Economic SystemsGoals:- List the three economic questions that must be answered by every society.- Describe three types of economic systems.- Identify 5 features of our market economy.- Explain why economies are mixed systems.- Explain why market economies are becoming common around the world.- Explain private property.
2. Economic Systems – Key Terms:- Business- Capitalism- Competition- Custom-based economy- Directed or planned economy- Economic system- Market Economy and Marketplace- Private enterprise- Profit
The three economic questions:- What goods and services are to be produced.- How should the goods and services be produced.- For whom should the goods and services be produced.
Countries are like people The “what”- They have unique wants and needs. - Space travel - Military - Manufacturing - Survival – basic needs
The “how”- If many people and few capital resources then heavy use of manual labor.- If few people and large capital resources then use of labor saving equipment.
The “for whom”- Which wants and needs are most critical?- How will the goods and services be distributed?- Should they be shared equally?- Should those who contribute more to producing the goods and services get a larger share?
In some economic systems …You can buy whatever you want as long as you have the money.In others, it depends on the country’s answers to the original questions.
Remember the original questions?A country’s access to these is its “Economic System” There is no pure economy
Custom-based Economy- In countries less developed, less responsive to the global economy, answers to economic questions are determined by custom / tradition.- Things are made the way they used to be made.
Directed (Planned) Economy- In some countries, answers come from the owners of resources.- Resources are owned and controlled by the government.- Agencies decide how much and what will be spent on the military and how much on consumer goods.
Market Economy- Usually found in democracies.- Questions are answered by the individuals through buying and selling activities in the marketplace.- Marketplace is any place where buyers and sellers exchange goods.
Did you recognize our system?Yes – Market Economy.
Capitalism- Economic resources are usually privately owned by individuals rather than by the government.- Individual owners are free to decide what they will produce with the resources.
Capitalism- Because of this freedom of the individual to choose that our system is also known as: “Free” or “Private Enterprise” system.
Capitalism- The right of “Private Property”. This means that you can own, use, or dispose of things of value by selling them, giving them, or even throwing them away.