Comparing economic systems

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Exploring Business Technologies

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  • 1. Comparing Economic Systems
  • 2. What is Economics? Studies how individuals and societies seek to satisfy needs and wants through incentives, choices, and allocation of scarce resources.
  • 3. Definitions Incentives: Things that motivate or encourage a person to do something Scarcity: Shortage or limitations of resources
  • 4. 4 Types of Resources Look up: -Natural Resources -Human Resources -Capital Resources -Entrepreneurial Resources
  • 5. Natural Resources Raw materials found in nature that are used to produce goods
  • 6. Human Resources People’s knowledge, efforts, and skills used in their work
  • 7. Capital Resources Goods used to produce goods and services (buildings, materials, and equipment)
  • 8. Entrepreneurial Resources Initiative to improve goods and services, or create new ones
  • 9. Economic Systems Nations use economic systems to determine how to use their limited resources effectively.
  • 10. 3 Questions Answered by Economic Systems 1. Who decides what will be produced? 2. Who decides how it will be produced? 3. Who decides who will receive what is produced?
  • 11. Traditional Economy Where Are These Found? In rural, under-developed countries Examples: Pygmies of Congo, Native Americans, & the Amish Economic activities are centered around the family or ethnic unit, and customs govern the economic decisions that are made Farming, hunting and gathering are done the same way as the generation before
  • 12. Traditional Economy Advantages: people have specific roles; security in the way things are done Disadvantages: Technology is not used; difficult to improve
  • 13. Market Economy Also known as: Free Market Economy, and Free Enterprise Economy Businesses and consumers decide what they will produce and purchase and in what quantities Decisions on production and pricing are based on the law of Supply and Demand
  • 14. Market Economy Advantage: competition to have the best products and services Disadvantage: huge gap between wealthy and poor Note: a true market economy does not exist.
  • 15. Command Economy The government (or central authority) determines what, how, and for whom goods and services are produced. Two Types Strong Command: Government makes ALL decisions Examples: North Korea, Cuba Moderate Command: Some private enterprise exists, but the government owns major resources. Examples: France and Sweden
  • 16. Mixed Economy Combination of a market and a command economy Government takes care of people’s Needs Market takes care of people’s Wants Most Nations have a mixed economy: Ex: United States, England, and Australia
  • 17. Mixed Economy Advantages: Government meets the balance of wants and needs in the market place Disadvantages: Citizens have to pay taxes to fund government