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Economic Systems
• WHAT TO PRODUCE? (What kinds of goods and services should be produced?)
• HOW TO PRODUCE? (What productive resources are used to produce goods and services?)
• FOR WHOM TO PRODUCE? (Who gets to have the goods and services?
Think about it!
• 1. How would you determine what to produce?
2. How would you determine how to produce?
• 3. How would you determine for who to produce?
Four Types of Economic Systems: • 1. Traditional Economy
• 2. Command Economy
• 3. Market Economy
• 4. Mixed Economy (Market + Command)
Traditional Economy •An economic system in which economic
decisions are based on customs and beliefs
•People will make what they always made & will do the same work their parents did
• Exchange of goods is done through Bartering: trading without using money
Traditional Economy
• Who decides what to produce?
• People follow their customs and make what their ancestors made
• Who decides how to produce goods & services?
• People grow & make things the same way that their ancestors did
• Who are the goods & services produced for?
• People in the village who need them
Traditional Economy
• Examples:
• Villages in Africa and South America; the Inuit tribes in Canada; the caste system in parts of rural India
Activity
• Create a economical visual about a traditional economy. For example, you can create a picture that looks like the one below:
Command System • Government makes all economic decisions & owns most of the property
• Governmental planning groups determine such things as the prices of goods/services & the wages of workers
• This system has not been very successful & more and more countries are abandoning it
Command Economy
• Who decides what to produce?
• Government makes all economic decisions
• Who decides how to produce goods and services?
• Government decides how to make goods/services
• Who are the goods and services produced for?
• Whoever the government decides to give them to
Command System
• Countries with communist governments have Command economies
• Examples: Cuba, former Soviet Union, North Korea
*Germany and Russia have moved away from having a Command economy since 1991. Now they have a Mixed economy.
Market Economy • An economic system in which economic decisions are guided by
the changes in prices that occur as individual buyers and sellers interact in the market place
• Most of the resources are owned by private citizens
Market Economy
• Who decides what to produce?
• Businesses base decisions on supply and demand and free enterprise (PRICE)
• Who decides how to produce goods and services?
• Businesses decide how to produce goods
• Who are the goods and services produced for?
• consumers
Choice Task-choose 1
• 1. Create a graphic organizer listing the three types of economies who they produce for; how they produce and what they produce. Include a picture as well.
• 2. Write a paragraph including the three types of economies and include information on who they produce for; how they produce and what they produce.
• 3. Create a picture book about the three types of economies; include facts about who they produce for; how they produce and what they produce.
Warm Up
• Government Review:
• 1. What are the three types of government? Explain each.
• 2. What are the three ways people participate in government? Explain each.
• 3. Describe the government of Russia.
Standard and Element
• SS6E5 The student will analyze different economic systems. b. Explain how most countries have a mixed economy located on a continuum between pure and market and pure command.
• c. Compare the basic types of economic systems found in the United Kingdom, Germany, and Russia.
• How many basic types of economic systems are there? 3
• Name the economic systems.
• Traditional, Command, Market
• Which economic system do most textbooks say is the most common throughout the world?
• Mixed. A blending of two different types of systems.
Mixed Economy
• For Example:
• In the United States, the government is primarily responsible for the administration of justice, education (although there are many private schools and training centers), the road system, social statistical reporting, and national defense. In addition, government often is asked to intervene in the economy to correct situations in which the price system does not work.
Review Questions
• 1. You are a small business owner and you sell computer gaming consoles. You have chosen to sell this product to teenagers and young adults. You decided to sell consoles because they are easy to build, are 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, and
• How many consoles you are sell each week
• Which type of economy do you have?
• A. subsistence B. command C. market D. closed
Review Questions
• 2. Which of the following explanations would reflect a country with a mixed economy (i.e., between a pure market and pure command)?
• A. Prices and wages are solely regulated by a country’s
• government.
• B. A combination of privately-owned industry and
• government control.
• C. A country’s distribution of resources is based on
• inheritance.
Review Questions
• The economic system of communist countries is most closely
• related to which of the following?
• A. command
• B. market
• C. traditional
• D. supply and demand
Standard and Element
• SS6E5 The student will analyze different economic systems
• c. Compare the basic types of economic systems found in the
• United Kingdom, Germany, and Russia.
Economy United Kingdom (1) What to produce?
The UK, similar to the US, is largely a service based
economy but also has an great
agricultural sector.
(2) How to produce?
Industries have much freedom in the UK. There have
been recent moves to partially-nationalize certain
industries like banking.
(3) For whom to produce?
The private sector produces goods and services for
domestic (in land) and international (all over the world) markets
based on the market price system (how much goods cost).
.
Economy Germany • (1) What to produce?
• Germany is primarily an export-based economy
• focusing on manufacturing and commodities.
• (2) How to produce?
• German businesses are largely privately owned and
• independent. There are increasing amounts of
• government involvement in the financial sectors
• There is also still an issue with updating the Eastern
• German economy to compete and operate on par
• with Western Germany.
• (3) For whom to produce?
• Germany survives largely based on their exports,
• which are determined by global markets. Western
• Germany still transfers billions of dollars to Eastern
• German states to help modernize and update
• factories and production lines
Russia Economy • (1) What to produce?
• The Russian government is still largely involved with
• many aspects of the economy and must approve any
• investment larger than 50 million rubles.
• (2) How to produce?
• Making large scale production changes in Russia is
• difficult due to the immense bureaucracy. There is a
• movement towards modernizing factories and
• agricultural equipment, but it is slow.
• (3) For whom to produce?
• Perhaps surprisingly, Russia has fairly low to moderate
• tax rates. Increasingly Russia is trying to allow for
• market interaction, but high tariffs and minimal
• protection of private property make this difficult.
PC AND HONORS
• 1. Recreate the Continuum on the PowerPoint slide in your small groups.
• Underneath Russia; Germany and the United Kingdom, write down where they are on the continuum, the percentage; describe is it difficult for the people to start their own business; if property rights protected; who decides the prices for goods and services.
Small Groups
• In your small Groups, recreate and complete the chart individually in your small groups.
Germany:
What to produce?
1.
2.
How to produce?
1.
2.
Who to produce
for?
1.
2.
United Kingdom
What to produce?
1.
2.
How to produce?
1.
2.
Who to produce for?
1.
2.