Chapter 2
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Transcript

  • 1. Chapter 2 Economic Systems
  • 2. Economic System
    • The way a country decides to use its resources to satisfy its peoples wants and needs
  • 3. Countries, like us have limited resources, so they must decide . . .
    • 1. WHAT should be produced?
    • 2. HOW should it be produced?
    • 3. For WHOM should it be produced ?
  • 4.
    • The way a country answers these three questions will determine the type of economic system that country will have.
  • 5. Types of Economic Systems TRADITIONAL MARKET COMMAND MIXED
  • 6. TRADITIONAL
    • Always done this way
    • Parents teach you trade
    • Families are tight
    • Know what you are going to do
    • Poor country -- Page 36
  • 7. Command (Socialism)
    • Gov’t leaders control factors of production – make all decisions.
    • (One person, a small group, or a group of central planners make decisions)
    • Gov’t decides pay and where you will work
    • Gov’t decides how goods & services will be distributed.
    • Economic decisions are made by the government
  • 8. Market
    • Opposite of Command economy
    • Decisions made by individuals not gov’t
    • Property owned by individuals
    • Also called Capitalism
    • Unrestricted competition
  • 9. American Free-Enterprise system (Capitalism)
    • Goals:
    • Freedom
    • Equity - fairness
    • Growth
    • Remember – easy to start a business in a free enterprise system
    • ALSO . . . . .
  • 10. Free – Enterprise Promotes. . .
    • Profit – amount earned after cost to produce the product
    • Competition – rivalry among producers and sellers to win business
    • Private-Property – property owned by individuals.
    • High Standard of Living – the material well being of an individual, group or nation
    • Economic Equity attempt to balance economic policy so that it is just – and everyone benefits fairly
  • 11. Mixed Economy
    • Combination of market and command economy
    • Most countries have a mixed economy
    • You can own your own property
    • Most decisions are made by individuals with only a small amount of gov’t input.
  • 12. Economist – Adam Smith
    • Father of the “Invisible Hand” theroy??
    • believed . . . Gov’t should not interfere in the marketplace . . . Which is Capitalism – which is another name for the ________ economy
    • Also know as laissiz-faire – where gov’t minimizes its interference in the economy.
  • 13. Economist Karl Marx
    • believed . . . . .
    • Capitalism would die out and pure communism (command) would replace it