The document discusses key economic terms and compares the economies of Southwest Asia. It defines different types of economic systems such as traditional, command, and market economies. It then examines the economies of Israel, Saudi Arabia, and Turkey. Israel has a mixed economy focused on high tech and agriculture, with some government ownership. Saudi Arabia also has a mixed economy but relies heavily on oil, with significant government control. Turkey has moved toward more private enterprise and exports around one fifth of its production. The document compares how each country determines what, how, and for whom to produce.

1. Economics Key Terms and
Comparative Economics of
Southwest Asia

2. Who chooses what to produce in a market
economy?
A. Based on local customs
B. Producers and consumers
C. The government
D. All the above

3. Key Vocabulary
 Analyze- to break down; to look at very closely
 Economic System- the system of production, distribution, and consumption.
 Traditional economy- an economic system where the exchange of goods or
services is based on custom and tradition (a barter system).
 Market Economy- an economy in which business owner and consumers make
decisions about what to make, sell, and buy.
 Command Economy- an economy in which the government owns most of the
industries and makes most of the economic decisions about production,
distribution, and consumption.

4. Traditional Economy
 In a traditional economy, decisions are made based on
customs and traditions.
 Can you think of an example that you can relate to?

5. Example: the way that people trade food in the
lunch room (barter system)

6. Command Economy
 In a pure command
economy the goods
and services that a
country produces, the
quantity in which they
are produced, and the
price at which they are
sold are all planned by
the government
 To help remember
this, think military
power

7. Which country in our area of study is
considered a command economy?

8. Example of Command Economy
 Government officials meet. They decide that bean production
is better for the country than wheat production. They call up
local officials and order them to tell farmers to shift to bean
production. Farmers make the adjustment.
 How could central government control be a problem for local
farmers?
 What if the soil is not suitable for beans, but better for wheat?
 How much input does the farmer have?

9. One criticism of command economies:
Who is better located to decide whether to plant wheat
or soybeans?
A. a government official in the middle of Moscow or Beijing or
Pyongyang, etc.
 or
B. a farmer who lives on productive land and has a great deal to
lose in making an incorrect crop choice.

10. Three broad types of economic systems can be
identified-a market economy, a command economy,
and a mixed economy.
 Soon you will be learning about the economic continuum.
 The economic continuum is a horizontal line that places a country’s economy on
rating scale of no economic freedom to total economic freedom.
 What does total in the statement above mean?

11. Command vs. Market Economies
 A Command Economy is the opposite of Market Economy
 Command Economy means that the government has total control of the economy.
Citizens have no economic freedom.
 Therefore in a Market economy, government controls how much of the economy?
 None
 In a Market economy, how much economic freedom do citizens have?
 Total

12. Market Economy
In a pure market economy
the goods and services
that a country produces,
and the quantity in which
they are produced is
determined by supply and
demand.
What is the “market”?

13. Example of Market Economy
The farmer looks at the market for agricultural
futures in his newspaper. Futures are a prediction of
what a certain commodity will sell for in the future.
The farmer sees that wheat futures are falling and
decides that wheat production won’t be as profitable
this year. He decides to plant soybeans instead.

14. Comparative Exercise…
 Between the two economic systems (command or market), where is the farmer the
happiest?
 There is no correct answer! The answer depends on how much government control
the farmer desires.
 How would a command economic system benefit the farmer? Hurt the farmer?
 How would a market economic system benefit the farmer? Hurt the farmer?

15. What would you call an economy that is neither
pure command nor pure market but a mix of the
two?
Mixed Economy

20. Who or what determines What, How, and For Whom to produce in the Economy?

21.  How many basic types of economic systems are there?
 Name the economic systems.
 Which economic system do most textbooks say is the most
common throughout the world?

22. Answers
 How many basic types of economic systems are there? 3
 Name the economic systems. Traditional, Command, Market
 Which economic system do most textbooks say is the most common
throughout the world? Mixed. The GCEE states that mixed is not
an economic system but rather a blending of two different
types of systems.

23. What does it mean to produce something?
 to create value or wealth by producing goods and services.
(“Making stuff”)
 Examples…
Brainstorm items that are produced

24. What does it mean to distribute
something?
Distribute: to transport or sell goods from a producer
to a consumer (“selling stuff”)
Examples…
Brainstorm how goods and services are distributed

25. What does it mean to consume
something?
 Consume: To purchase and/or use goods and services. (“buying
stuff”)
 Examples…
Brainstorm examples of consumption of goods and services

26. Match the picture to the term:
Producer or Consumer

27. Producer or Consumer

28. Society
 a group of people living together in an enduring and
cooperating social group of people whose members have
developed organized patterns of relationships through
interaction with one another.

29. Warm Up: Map reading exercise

30. Remember that continuum…
Continuum – a line with two points fixed on each end
(example: market and command economy) and any
point in the middle is mixed economy with some
elements of the two fixed points (command and
market).

32. Mixed Economy
 Definition- an exchange of goods and services based on at
least two other types of economic systems.
 Most mixed economies include some elements of a market
economy and some elements of a command economy.

33. Why do most countries have a mixed economy on a
continuum in between pure market and pure
command?
 Brainstorming session. Why do you think most countries have
a mixed economy?
 Possible answers…
Government is often involved with safety and environmental
issues, price fixing, and monopolies.
Business owners want government to protect their business
interests.

34. SS7E5c Compare/Contrast economies of
Israel, Saudi Arabia, and Turkey

35. Israel has a mixed (market) economy
What to produce
 A large portion of Israel’s GDP comes from high tech
manufacturing, financial services, and agriculture.

36. Israel
How to Produce
 Israel has substantial government ownership of business, but is
gradually privatizing companies.

37. Israel
For Whom to produce
 The private sector produces goods and services for domestic
and international markets based on the market price system.

38. Saudi Arabia has a mixed (command) economy
What to produce
Saudi Arabia is the world’s
leading producer of oil. The
Saudi government
continues to invest in
industrial production.
They are a leader in
petrochemicals, mining,
and refining.

39. Saudi Arabia
How to produce
 Over 95% of the oil industry in the country is operated by the government. Most other
major industries have significant government involvement.
 Saudi Arabia relies heavily on specialized labor from other countries. Estimates are that
a third of the labor force falls in this category.
 Since the 1980s, the Saudi government has been trying to increase private ownership of
business and encourage more joint ventures with private foreign companies.
 Since the 1980s, How could we describe Saudi Arabia’s shift on the economic
continuum?

40. Saudi Arabia
For Whom to produce
 One third of Saudi Arabia’s GDP is based on exports to other
countries. (This is due to the economy’s reliance on the oil
sector.)
 Place on the continuum: Saudi Arabia would fall to the
command side of center on the continuum.

41. Turkey has a mixed (market) economy
What to produce
Turkey has a diversified economy with large service,
manufacturing, and agricultural sectors.

42. Turkey
How to produce
Since the late 1980s, Turkey has gradually moved
from a government directed economy to more private
enterprise

43. Turkey
for Whom to produce
 One fifth of Turkey’s production is exported. The remainder is
consumed by domestic consumers and the government.
 Place on the continuum: Turkey would fall between Saudi
Arabia and Israel on the market side of the continuum.

44. Comparison of Middle Eastern Economies

46. SS7E6 Vocabulary:
Voluntary trade
 definition- a willing exchange of goods and services for
money or other goods and services
 How does voluntary trade benefit buyers and sellers in SW
Asia?
 Voluntary Trade benefits buyers and sellers in SW Asia
because it allows buyers and sellers to choose the types of
goods and services that they wish to have.

47. Specialization
 Definition- Specialization is when a country focuses on
making or providing one specific good or service because the
country can produce the good or service at a lower cost.
 How does specialization encourage trade between countries?
Specialization allows a nation to be efficient in the production
of a few goods and services. It also encourages countries to
trade their goods and services for those things they cannot or
do not produce well.
 Lemonade exercise

48. SS7E6b: trade barriers
 Tariff – tax on trade: tax placed on goods when they are
brought (imported) into one country from another country.
 Quota – limit on trade: a specific amount or number of a
particular product that can be imported or acquired in a given
period.

49. Trade barriers
Embargo -- when one country announces that it will no
longer trade with another country in order to isolate the
country and cause problems with that country’s economy.
(1973 oil crisis; U.S. embargo of Iran due to the Iranian
hostage crisis, Cuban embargor)
How do tariffs, quotas, and embargos serve as barriers to
trade? Tariffs, quotas, and embargos serve as barriers to
trade because they each put some form of limit on the
freedom of trading.

50. What is international trade?
Hop-think.
What does international mean?
What does trade mean?
International trade is the trade between countries
around the world.

52. What is currency?
Currency – monetary unit of a nation (money of
a country)

53. Why do we need currency exchange?
Why does international trade require a system
for exchanging currencies between nations?
exchange rate
What is the exchange rate?
 http://www.x-rates.com/table/?from=USD&amount=1

54. SS7E6c: OPEC
 What is the Organization of Petroleum Exporting Countries
(OPEC)?
 OPEC is an confederation of countries that have joined
together for the common purpose of controlling the price and
supply of oil.

55. OPEC was established in 1960 by five original members: Saudi
Arabia, Iran, Kuwait, Iraq and Venezuela.

56. (Explain the primary function of the Organization of
Petroleum Exporting Countries (OPEC).)
 OPEC's mission is to coordinate and unify the petroleum
policies of Member Countries and ensure the stabilization of
oil markets in order to secure an efficient, economic and
regular supply of petroleum to consumers, a steady income to
producers and a fair return on capital to those investing in the
petroleum industry.

57. In Other Words……..
Write one sentence that sums up
OPEC’s purpose.
 OPEC’s purpose is to control the price and supply of oil in the world.

58. How does OPEC achieve their purpose of maintaining
stable and fair global oil prices?
The economic principle of supply and demand.

59. OPEC adjust its oil production to achieve a
balance in supply and demand. OPEC ministers
meet at least several times a year to discuss oil
production.

60. Graph analysis. What does this graph tell us
about OPEC? Describe the OPEC’s control on
the global oil market.

61. Discuss…
Why might oil–exporting countries want to be a
member of OPEC?
Why might some oil-exporting countries NOT want
to be a member of OPEC?

62. Oil is the major export of Saudi Arabia to many
different countries. Saudi Arabia’s international trade in
oil is made much easier by
 A. Use of a world wide currency.
 B. A system to exchange currency between countries.
 C. Trading only with countries that have the same currency.
 D. Trade of oil for other needed goods so currency is not needed.

63. Opening and class activity
Review Vocabulary.
In a market economy, what does supply and demand
mean to prices?
Pick one of the following products
Pencil
Video game
Composition books
 Concept to consider: trade, specialization, needs vs. wants,
barriers to trade, embargo, quota, tariff, supply and demand

64. Word splash writing activity
(turn in at end of the period)
Write to show what you know.
Use the following words to demonstrate your
understanding of economic terms: trade, supply, demand,
specialization, embargo, tariff
 Bonus (must pick two)
1. What is the Economic Continuum? Write your answer in
sentence form.
2. Where would the US be on the continuum? You may
draw a Continuum and place the general area that the US
would be. Is it more Market or more Command?
3. What is currency? Why is currency important? What is
currency exchange?

65. Warm Up
 After the Persian Gulf War, the United Nations imposed an embargo on Iraq.
What would be the reason an embargo was used by the United Nations?
 A. To restrict trade with Iraq until they met UN requirements.
 B. To increase the cost of Iraqi products to help Iraq’s economy.
 C. To protect Iraq’s domestic industry so it would grow after the War.
 D. To control the Iraqi economy after the War.

67. What is Human Capital?
Human Capital is the value of
people’s work.
Providing education, training, and
healthcare to a worker is an investment
in human capital.
The more educated and healthy your
workforce is, the better the
employees productivity will be.
What does this mean? Tell me in
your own words.

68. Investment
 “Investment” refers to the use of resources by businesses, individuals, or
government to increase productive capacity by developing new technology,
obtaining new capital resources, or improving the skills of the work force.
 Define Investment in your own words
 “to put out money in order to gain profit”
 Examples:
 A restaurant buys new stoves in which to bake bread
 An individual buys tools to make some repairs.
 A school buys new computers and textbooks.

69. What does it mean to have an investment
in Human Capital?
To spend time and money to develop better
education and training of the people in the
workforce.
 Does a company make an immediate profit by using work
(productivity) time and spending money to educate an
employee? Yes or No? Explain
 Does a company make a long-term profit by using work time
and spending money to educate an employee? Yes or No?
Explain

70. What is Gross Domestic Product (GDP)?
GDP – the value of those goods and services
produced within a country over a specific time frame.

71. What is the relationship between investment in
human capital (education and training) and
gross domestic product (GDP)?
By investing (putting time and money into) in human capital
(education and training), the gross domestic product will rise
due to the increased level of experience and skills of the
employees.

72. SS7E7b: Capital and GDP
What is Capital?
Capital – factories, machinery, and technology

73. What does it mean to have an investment
in Capital?
To put money and time into developing better
factories, machinery, technology.
What are the advantages of putting time and money
into investing in capital?
Disadvantages?

74. What is the relationship between investment in capital
(factories, machinery, and technology) and gross
domestic product (GDP)?
 When you spend time and money on developing better
factories, machinery, and technology (capital), the value of all
goods and services in a country (GDP) will increase.

75. SS7E7c
Role of Oil in Israel, Saudi Arabia, and Iran
What is the most abundant natural
resource in Southwest Asia?

76. What is the role of oil in Israel?
Oil does not have much of role in the
economy of Israel since there are no
significant proven reserves.
Israel depends on other industries to
provide income and GDP growth.

77. What is the role of oil in Saudi Arabia?
Saudi Arabia is the largest
producer and exporter of
oil in the world.
Approximately 90% of
government revenues
come from the oil
industry.

78. What is the role of oil in Iran?
 Iran’s economy relies
primarily on the oil industry.
Over 85% of government
revenues come from this
sector. Over 80% of exports
are petroleum and petroleum
products.

79. In Iran, the economy is highly centralized and there are a lot of
regulations about private individuals opening and operating
businesses. However, Saudi Arabia has made owning and
operating a business very easy compared to the world average.
What impact does this have on the role of entrepreneurs in both
countries?
 A. Entrepreneurs are not affected by government regulations.
 B. It will limit efforts of entrepreneurs in both Iran and Saudi Arabia.
 C. Entrepreneurs will be able to make significant contributions to
Saudi Arabia’s economy but not to Iran’s economy.
 D. Both Iran and Saudi Arabia will benefit greatly from the efforts of
entrepreneurs.

80. What are Entrepreneurs?
 A person who organizes a business venture and assumes the
risk for it.

81. Which SW Asian country would have the
most entrepreneurs? Why?
Saudi Arabia
The government makes opening, operating, and
closing a business easy compared to the world
average.

82. Determining a countries Economic
Freedom Index
 Just for info…
 One source for information on entrepreneurship in various countries is The
Heritage Foundation’s Economic Freedom Index. The index ranks countries based
on scores in ten economic categories, one of which is Business Freedom. Since the
same criteria are used for all countries, the index can help with comparisons of
entrepreneurship. For over a decade, The Wall Street Journal and The Heritage
Foundation have tracked the march of economic freedom around the world with
the Index of Economic Freedom.
 Additional information can be found at http://www.heritage.org/index/

83. What is the role of entrepreneurship in
Southwest Asia?
Israel – moderately open to entrepreneurship
 It is relatively easy to start a business but still takes longer than
the world average.
 Private property rights are well protected by law. Foreign
investment is encouraged, but is limited in some sectors.
 http://www.heritage.org/index/country/israel

84. What is the role of Entrepreneurship in
Saudi Arabia?
increasingly open to entrepreneurship.
The government makes opening, operating, and closing a
business easy compared to the world average.
There is good protection of private property rights and
foreign investment is encouraged, although some
investors must have Saudi citizens as partners to operate
legally.
 http://www.heritage.org/index/country/saudiarabia

85. What is the role of Entrepreneurship in
Iran?
 not very open to entrepreneurship.
 The economy of Iran is highly centralized and regulations
make it difficult for individuals to open, operate, and close
businesses.
 There is little protection of private property rights, and the
government allows very little foreign direct investment.
 http://www.heritage.org/index/country/iran

87. Independent Activity
 It is time to “think like an Entrepreneur”.
 Have you every thought of a product or service that you
would like to create or sell? Now is the time to put
pencil to the paper and make your ideas a reality.
 Write down your idea or just create a product or service
(you are only limited by your creativity)
 What do you need to create your product or service?
Capital? Investment? Resources? Specialization?
 How will you market or sell your product?
 What are the risks to selling your product or service?

88. Exploring the CIA World Factbook
 https://www.cia.gov/library/publications/the-world-factbook/
 Use the CIA World Factbook to research the countries on the chart in your packet.
 Type in www.tinyurl.com/ciafact and select country to begin

89. Economic Information: SW Asia

90. Economic Information: SW Asia

91. Use your chart to answer the following
questions.
Which country has the highest literacy rate?
Which country has the highest GDP?
Which country spends the most on capital?
Which country spends the most on human capital?

92. Wrap up and review…
 Take a moment to look over your student note packet. Where
do you need extra help?