Chapter Intro 3

1. Chapter Intro 3 Click the Speaker button to replay the audio.

2. Former U.S. trade negotiator Charlene Barshefsky meets with China’s Minister of Foreign Trade Shi Guangsheng. Section 2-3 Click the Speaker button to replay the audio.

3. Market Economies • The way a society answers the basic economic questions of what to produce, how to produce, and for whom to produce determines its economic system. Section 2-4 • In a pure market economy, also called capitalism, these decisions are made in free markets by the interaction of supply and demand. • In a market economy, private citizens–not the government–own the factors of production: natural resources, capital, labor, and entrepreneurship. (pages 572–574) Click the mouse button or press theSpace Bar to display the information.

4. Market Economies (cont.) • Driven by the desire to earn a profit, businesses make their own decisions regarding what to produce, how to produce, and for whom to produce. Section 2-5 • At the same time, consumers make their own decisions about what to buy. • Supply and demand interact in the market to set prices, and producers and consumers base their decisions on prices. (pages 572–574) Click the mouse button or press theSpace Bar to display the information.

5. Market Economies (cont.) • A market economy is decentralized–decisions are made by all the people, not just a few. Section 2-6 • No one coordinates these decisions. • In the United States, the government plays several important roles in the economy. • It provides public goods. • It regulates businesses to make sure markets stay competitive. • It works to reduce negative externalities and increase positive externalities. (pages 572–574) Click the mouse button or press theSpace Bar to display the information.

6. Market Economies (cont.) • Dividing GDP by a country’s population yields the country’s per capita GDP. Section 2-7 • By expressing GDP in terms of each person, we can compare one nation’s economic success to another without regard to the size of the two economies. • Most countries with high per capita GDPs have market economies. (pages 572–574) Click the mouse button or press theSpace Bar to display the information.

7. Command Economies • In a pure command economy, the central government makes the major economic decisions. Section 2-9 • Individuals have few choices and little influence over the economy. • This system has also been called a controlled economy, socialism, or communism. (pages 574–575) Click the mouse button or press theSpace Bar to display the information.

8. Command Economies (cont.) • Socialism is the belief that the means of production should be owned and controlled by society, either directly or through the government. Section 2-10 • In this way, socialists felt that wealth would be distributed equally among all citizens. • Karl Marx, a German thinker, was a socialist. (pages 574–575) Click the mouse button or press theSpace Bar to display the information.

9. Command Economies (cont.) • He believed that industrialized nations were divided into capitalists, or the bourgeoisie, who own the means of production, and workers, or the proletariat, who work to produce the goods. Section 2-11 • Marx saw history as a class struggle in which the workers would eventually overthrow the capitalists. (pages 574–575) Click the mouse button or press theSpace Bar to display the information.

10. Command Economies (cont.) • Marx believed that in time, socialism would develop into communism. Section 2-12 • Under communism one class would evolve, property would all be held in common, and there would be no need for government. • In a command economy, the government owns most productive resources, especially land and capital. • The government makes the three basic economic decisions. (pages 574–575) Click the mouse button or press theSpace Bar to display the information.

11. Command Economies (cont.) • It tells producers what to produce, how to produce, and for whom to produce. Section 2-13 • The government fixes the wages of workers and sets prices. • Government planning agencies control different parts of the economy, such as agriculture and steel production. (pages 574–575) Click the mouse button or press theSpace Bar to display the information.

12. Command Economies (cont.) • Command economies can be very inefficient, resulting in slower growth and lower per capita GDPs than market economies. Section 2-14 • The two leading command economies are Cuba and North Korea. (pages 574–575) Click the mouse button or press theSpace Bar to display the information.

13. Mixed Economies • A mixedeconomy combines basic elements of a pure market economy and a command economy. Section 2-16 • Most countries have a mixed economy that combines private ownership of property and individual decision making with government intervention and regulations. (page 575) Click the mouse button or press theSpace Bar to display the information.

14. Mixed Economies (cont.) • In the United States, individuals make decisions based on market phenomena. Section 2-17 • However, federal, state, and local governments make laws to protect private property and regulate areas of business. (page 575) Click the mouse button or press theSpace Bar to display the information.