Sponge: Thursday, September 20

1. Sponge: Thursday, September 20 • What is communism? Are there any countries in the world today that are communist countries? • Think back to the trading simulation that we did at the beginning of the semester in which you started off with a random item (like girls’ sandals or a football jersey) and were able to trade in two different rounds. • When a trade was made (assuming it was voluntary and non-fraudulent), was only one party better off after the trade or were both parties better off? Why? • Homework due Monday: see website • Test Wednesday/Thursday

2. Economic Systems: Traditional, Command, Market and Mixed Economies

3. Today’s Standard SSEF4 Compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.

4. Economic Systems • All economic systems must answer the three fundamental economic questions: • What will be produced? • How will it be produced? • For whom will it be produced? • Additional factors that define an economy: • Who owns the means of production • What motivates producers • Government’s role in the market

5. Economic Systems • Four major economic systems exist: • Traditional (textbook only) • Command • Market • Mixed economy (combines elements of the first three)

6. Traditional Economies Traditional societies use ritual, habit, or customs to answer the basic questions of WHAT, HOW, and FOR WHOM to produce. • In a traditional economy, the use of scarce resources and economic activity is based on habit or custom. • Examples: Inuit, rural Africa, Amish

7. Traditional Economies (cont.) • Advantages • Everyone knows which role to play. • Little uncertainty on what or how to produce. • Customs and traditions determine who is provided for.

8. Traditional Economies (cont.) • Disadvantages • Usually operates at a subsistence level, making just what is needed to survive • Productivity is motivated by survival and a sense of purpose (become an expert in your assigned role) • Individuals generally not free to make decisions; strict rules defined by elders and ancestors • New ideas discouraged, leading to stagnation and a lower standard of living

9. Command Economies Command economies rely on a central authority to make most of the economic decisions. • A central authoritymakes the major decisions in a command economy.

10. Command Economies: Characteristics • Government owns most of the property and means of production, therefore private property ownership is minimal • Gov’t is dominant actor, determining what is produced, the price of goods/services, and how distribution will occur • Distribution is based on equity (in theory) • Laborers may have little say in what job they hold or the conditions of their work • Profit motive doesn’t drive production b/c gov’t owns the businesses • Production incentives are duty to country and/or personal pride

11. Command Economies (cont.) • Advantages • Can change direction drastically through emphasizing/allocation • Health care and public services available to everyone at little or no cost • Greater job opportunities and security • Better income distribution (in theory)

12. Command Economies: Disadvantages (cont.) • Basic wants and needs of consumers can be ignored, and career options can be limited. • Economies tend to be unproductive, not producing a good product. • Large decision-making bureaucracy lacks flexibility; slow to react to demand changes • Susceptible to corruption and greed (like market economies)

13. A Line at a Government-Run and –Owned Dairy Store in the Former Soviet Union

14. Command Economies: Disadvantages (cont.) • Severely limits private property rights • Individual freedom and initiative are limited • Serious limits to voluntary exchange • Little innovation b/c potential innovators don’t have the incentive of financial gain

15. Work Period: Thursday, September 20 • Create a double-bubble map comparing and contrasting command economies with market economies • See Chapter 3, section 1 in your book if you need help

16. Work Period: Thursday, January 19 • 15 minutes: finish your flow map and paragraph from yesterday • Each group should create two pieces for our word wall: include the term, definition and symbol or picture (I will assign groups the words) • Work on vocabulary cards for personal word wall • Closing: at 9:20 we will discuss the standard break-down sheet

17. Sponge: Friday, January 20 (18?) • Who answers the three essential economic questions (what, how and for whom) in a command economy? • Who owns the means of production in a command economy? • http://sbrownsocialstudies.weebly.com/ Plan on Tuesday for a unit test on standards 1-6.

18. Today’s Standard SSEF4 Compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.

19. Essential Question • How well does each system answer the three economic questions and meet the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability?

20. Market Economies In a market economy, consumers and businesses jointly answer the questions of WHAT, HOW, and FOR WHOM to produce. • Market economies are based on capitalism—an economic system in which private citizens own and use the factors of production in order to generate profits (also, free enterprise)

21. Market Economies (cont.) • A market economyallows people to make decisions in their own best interest. • Producers are motivated by profit • Laborers by higher wages/salaries and personal advancement • Consumers tend to have many choices and are motivated by prices

22. Market Economies (cont.) • Advantages • High degree of individual freedom for consumers and producers • Large variety of goods and services • Little government interference with decentralized decision-making • Innovations and specialization usually make mkts more efficient and likely to grow and prosper • Adjusts gradually to change over time

23. How do you think consumer satisfaction would compare in a market economy versus a command economy?

24. Market Economies (cont.) • Disadvantages • May not provide enough of some basic goods and services for everyone • Inequality in wealth class divisions • High degree of uncertainty and less security for workers and employers • Greater risk of failure for businesses

26. Mixed Economies Most economies in the world today feature some mix of traditional, command, and market economies. • A mixed economy has elements of more than one system that makeup their economic framework

27. Mixed Economies (cont.) • Advantages of a mixed economy • Provides assistance for some people who might otherwise be left out • In a democratic society, voters use electoral power to affect WHAT, HOW, and FOR WHOM decisions. • In a socialist society, FOR WHOM is addressed more directly by government.

28. Mixed Economies (cont.) • Disadvantages • More services mean higher costs for citizens overall. • In socialist countries, availability of services may be limited or quality may deteriorate over time.

30. Sponge: Friday, September 21 • Consult your textbook to answer the following questions: • What are advantages and disadvantages of a market system (name three of each)? • What motivates producers, laborers and consumers in a market system? • What is a mixed economy? • What are advantages and disadvantages of a mixed economy (name two of each)? • You need a clean sheet of paper for a quiz

31. Quiz • Clean sheet of paper • Remember, test is next Wednesday or Thursday (B Week) • Chapter 3 homework is important—study those sections for our test and review all the way back to the beginning of the semester. • You will see graphs on the test!

32. DEAR Period: 11:18 to 11:38

33. Sponge: Monday, September 24 • What is productivity? When does productivity increase? Check out your textbook for answers. • See Figure 1.4 on page 16 in your textbook. Based on this information, give examples of how investment in education can lead to a higher standard of living. • What is the opp cost of increasing car production from 40 to 70? • What is the opp cost of increasing clothing prod. from 300 to 400?

34. SSEF6 The student will explain how productivity, economic growth, and future standards of living are influenced by investment in factories, machinery, new technology, and the health, education, and training of people. a. Define productivity as the relationship of inputs to outputs. b. Give illustrations of investment in equipment and technology and explain their relationship to economic growth. c. Give examples of how investment in education can lead to a higher standard of living.

35. Today’s Standard SSEF4 Compare and contrast different economic systems and explain how they answer the three basic economic questions of what to produce, how to produce, and for whom to produce. a. Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer sovereignty, competition, and government regulation. b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability.

36. Mixed Economies: Examples • The United States Economy: • Based on free-market principles, but not a pure market system • Offers great freedom to economic actors (i.e., producers and consumers) • Limited government controls are used hopefully to avoid economic catastrophes (like a depression, massive inflation, crucial shortages of needed goods) • The Chinese Economy: • More like a command economy, with elements of a traditional economy in rural areas • State owns many means of production and exercises tight economic control • Some private ownership and market competition allowed for international competition and market growth

37. Let’s Debate! • We will have four teams in this debate—one for each kind of economic system (traditional, command, market and mixed). • Each team will have the following roles; every person MUST HAVE A ROLE: • Opening statement • Ask cross-examination of three other teams (three people will have this role) • Answer cross-examination from other teams (three people will have this role) • Closing statement • Researcher to help write points for opening and closing statements; to help draft cross-ex questions (more than one person will have this role) • Recorder to write down points that other teams make; these can be used for cross-ex and closing statements (more than one person will have this role)

38. Debate Rules • Opening statement: 1 minute • Use the opening statement to set forth the strongest case for your economic system • Cross-ex: 3 minutes (one minute each to question the three other teams) • Closing statement: 2 minutes • Restate the strongest points in favor of your system and sum up the weaknesses of the other systems • No talking while someone else has the floor • Defend your economic system with enthusiasm! • Everyone must write down at least three facts about the three economic systems of the other teams. • TURN IN HOMEWORK AT THE END OF CLASS!

39. Role of Government in a Market Economy SSEF5 The student will describe the roles of government in a market economy. a. Explain why government provides public goods and services, redistributes income, protects property rights, and resolves market failures. b. Give examples of government regulation and deregulation and their effects on consumers and producers. Essential question: Why would the government choose to take an active role in a market economy?

40. Role of Government in a Market Economy, cont’d 1. The government provides certain public goods and services because profit motive does not naturally provide everything that consumers need, for example: • National defense • Police and fire protection • Public parks • Public housing, etc. The government provides these goods and services because they are needed regardless of how profitable they may or may not be

41. Role of Government in a Market Economy, cont’d 2. Redistribution of income: Some governments redistribute income in order to maintain stability in society and to preserve public order. • Government collects money (through taxes) from citizens who have it and gives it to citizens who don’t have enough money to survive (through social welfare programs) and provides other public goods and services

42. Role of Government in a Market Economy, cont’d 3. Intervention to resolve market failures: Governments might interfere with a natural economic cycle in order to avoid an economic crisis • Great Depression in 1930s: FDR’s New Deal • 2008 Financial Crisis: President George W. Bush bail-out

43. Role of Government in a Market Economy, cont’d 4. Common government regulations of the economy: • Tariffs--taxes on foreign imports to give U.S. manufacturers and advantage • Subsidies—money paid to make up for losses in an industry • Actions by the Federal Reserve—the U.S. central bank • Environmental regulations • Workplace safety guidelines • Consumer-protection laws • Property-right protections—laws to protect property are passed to indirectly stimulate the economy

44. Role of Government in a Market Economy, cont’d 5. Deregulation:Stopping or decreasing government regulations of a particular industry • 1970’s deregulation of the airline industry by President Carter. This removed government controls and policies that had set fares, determined routes and finalized schedules • Railroads, trucking, telecommunications and energy have all been deregulated to some degree

45. Work Period: Friday, January 18-20 • In a group, create a double-bubble map comparing a market economy with a command economy in the following areas: • private ownership • profit motive • consumer sovereignty • competition • government regulation. • From the map, each person should write a paragraph in which you answer the essential question: how well does each system answer the three economic questions and meet the broad social and economic goals of freedom, security, equity, growth, efficiency, and stability?