics Handbook at the back of the textbook. Definitions plus examples are provided. Definitions plus examples are provided. SS7E5 The student will analyze different economic systems. a. Compare how traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce. a. Compare how traditional, command, and market economies answer the economic questions of (1) what to produce, (2) how to produce, and (3) for whom to produce. Enduring Understanding The student will understand that the production, distribution, and consumption of goods/services produced by the society are affected by the location, customs, beliefs, and laws of the society. The student will understand that the production, distribution, and consumption of goods/services produced by the society are affected by the location, customs, beliefs, and laws of the society. Essential Questions Essential Question 1: How do the three types of economic systems (traditional, command, and market economies) answer the questions of what, how, and for whom to produce? Essential Question 1: How do the three types of economic systems (traditional, command, and market economies) answer the questions of what, how, and for whom to produce? Essential Question 2: How do most countries strike a balance between having a pure market and pure command economy? Essential Question 2: How do most countries strike a balance between having a pure market and pure command economy? Essential Question 3: How are the economic systems of the United Kingdom, Germany, and Russia similar? Essential Question 3: How are the economic systems of the United Kingdom, Germany, and Russia similar? What is Economics? Economics is the study of the production, distribution, and use of goods and services. Economics is the study of the production, distribution, and use of goods and services. Economics is making decisions about allocating limited resources to get the unlimited number of things we want. Economics is making decisions about allocating limited resources to get the unlimited number of things we want. Each country uses an economic system to manage the financial welfare of their people. Each country uses an economic system to manage the financial welfare of their people. Traditional Economy A traditional economy is based on customs and traditions. A traditional economy is based on customs and traditions. Traditional economies generally share the goods and services with all members of the economy. Often, products are made, sold, and or traded in an open market. Traditional economies generally share the goods and services with all members of the economy. Often, products are made, sold, and or traded in an open market. An example of a traditional economy is one that hunts and gathers to survive. An example of a traditional economy is one that hunts and gathers to survive. A community that uses a traditional economy relies on itself for all of its needs. A community that uses a traditional economy relies on itself for all of its needs. Can you think of regions in the world where there may be aspects of traditional economies? Can you think of regions in the world where there may be aspects of traditional economies? Command Economy In a command economy the government decides what goods are made and how they will be made. In a command economy the government decides what goods are made and how they will be made. For example, the government may decide that all students desks should be 3 feet wide and 2 feet deep and all the desks will made the same color in the same way. For example, the government may decide that all students desks should be 3 feet wide and 2 feet deep and all the desks will made the same color in the same way. The government decides which goods and services to produce, and the wages workers will be paid. The government decides which goods and services to produce, and the wages workers will be paid. Market Economy- Free Enterprise or Capitalist system (all mean the same thing) In a pure market economy, the government plays no role. There are no pure market economies in the world. In a pure market economy, the government plays no role. There are no pure market economies in the world. In a pure market economy (free enterprise or capitalist system), people are free to exchange goods and services with no government involvement or regulation. In a pure market economy (free enterprise or capitalist system), people are free to exchange goods and services with no government involvement or regulation. Individuals set the pricing of goods and services with out government involvement or central planning. Individuals set the pricing of goods and services with out government involvement or central planning. Any person may start a business selling or making whatever they want. There is no promise of success, but anyone can try. These people are called entrepreneurs. Any person may start a business selling or making whatever they want. There is no promise of success, but anyone can try. These people are called entrepreneurs. What does it look like to you? Take a sheet of paper and fold it vertically to make three columns. Take a sheet of paper and fold it vertically to make three columns. In each column, draw an illustration of what a traditional, command, and market economy would look like to you. How would the people buy and sell goods and services? Would they have many choices? In each column, draw an illustration of what a traditional, command, and market economy would look like to you. How would the people buy and sell goods and services? Would they have many choices? Do not label each column. Switch with a partner and see if your partner can decide which picture belongs with each type of economic system. Do not label each column. Switch with a partner and see if your partner can decide which picture belongs with each type of economic system. After a few minutes, see if your partners choices match what you had in mind as the type of economic system for each picture. Talk together about why you each drew the pictures you drew. After a few minutes, see if your partners choices match what you had in mind as the type of economic system for each picture. Talk together about why you each drew the pictures you drew. Advantages and disadvantages of each economic system With your partner discuss the advantages and disadvantages you see with each type of system? Write your advantages and disadvantages on the back of your sheet. With your partner discuss the advantages and disadvantages you see with each type of system? Write your advantages and disadvantages on the back of your sheet. Each economic system determines how these three important economic questions are answered What to Produce? What to Produce? How to Produce? How to Produce? For whom to Produce? For whom to Produce? In a command economy who decides what and how to produce? In a market economy who decides what and how to produce goods and services? SS7E5 continued b. Explain how most countries have a mixed economy located on a continuum between pure market and pure command b. Explain how most countries have a mixed economy located on a continuum between pure market and pure command What economic system do most countries have? There are no true command or market economies. There are no true command or market economies. All economies have aspects of a command and market economy to different degrees. All economies have aspects of a command and market economy to different degrees. Modern economies fall between a pure command and pure market economy. Modern economies fall between a pure command and pure market economy. Why do you think that is true? Why do you think that is true? What is a Mixed Economy? A country has a mixed economy when the country has aspects of a command and market economy. Most countries of the world have mixed economies. A country has a mixed economy when the country has aspects of a command and market economy. Most countries of the world have mixed economies. To some degree, all modern economies exhibit characteristics of both a command and market system and are called mixed economies. To some degree, all modern economies exhibit characteristics of both a command and market system and are called mixed economies. For example, in the US the government makes many important economic decisions even though the market system is still predominant. For example, in the US the government makes many important economic decisions even though the market system is still predominant. Even in strict command economies, like Cuba and North Korea, people will engage in market activities in small towns and villages. Even in strict command economies, like Cuba and North Korea, people will engage in market activities in small towns and villages. SS7E5 continued C. Compare and contrast the economic systems in Israel, Saudi Arabia, and Turkey. C. Compare and contrast the economic systems in Israel, Saudi Arabia, and Turkey. Discuss and review the location of these countries. Discuss and review the location of these countries. How do you think the location may impact these countries economies? How do you think the location may impact these countries economies? Economic Systems of Israel, Saudi Arabia, and Turkey Israel Has a mixed economy Has a mixed economy The government and private Israeli companies own and control the economy The government and private Israeli companies own and control the economy Does not have many natural resources Does not have many natural resources Produces high-tech equipment, crops, and diamonds Produces high-tech equipment, crops, and diamonds Relies heavily on U.S. economic aid Relies heavily on U.S. economic aid Brain Teaser! What types of economic systems is Israels economy a mix of? Saudi Arabia Has a mixed economy Has a mixed economy The government has most of the economic control The government has most of the economic control Main export is oil Main export is oil Oil funds the countrys education, defense, transportation, health, and housing Oil funds the countrys education, defense, transportation, health, and housing Turkey Government controls almost all of the economy Government controls almost all of the economy Large part of economy based on farming Large part of economy based on farming Clothing and textiles are major industries Clothing and textiles are major industries Service industry makes up about of the economy Service industry makes up about of the economy Entrepreneurs are new to Turkeys economy Entrepreneurs are new to Turkeys economy Brain Teaser! What type of economy do you think Turkey has? Why do you think that? Turn and Talk Why does an educated workforce result in a stronger economy? Why does an educated workforce result in a stronger economy? How do entrepreneurs help make an economy stronger? How do entrepreneurs help make an economy stronger? We discussed that all three countries had mixed economies. Some having more government control than others. Rank the economies of the three countries we have discussed with 10 being the truest market economy and 1 being the truest command economy. Where do these three countries fall between 1-3? Defend your ranking. We discussed that all three countries had mixed economies. Some having more government control than others. Rank the economies of the three countries we have discussed with 10 being the truest market economy and 1 being the truest command economy. Where do these three countries fall between 1-3? Defend your ranking. Application Create a three circle Venn diagram. Create a three circle Venn diagram. The student should label each circle with each Southwest Asian country previously discussed. The student should label each circle with each Southwest Asian country previously discussed. Complete the diagram to compare and contrast each countrys economic system. Complete the diagram to compare and contrast each countrys economic system. What similarities and differences can you see? What similarities and differences can you see? Do You Know? You are a small business owner, and you sell computer gaming consoles. You have chosen this product to sell to teenagers and young adults because they are easy to build, popular, and make a high profit. You decide on the prices for your consoles based only on the following factors: You are a small business owner, and you sell computer gaming consoles. You have chosen this product to sell to teenagers and young adults because they are easy to build, popular, and make a high profit. You decide on the prices for your consoles based only on the following factors: How many consoles you have in your warehouse How many consoles you have in your warehouse and how many consoles you usually sell each week and how many consoles you usually sell each week What kind of an economy do you have? Defend your What kind of an economy do you have? Defend your answer. answer. Do You Know? What do the economies of Israel, Saudi Arabia, and have Turkey all have in common? What do the economies of Israel, Saudi Arabia, and have Turkey all have in common? a. All are examples of pure market economies. b. All are examples of mixed economies that are mostly market economies with some elements of command economies. c. All are examples of mixed economies that are mostly command economies with some elements of market economies. d. All are examples of pure command economies. Answers 1. A market economy because the business owner controls prices and supply as well as decides what he/she will sell. 1. A market economy because the business owner controls prices and supply as well as decides what he/she will sell. 2. B- There are no pure command or market economies. These three countries have a mixed economy with some government control. 2. B- There are no pure command or market economies. These three countries have a mixed economy with some government control.