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Everything but the kitchen sink: ECONOMICS of Africa, Asia, and Southwest Asia. ECONOMIC SYSTEMS. MIXED ECONOMIC SYSTEMS
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Everything but the kitchen sink: ECONOMICS of Africa, Asia, and Southwest Asia
MIXED ECONOMIC SYSTEMS An economic system is the way society organizes the production and consumption of goods and services. Every economic system answers three basiceconomic questions: What to produce? How to produce? and For whom to produce? How a society answers the three basic economic questions determines the society’s economic system. Historically, there are three types of economic systems—tradition, command, and market (price) system. These economic systems answer the basic economic questions in different ways. In an economic system based on tradition, decisions are based on past behavior. In a command economy, decisions about production and consumption are made by a central planning unit, such as the government. A market system answers the basic economic questions in the marketplace. A market economy is an economic system where most goods and services and resources are exchanged through transactions by people and businesses. Most economies contain some features from a market and command economic systems; this is called a MIXED ECONOMY. Mixed economic systems are best because a mixture best satisfies the economic goals of a society - such as economic freedom, equity, and economic security.
MIXED ECONOMIC SYSTEM CONTINUUM 0% 100% Pure Pure Command Market Place the following countries on the continuum. Pick one of the countries that are 70% or higher on the continuum and describe why it is so much more market than command. Use your notebooks to help you. Pick one of the countries that are in the 50% on the continuum and describe why it is almost equally market and command. Use your notebooks to help you. Pick the country that is below 50% on the continuum and describe why it is so much more command than market. Use your notebooks to help you.
ECONOMIC SYSTEMS SAMPLE QUESTIONS • The economic system of communist countries is most closely related to which of the following? • A. command • B. market • C. traditional • D. supply and demand • You are a small business owner and you sell computer gaming consoles. You have chosen to sell this product to teenagers and young adults. You decided to sell consoles because they are easy to build, are popular and make a high profit. You decide on the prices for your consoles based ONLY on the following factors: • How many consoles you have in your warehouse, and • How many consoles you are sell each week • Which type of economy do you have? • A. subsistence • B. command • C. market • D. closed • What do the economic systems of the Japan and Israel have in common? • A. All are examples of pure market economies. • B. All are examples of mixed economies that are mostly market economies with • some elements of command economies. • C. All are examples of mixed economies that are mostly command economies with • some elements of market economies. • D. All are examples of pure command economies. • In this country a single or centralized government authority decides what is produced. Which term identifies this type of economic system? • A. Traditional • B. Command • C. Market • D. Pubic • South African economic policy is conservative focusing on controlling inflation, maintaining a budget surplus, and using state-owned enterprises to deliver basic services to low-income areas as a means to increase job growth and household income. However, companies are freed to choose what to produce, how to produce, and for whom to produce. Where does this policy place South Africa on a continuum between pure market and pure command? • A. Almost pure traditional • B. Pure market • C. More market than command • D. Pure command
INVESTMENT IN HUMAN CAPITAL • What are the ways a country or business can invest in its human capital? • Education and training for its citizens • Ensure safe working conditions • Invest in the health of its workforce (healthy workers can go to work) INVESTMENT IN CAPITAL GOODS • What are the ways a country or business can invest in its capital goods? • Encourage building of new factories • Uses new machines and tools • Encourage use of high tech tools • Improve its infrastructure (roads, bridges, electricity grids, etc)
Entrepreneurship • Entrepreneurs are people who have an idea for a business, are willing to take a risk, and combine human, natural, and capital resources to produce a new good or service. Entrepreneurs are only able to succeed in a more market system (closer to market than command on the economic continuum), where they have the freedom to control their own economic decisions. • Benefits of Entrepreneurship in an economy • Creates new jobs / hires more people • Creates new products and increases trade • Tax money from their business helps the government • Encouraging Entrepreneurship in an Economy • Make the laws to ensure it is quick and easy to start a new business • Have courts and laws that protect privately owned property and investments
TRADE BARRIERS Determine each type of trade barrier below: embargo tariff quota
LITERACY RATE & STANDARD OF LIVING Literacy rate of a country is the percentage of people over the age of 15 who can read and write. The economy of a nation impacts the ability of a country to improve literacy and standard of living. There is a relationship between literacy to the standard of living and the cultural development of a country. Literacy rate is a factor affecting human capital which in turn impacts standard of living and culture. How does the high literacy rate in Japan affect its economy and enhance the standard of living for its citizens? A. Japan’s high literacy rate contributes to its economic success and promotes a high standard of living.* B. The literacy rate has little effect on Japan’s economy; thus, it does not affect the standard of living. C. Japan’s high literacy rate is the result of its poor economy. D. The small percentage of people who cannot read are hindering most of Japan’s economic growth. The relationship between the literacy rate and standard of living in Nigeria is A. Literacy rate has no affect on the standard of living. B. The higher the literacy rate the higher the standard of living.* C. The standard of living is independent of literacy rate. D. Low literacy rate creates a higher standard of living.
SPECIALIZATION **Specialization encourages trade between nations** The division of labor refers to the practice that the tasks of producing a good or service are divided up into separate tasks. When workers focus on performing separate tasks, specialization occurs. Within the economy as a whole, the division of labor explains why even if you bake your own bread, you typically don't grow your own wheat, grind it into flour, build your own oven, make your own bread-pans and so on. Instead, people specialize in a few skills and then take the wages that they earn from those skills to purchase the other products that they desire from other specialists. • There are three reasons why the division of labor increases output: • workers who specialize on one job become much better at doing it; • with specialization, the time that it would take to switch between jobs is eliminated • workers who specialize on one job often invent more effective ways or new machines for doing the job.
