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Economic Systems

Economic Systems



2.01 Business Technology

2.01 Business Technology



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    Economic Systems Economic Systems Presentation Transcript

    • 2.01 Economic Systems
      Objective 2.01 Compare different types of economic systems: traditional, free enterprise, command and mixed.
      By: Ms. Springsteen
      July 1, 2009
    • What is Economics?
      Economics studies how individuals and societies seek to satisfy needs and wants through incentives, choices, and allocation of scarce resources.
    • Factors of Production
      Economic Resources
      Natural Resources – raw materials found in nature that are used to produce goods
      Human Resources – people’s knowledge, efforts, and skills used in their work
      Capital Resources – used to produce goods and services (buildings, materials, and equipment)
      Entrepreneurial Resources - recognize the need for new goods or service
      Scarcity – shortage of resources
    • Why Economic Systems?
      Nations use economic systems to determine how to use their limited resources effectively.
      Primary goal of an economic system is to provide people with a minimum standard of living, or quality of life.
      Different types of Economic Systems
      Traditional Economy
      Market Economy (free enterprise)
      Command Economy
      Mixed Economy
    • Traditional Economy
      Found in rural, under-developed countries–
      Pygmies of Congo
      Eskimos & Indian tribes
      Customs govern the economic decisions that are made
      Farming, hunting and gathering are done the same way as the generation before
      Economic activities are centered around the family or ethnic unit
      Men and women are given different economic roles and tasks
      Advantages: people have specific roles; security in the way things are done
      Disadvantages: Technology is not used; difficult to improve
    • Market Economy (Free Enterprise)
      Supply and demand of goods and services determine what is produced and the price that will be charged.
      Advantage—competition to have the best products and services
      Disadvantage—huge rift between wealthy and poor
      Note: a true market economy does not exist today because all countries have some government control
      Also called a Free Market Economy or Free Enterprise Economy
      Businesses and consumers decide what they will produce and purchase and in what quantities
      Decisions are made according to law of supply & demand
    • Command Economy
      The government (or central authority) determines what, how, and for whom goods and services are produced.
      Two types:
      Strong Command – where government makes all decisions (communism – North Korea, Cuba)
      Moderate Command – Socialism, where some form of private enterprise exists but the state owns major resources France and Sweden)
      Guarantees equal standard of living for everyone (determined by government)
      Less crime and poverty
      Needs are provided for through the government
      Minimal choices
      Fewer choices of items
      No incentive to produce better product or engage in entrepreneurship
      Also known as a Planned or Managed Economy
    • Mixed Economy
      Combination of a market and a command economy
      Government takes of people’s needs
      Marketplace takes care of people’s wants.
      Most nations have a mixed economy:United States, England, Australia
      Advantage—balance of needs and wants met by government and marketplace
      Disadvantage—citizens have to pay taxes for government programs