12/5 Warm-Ups12/5 Warm-Ups
• Pass forward 26.2Pass forward 26.2
1. In which market do firms purchase the 1. In which market do firms purchase the factors of production from households?factors of production from households?
2. Which market supplies households with 2. Which market supplies households with goods and services?goods and services?
Bonus Questions- Bonus Questions-
Charlotte is competing with several other major cities for a Charlotte is competing with several other major cities for a contract with which industry? (hint, they’re in the contract with which industry? (hint, they’re in the transportation business)transportation business)
Most missed ?’sMost missed ?’s
Why are all goods and services scarce? Why are all goods and services scarce? What is total revenue minus total cost?What is total revenue minus total cost? Who owns factors of production in a Who owns factors of production in a
market economy?market economy? Can you have a cost if you don’t produce Can you have a cost if you don’t produce
anything? Why?anything? Why? Why would money flow from firms to Why would money flow from firms to
households?households?
Four Types of EconomiesFour Types of Economieschart on p. 225chart on p. 225
Objective: to differentiate between Objective: to differentiate between the various types of economies the various types of economies through completion of comparison through completion of comparison chart. chart.
TYPES OF ECONOMIES
Economic system is a an agreed upon procedure within and among communities to organize the production and distribution of goods and service.
Traditional EconomyTraditional Economy
Definition:Definition:
Economic Economic system that system that relies on habit relies on habit and customand custom
““That is the way That is the way we have always we have always done it”done it”
Traditional EconomyTraditional Economy
How are the three
economic questions answered?By tradition
Growth
Notconcerned
with growth(bartering is used)
Who / What influences
the economy?
Tradition
Traditional EconomyTraditional Economy Examples: very Examples: very
isolated tribesisolated tribes
Amish
Who loses power in this type of economy?
Political Philosophy and
People
n/aDoes not apply to
traditional economies
n/a
Command EconomyCommand Economy(Centrally planned)(Centrally planned)
Definition:Definition:
Central government Central government makes all decision makes all decision on the production on the production and consumption and consumption of goods and of goods and services.services.
““We do what we are We do what we are told”told”
Command EconomyCommand EconomyHow are the
three economic questions answered?
Whatever the govt.
decides is needed at the least
cost
Growth
Slow growth,
inefficient
Who / What influences
the economy?
Government has
complete control
Command EconomyCommand Economy Examples: Cuba, North Korea, IranExamples: Cuba, North Korea, Iran
1920-1991 Soviet Union 1920-1991 Soviet Union
Command EconomyCommand Economy
Who loses power in this type
of economy?
Political Philosophy and People
Citizens CommunismKarl MarxSocialism
Karl Marx p. 226 Karl Marx p. 226
Marx was born in Germany in Marx was born in Germany in 1818 and died in London in 1818 and died in London in 1883. He was a philosopher 1883. He was a philosopher and political economist but and political economist but was known best as a was known best as a revolutionary communistrevolutionary communist. . Marx along with Friedrich Marx along with Friedrich Engels wrote the Engels wrote the Communist Communist ManifestoManifesto..
CommunistCommunist ManifestoManifesto History should be described as History should be described as
social classes strugglingsocial classes struggling with one anotherwith one another
19th Century social classes19th Century social classes Proletariat Proletariat – those that own – those that own
very littlevery little and therefore must and therefore must sell sell laborlabor to the to the capitalistscapitalists
BourgeoisBourgeois ( (capitalistscapitalists) – the ) – the person that person that ownsowns the the factoriesfactories and and buys laborbuys labor
CommunistCommunist Manifesto Manifesto (continued)(continued)
The conflict between these two classes The conflict between these two classes will eventually lead to will eventually lead to revolutionrevolution by the by the workingworking class (proletariat). With this class (proletariat). With this revolution there would cease to be a revolution there would cease to be a struggle. struggle.
“ “ Workers of all lands, unite”Workers of all lands, unite” – the – the final words of the final words of the Communist ManifestoCommunist Manifesto
This document lays out the foundations of This document lays out the foundations of communism.communism.
Since the collapse of the Soviet Since the collapse of the Soviet Union, few countries would describe Union, few countries would describe themselves as having a Marxist themselves as having a Marxist government. Political parties government. Political parties throughout the world still maintain throughout the world still maintain Marxist ideologies. Marxist ideologies.
Despite Marx’s Despite Marx’s predictionspredictions, , capitalismcapitalism is still is still thrivingthriving! We still ! We still see the existence of a working class see the existence of a working class and entrepreneurs. and entrepreneurs.
Contemporary Communims: Contemporary Communims: Its Status and FutureIts Status and Future
Korean Peninsula From Korean Peninsula From Space Space
Market EconomyMarket Economy
Definition:Definition: Economic system Economic system in which all in which all economic decisions economic decisions are made by the are made by the citizens citizens
““Make as much as Make as much as we want”we want”
Market EconomyMarket EconomyHow are the three econ. questions answered?
What? – most profitable
How? – least cost method
For Whom? – Highest bidder
Growth
Successful and
efficient
Who / What influences
the economy?
CitizensSupply and
demandCompetition
Invisible Hand
Market EconomyMarket Economy
Examples: Examples:
United States, United States, Singapore, Hong Singapore, Hong KongKong
Market EconomyMarket Economy
Who loses power in this type
of economy?
Political Philosophy and People
Government CapitalismAdam Smith
Mixed EconomyMixed Economy
Definition:Definition: Market based Market based economies in economies in which govt. which govt. plays a limited plays a limited role role
All economies of the world are mixed….. There are no true command or completely free market economies…
Mixed EconomyMixed Economy
How are the three
economic questions answered?
Govt. and Citizens
Growth
varies
Who / What
influences the
economy?
Part citizen / part govt.
Mixed EconomyMixed Economy
Examples: Examples:
(technically every country is, (technically every country is, to a degree, mixed) to a degree, mixed) including: *United Statesincluding: *United States
*France*France
*United Kingdom*United Kingdom
*Canada*Canada
Mixed EconomyMixed EconomyWho loses
power in this type
of economy
?
Political Philosoph
y and People
varies John Maynard Keynes
Objective:Objective: to identify the to identify the characteristics of a mixed characteristics of a mixed
economy through class notes economy through class notes and discussionand discussion
Mixed Economies: 229Mixed Economies: 229
Mixed EconomiesMixed Economies
Review…..Review…..What are the 3 Economic What are the 3 Economic
questions?questions?• What goods and services should be produced?• How should these goods and services be produced?
• For whom should these goods and services be produced?
Mixed EconomyMixed EconomyCOMMAND______________________________MARKETCommunism CapitalismSocialism Free MarketCentrally Planned/Controlled Free EnterpriseAuthoritarian Profit
EnterpriseLimited social gain Individual preference of
jobsGovernment directed Progress is stressedFactors of production gov’t owned High self-gainNo self-interest or competitionCompetition
Material rewardsGOV’T CONTROL FREEDOM
North Korea China France US
SingaporeCuba
Mixed EconomyMixed Economy- Most contemporary economies Most contemporary economies
are a blend of market with some are a blend of market with some government interferencegovernment interference
Remember…..Remember…..What does What does laissez-faire mean????laissez-faire mean????
Mixed EconomyMixed Economy
- There IS a need for certain government - There IS a need for certain government interference because some needs and interference because some needs and wants of society are difficult to address wants of society are difficult to address in the market place (Could the market in the market place (Could the market place provide for national defense or a place provide for national defense or a highway system??)highway system??)
Mixed EconomyMixed Economy
- Some needs that markets - Some needs that markets couldcould meet fall meet fall to the government so that ALL members to the government so that ALL members of society can participate (i.e. education)of society can participate (i.e. education)
- Governments create laws to protect - Governments create laws to protect property rights and enforce contracts property rights and enforce contracts (Why would someone develop a new (Why would someone develop a new product if they couldn’t patent the product if they couldn’t patent the product?)product?)
Mixed EconomiesMixed Economies
- Societies must look at whether their - Societies must look at whether their goals could be better addressed by goals could be better addressed by an open market or government an open market or government action and look at the opportunity action and look at the opportunity cost for each action (Are you willing cost for each action (Are you willing to pay taxes to fund an army?? Give to pay taxes to fund an army?? Give all people an education??)all people an education??)
Mixed EconomiesMixed EconomiesCircular Flow DiagramCircular Flow Diagram
Remember the circular flow diagram Remember the circular flow diagram we looked at in Goal 7??? we looked at in Goal 7???
What were the two different markets What were the two different markets in this flow? in this flow?
Who were the two major players in Who were the two major players in this flow?this flow?
Market Economy Circular FlowMarket Economy Circular Flow
monetary flow
physical flow
monetary flow
physical flow
Circular Flow Diagram of a Market Economy
Households Firms
Product Market
Factor Market
Firms supply households with goods and services.
Households supply firms with land, labor, and capital
Households pay firms for goods and services.
Firms pay households for land, labor, and capital.
Mixed EconomiesMixed EconomiesCircular Flow DiagramCircular Flow Diagram
Adding the government….Adding the government….-Governments purchase land, labor, and -Governments purchase land, labor, and
capital from households in the factor marketcapital from households in the factor market-Governments purchase goods and services in -Governments purchase goods and services in
the product market (buildings, office the product market (buildings, office supplies, phones, computers, etc.)supplies, phones, computers, etc.)
-Governments provide goods and services by -Governments provide goods and services by combining resources through the product combining resources through the product market (i.e. roads)market (i.e. roads)
-Governments collect taxes from both -Governments collect taxes from both households and businesseshouseholds and businesses
Mixed EconomiesMixed EconomiesCircular Flow Diagram Circular Flow Diagram
monetary flow
physical flow
monetary flow
physical flow
Circular Flow Diagram of a Mixed Economy
Households Firms
taxes
govern
ment
purchase
s
gover
nmen
t
-owned
fact
ors
taxes
Government expendituresexpenditures
Mixed EconomiesMixed Economies
Comparing Mixed EconomiesComparing Mixed Economies
Free enterpriseFree enterprise:: economic system economic system characterized by private or corporate characterized by private or corporate ownership of capital goods; investments ownership of capital goods; investments are determined by private decision rather are determined by private decision rather than state controlthan state control
TransitionTransition:: a period of change in a period of change in which an economy moves away which an economy moves away from central planning toward from central planning toward a market-based systema market-based system
China
Mixed EconomiesMixed Economies
PrivatizedPrivatized:: to make a transition, state firms to make a transition, state firms must sell their businesses to individuals and must sell their businesses to individuals and then allow them to compete with one then allow them to compete with one another in the marketplaceanother in the marketplace
THE US HAS A FREE ENTERPRISE THE US HAS A FREE ENTERPRISE SYSTEM!!SYSTEM!!
-Government interferes to provide services, -Government interferes to provide services, keep order, and promote the general keep order, and promote the general welfarewelfare
-US law protects private property-US law protects private property
Test Corrections and Test Corrections and HomeworkHomework
Write the question and the complete Write the question and the complete answer (not just the letter) or rewrite answer (not just the letter) or rewrite the question and answer in a the question and answer in a complete sentence.complete sentence.
P. 231 reading guide 21.1 and 21.2P. 231 reading guide 21.1 and 21.2
Origami FoldableOrigami Foldable
Use the distributed handout as your guideUse the distributed handout as your guide You will need 4 colored pieces of paper You will need 4 colored pieces of paper You will need 3 white pieces of paperYou will need 3 white pieces of paper
Fold like this – 3 times per square……
TOP
Rt top
Rt bottom
Left top
Left bottom
Bottom
Recommended
