The document discusses four key questions that all economic systems must address: what to produce, how to produce it, who the goods and services are produced for, and how much to produce. It also covers different types of economic systems including command economies, socialism, mixed economies, and free market economies. A mixed economy, like in the US, combines elements of private ownership and government involvement in an attempt to balance efficiency with social welfare.
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Bob Boule
Robert Boule is a technology enthusiast with PASSION for technology and making things work along with a knack for helping others understand how things work. He comes with around 20 years of solution engineering experience in application security, software continuous delivery, and SaaS platforms. He is known for his dynamic presentations in CI/CD and application security integrated in software delivery lifecycle.
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3. Four Questions All Economic Systems
must address…
l
What is produced?
*Production*
Goods and services must satisfy the
consumers wants and desires
4. Four Questions All Economic Systems
must address…
l
HOW should these goods be produced?
*Factors of Production*
1.
2.
3.
Capital
Land
Labor
Combine the factors of production to make or produce the goods and services
5.
6. Four Questions All Economic Systems
must address…
For WHOM are the goods and services
produced?
*Distribution*
Getting the goods and services from producer
to consumer
l
7.
8. Four Questions All Economic Systems
must address…
HOW MANY goods and services should be
produced?
*Consumption*
Make enough to have a large profit and still
have consumer demand. How many is
determined by supply and demand.
l
11. Supply and Demand…
l
l
l
Scarcity is the inability to satisfy all wants at
the same time due to limited resources
Choices must be made as to what to
produce, how much to produce and who will
receive what is produced.
PRICE: Mechanism to decide who gets
goods and services. The amount that
satisfies both producers for profit and
consumers for value.
15. Supply and Demand determine price
through their interaction
l
DEMAND: is the
amount of a good or
service that consumers
are willing and able to
buy at a certain price
l
SUPPLY: is the amount
of a good or service
that producers are
willing and able to sell
at a certain price.
16. LAW OF SUPPLY :
Businesses will provide more products
when they can sell them at higher prices
LAW OF DEMAND:
Buyers will demand more products
when they can buy them at lower prices
26. Since resources are LIMITED consumers and
producers must make CHOICES
l
CHOICE: selecting
from a set of
alternatives
l
OPPORTUNITY COST:
what is given up when
the choice is made.
27. *Scarcity forces us to choose which
needs and wants to satisfy with
available resources.
*Scarcity affects decisions
concerning what and how much to
produce, how goods and services
will be produced and who will get
what is produced
28. Production: (sellers)
Consumption (buyers)
*Combining resources to
make goods and
services.
*Using goods and
services
*Available resources and
consumer preference
determine what is
produced
*Consumer preference
and price determine
what is purchased
31. Command Economy
l
l
l
The central government
makes decisions and
determines how
resources will be used.
The central government
owns property and
resources.
Businesses are not run
for profit.
l
l
l
l
l
Businesses are not run
for profit.
No competition
Lack of consumer
choice
The government sets
the prices of goods and
services.
China, North Korea,
Cuba
32.
33. Socialism
Allows for wider range of free enterprise along with
government-run activities
l 3 goals:
–
–
–
The equal distribution of wealth & economic opportunity
Society’s control, through its government, of all major decisions
of production
Public ownership of most land, factories, and other means of
production.
Democratic Socialism – people have basic human
rights and elect their political leaders, even though
government controls certain industries.
34. Mixed Economy
l
l
l
l
l
Most common type of
economic system
Government and individuals
share the decision making
process
Individuals and businesses
make decisions for the
private sector
Individuals own the means of
production
Government makes plans for
the public sector
l
l
l
l
Government guides and
regulates production of
goods and services offered.
A greater government role
than in a free market
economy
Most effective economy for
providing goods and services
U.S. and most Western
European countries are
mixed economies
35.
36. Free Market Economy
l
l
l
l
Also known as capitalism
or free enterprise
Private ownership of
property and resources
(owned by individuals)
Individuals and
businesses make profits
Individuals and
businesses compete
l
l
l
l
Economic decisions are
made by supply and
demand
Profit is a motivator for
productivity
No government
involvement
Consumer sovereignty:
buyers determine what is
produced
37. Money left
over after
all business
expenses
have been
paid.
COMPETITION
PROFIT
FREE
MARKETS
Markets are
allowed to operate
without undue
interference from
the government.
Money, goods and
services flow
continuously
among individual
households,
businesses and
the government
The U.S. economy is
a MIXED
ECONOMY
CONSUMER
SOVEREIGNTY
Rivalry
between
businesses
for the
same
customers;
results in
better
quality Individuals can
own the means
of production &
property without
undue
government
interference
PRIVATE
PROPERTY
Consumers
determine
what goods
and
services are
produced
by what
they buy