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Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
Chapter 2 lecture 2012 22014
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Chapter 2 lecture 2012 22014

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  • 1. CHAPTER-2 ECONOMIC SYSTEMS
  • 2. TYPES OF ECONOMIC SYSTEMS  Traditional Economies – the allocation of scarce resources, and nearly all other economic activity, stems from ritual, habit or custom.  Command Economies – are economies in which a central authority makes most of WHAT, HOW, and FOR WHOM decisions. Economic decisions are made by the government.  Market Economies – People and firms act in their own best interests to answer the WHAT, HOW, and FOR WHOM questions.
  • 3. MIXED ECONOMIES OR MODIFIED FREE ENTERPRISE ECONOMY  Most economies in the world today feature some mix of traditional, command, and market economies.  The United States has a combination of command (planned) and market economies.  We have a market (free enterprise) economy with some government intervention.
  • 4. PLACE THE U.S. ECONOMY?
  • 5. SPECTRUM OF MIXED ECONOMIES Planned FreeSocialism NorthKorea HongKong Germany India UnitedStates France Russia Canada GreatBritain China The Role of Government Makes most, if not all Economic Decisions Owns most key resources Promotes competition and Supplies' Public Goods
  • 6. SECTION 2 EVALUATING ECONOMIC PERFORMANCE 1) Economic Freedom – freedom to make your own economic decisions 2) Economic Efficiency – benefits gained must be greater than costs incurred 3) Economic Equity – a strong sense of justice, impartiality, and fairness R
  • 7. EVALUATING ECONOMIC PERFORMANCE CONTINUED 4) Economic Security – protection from adverse economic events as layoffs and illnesses 5) Full Employment – to produce as many jobs as possible 6) Price Stability – steady prices, void of inflation 7) Economic Growth – to meet the needs of population growth R
  • 8. SECTION 3 FREE ENTERPRISE CAPITALISM  In a Capitalistic Economic System individuals own most of the factors of production. This economic system exists due to free enterprise. In a free enterprise economy, competition is allowed to flourish with a minimum of governmental interference. R
  • 9. MAJOR FEATURES OF CAPITALISM 1. Economic Freedom 2. Voluntary Exchange 3. Private Property Rights 4. Profit Motive 5. Competition
  • 10. COMPETITION & FREE ENTERPRISE  Economic Freedom allows individuals and businesses to choose their economic destiny.  A Voluntary Exchange happens when both parties benefit from the transaction. R
  • 11. COMPETITION & FREE ENTERPRISE CONTINUED The privilege that entitles people to own and control their possessions as they wish is known as Private Property Rights.
  • 12. COMPETITION & FREE ENTERPRISE CONTINUED  Profit is the extent to which persons or organizations are better off at the end of a period than they were at the beginning.  Profit motive is the driving force that encourages people and organizations to improve their material well being.
  • 13. COMPETITION & FREE ENTERPRISE CONTINUED The result of Competition is that goods and services are produced at the lowest possible cost and allocated to those who are willing and able to pay for them. R
  • 14. THE ROLE OF THE ENTREPRENEUR  The entrepreneur is one of the most important people in a free enterprise (capitalistic) economy. The entrepreneur organizes and manages land, labor, and capital in order to seek the reward called profit. In other words – Entrepreneurs make things happen.
  • 15. THE ROLE OF THE CONSUMER  Consumers play an important role in the American Free Enterprise economy.  They control what is produced when they express their wants through purchasing goods and services. R
  • 16. THE ROLE OF GOVERNMENT (CONTINUED) Provider & Consumer – Federal, State and Local governments provide goods and services for citizens. In the process of providing, government consumes factors of production.
  • 17. THE ROLE OF GOVERNMENT Protector – The government protects property rights and enforces contracts to ensure an efficient and fair economy.
  • 18. THE ROLE OF GOVERNMENT (CONTINUED) Regulator – The national government is charged with preserving competition. Local and state governments control businesses with zoning regulations, taxes, insurance rates, etc. Promoter of National Goals The government should reflect the will of the majority of its people.

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