Scarcity and How Society Allocates resources

1. Scarcity and How Society Allocates resources

2. Broad Social Goals • Economic Freedom • The right to choose • Economic Efficiency • Gains must be more than costs • Economic Equity • Fairness • Economic Security • Protections

3. Broad Social Goal Continued… • Full Employment • Externalities • Price Stability • Inflation • Economic Growth • Improvement in standard of livingover time

4. Capitalistic Ideology • Private Property • Freedom of Enterprise • Role of Self Interest • Competition • Markets and Prices • Limited Government Interaction • Use of Capital goods • Division of Labor • Money • Specialization

5. Traditional Economy • Ritual, habit, custom • Not a lot of choice • 3 economic questions are answered • Stable

6. Traditional Weaknesses • No innovation • Lack of progress • Few choices

7. Command Economy • Centralized authority • Quick changes can be made

8. Command Weaknesses • Does not meet wants and needs • Little incentive to work • Huge bureaucracy to make decisions • Little flexibility • Trouble getting ahead

9. Market Economy • Supply and demand • The money makes the decisions • Room for adjustments • Producers make decisions • Efficiency • Little government • Individuals have influence • Large variety • Everyone’s needs can be met

10. Market Weaknesses • FOR WHOM ? Is weak • Competition is not always at its best • Market failures • Only rewards producers

11. Capitalism • Advantages • More efficient • High quality @ low price • Individual freedom • Flexible • Disadvantages • Pure capitalism does not meet all needs

12. Socialism • Advantages • Takes care of non-producers • People elect officials • Disadvantages • Less efficient • Special interest influence

13. Communism • Advantages • Workers cannot be fired • Public goods • Disadvantages • Lost individual freedom • Lack of incentives • Inefficient central planning