Comparing different types of economic systems:traditional, free enterprise, command and mixed.
Economics studies how individuals and societies seek to satisfy needs and wants through incentives, choices, and allocation of scarce resources. Technology LandOil & fuel Doctors
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.
Scarcity forces all Scarcity leads tocountries to answer conflict these 3 questions
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
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
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
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
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
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.
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
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
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
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
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
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
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
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
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
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