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Economic Systems


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Economic Systems

  1. 1. Comparing different types of economic systems:traditional, free enterprise, command and mixed.
  2. 2.  Economics studies how individuals and societies seek to satisfy needs and wants through incentives, choices, and allocation of scarce resources. Technology LandOil & fuel Doctors
  3. 3.  Na tions mus t a ns we r thre e ba s ic Economic que s tions :  Wha t goods a nd s e rvice s s hould be produce d?  How s hould the goods a nd s e rvice s be produce d?  For who s hould the goods a nd s e rvice s be produce d? The wa y a na tion a ns we rs the s e que s tions de fine s the ir e conomy.
  4. 4. Scarcity forces all Scarcity leads tocountries to answer conflict these 3 questions
  5. 5.  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
  6. 6.  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
  7. 7.  Defined: An economic system that does things as it always has Ownership of Resources: All productive resources are owned by families Allocation of Resources: Based of customs and traditions within the tribe Role of Government: Tribes play some role in making economic decisions
  8. 8.  Found in rural, under-  Economic activities are developed countries– centered around the family or  Vanuatu ethnic unit  Pygmies of Congo  Men and women are given  Eskimos & Indian tribes different economic roles and tasks  Belarus  Advantages: people have Customs govern the specific roles; security in the economic decisions that are way things are done made  Disadvantages: Technology is Farming, hunting and not used; difficult to improve gathering are done the same way as the generation before
  9. 9.  Goals: Keep things how they have always been Methods: Customs and traditions passed down through family lineage Characteristics: Children follow in parent’s footsteps, lack of economic growth Current Examples: Aborigines Australia Mbuti Pygmies of the Congo Kung Bushmen of Africa Political System: Tribal Organizations
  10. 10.  Also called a Free Market  Supply and demand of goods Economy or Free Enterprise and services determine what Economy is produced and the price that Businesses and consumers will be charged. decide what they will  Advantage—competition to produce and purchase and in have the best products and what quantities services Decisions are made  Disadvantage—huge rift according to law of supply & between wealthy and poor demand  Note: a true market economy does not exist.
  11. 11.  Allocation of Resources: Resources are obtained through the lure of profits in the market Role of Government: Government only tries to make sure there is some competition and provides some public goods
  12. 12.  Goals: Profit for individuals, people are motivated by economic rewards Methods: Competition, supply and demand Characteristics: Private property, specialization, minimal government regulation Political System: Democracy/Parties Current World Examples:Switzerland Canada Australia Chile Argentina South Africa
  13. 13.  An e conomic s ys te m cha ra cte rize d by priva te owne rs hip of bus ine s s e s a nd ma rke tpla ce compe tition The gove rnme nt is conce rne d a bout its pe ople a nd ta ke s ca re of thos e who ca nnot ca re for the ms e lve s The politica l s ys te m is a de mocra cy with le a de rs e le cte d by the pe ople The Unite d S ta te s a nd J a pa n a re e xa mple s of a Ca pita lis t Economy
  14. 14.  The government (or central  Advantages authority) determines what,  Guarantees equal standard of how, and for whom goods living for everyone and services are produced.  Less crime and poverty Two types:  Needs are provided for  Strong Command – where through the government government makes all  Disadvantages decisions (communism –  Minimal choices China, Cuba)  Fewer choices of items  Moderate Command –  No incentive to produce better where some form of private product or engage in enterprise exists but the entrepreneurship state owns major resources (socialism – France and  Also known as a Planned or Sweden) Managed Economy
  15. 15.  Goals: Equal distribution of income Methods: Revolution to gain control, no opposition forces allowed Characteristics: no private property, one political party Political System: Totalitarian Current and Former World Examples:Cuba North Korea China Former Soviet Union
  16. 16.  The gove rnme nt runs e ve rything (Tota lita ria n gove rnme nt) Only one politica l pa rty, the Communis t pa rty, runs the gove rnme nt All pe ople a ble to work a re a s s igne d jobs – the re is virtua lly no une mployme nt The gove rnme nt a s s igns hous ing, s chools , a nd occupa tions The re is little to no e conomic fre e dom Cuba , North Kore a , a nd China a re e xa mple s
  17. 17.  Combination of a  Most nations have a mixed market and a economy: United States, command economy England, Australia Government takes of  Advantage—balance of people’s needs needs and wants met by government and in Marketplace takes care marketplace of people’s wants.  Disadvantage—citizens have to pay taxes
  18. 18.  Incre a s e d gove rnme nt involve me nt in pe ople ’s live s a nd the e conomy The ma in goa l is to ke e p price s low for a ll pe ople a nd to provide e mployme nt for ma ny The gove rnme nt runs ke y indus trie s a nd ma ke s e conomic de cis ions More s ocia l s e rvice s for a ll a nd fre e or low cos t me dica l ca re Ca na da , Ge rma ny, S we de n, Aus tra lia a nd Gre a t Brita in a re a ll e xa mple s of s ocia lis t e conomie s
  19. 19. Command Economy S ocialism Market Economy Com unism m Left of center but right Capitalism On the far left of communism On the far right
  20. 20.  The bre a kup of the S ovie t Union is the be s t e xa mple of a country cha nging from a Comma nd Economy to a Ma rke t Economy S ta te owne d indus trie s ha ve be e n priva tize d (gove rnme nt owne d bus ine s s e s a re s old to priva te citize ns ) Toda y e ve n s ocia lis t countrie s a re s e lling s ome of the ir gove rnme nt owne d bus ine s s e s to individua ls