Chapter 5 Notes: The Mixed Economy

1. Chapter 5 Notes:The Mixed Economy Pull out a blank sheet of paper…and let’s begin our next chapter. Today’s work will be Assignment #2

2. Warm-Up Get a textbook and open to page 34. Then, provide a summary of the THREE ECONOMIC QUESTIONS?

3. Three Basic Econ Questions • What to Produce??? • How to Produce??? • For Whom to Produce???

4. HOW TO PRODUCE??? • For every economy, the goods are produced by private enterprise, the government, or a combination of both. Government OR Private Businesses

5. Command (Pure Centrally Planned Economy) • Government produces everything. All resources are government owned and production is coordinated by the central plans of government. • Pure Capitalistic (Pure Market Economy) • Private enterprise produces everything. There is no government at all. • Mixed Capitalism(Mixed Economy) • Combination of government and private enterprise

6. Stop, Drop, and Draw • Draw one big circle map and write “The Three Different Economic Systems” as your subject and using a different color to symbolize each system draw as many stick figures to illustrate each . • What can you draw to remember the differences between the three systems?

7. Read about Pure Market Economies and Pure Centrally Planned Economies • Read on pages 35-38 • Individually create a tree map with two branches and write about the weaknesses associated with both economic systems.

8. Making a JUMBO Tree Map • Both a pure market economy and a pure centrally planned economy…come with problems. • After you complete your tree map, get into groups of 4 and create one large tree map on butcher paper that highlights the flaws with both economic systems.

9. Your Tree Map Must: • Write out each weakness • Provide a brief summary • Create an illustration of each weakness • I might ask groups to share out their answers …however, each group will be graded based on what I see on your paper!!!

10. Difficult enforcing property rights Some people have few resources Some firms try to monopolize markets No public goods Externalities Consumers get low priority Little choice of freedom Central planning can be inefficient Resources owned by the State are sometimes wasted Environmental damage PME PCPE

11. PURE CAPITALISM(PME) • PRIVATE ENTERPRISE PRODUCES EVERYTHING…meaning, INDIVIDUALS make the economic decisions…looking out for themselves and their families. Profit is the one and only motive • Advantages: People have the freedom to choose, provides competition so consumers get the best • Disadvantages: What happens to those that need help…the young, old, disabled…without the help of government?

12. COMMAND(PCPE) • GOVERNMENT DECIDES HOW, AND PRODUCES EVERYTHING!!! • Only a few countries today still have much of a command economy. (i.e.-North Korea, China) • Advantages: ability to quickly reroute resources in case of emergencies [war], nationwide goals can be set • Disadvantages: creates no incentive to work hard, lack of consumer choice, inefficient

13. Dear Abby… Dear Abby, I am the leader of a new country and our Parliament is in the middle of a heated debate on whether to design an economy that is primarily command-oriented or pure capitalistic-oriented. What should I advise our new Parliament members to do? And Why??? Sincerely, Confused Leader

14. MIXED CAPITALISM • BOTH GOVERNMENT AND PRIVATE ENTERPRISE • Most countries today are mixed!!! (United States, Great Britain, Mexico, France, Canada, Italy, Japan, etc….and the list goes on and on) WHY DO YOU THINK MOST COUNTRIES TODAY ARE MIXED???? (think about it!!!)

15. REVIEW:Advantages and Disadvantages • On your paper, create a chart that lists the advantages and disadvantages of the three different economic systems.

16. Review: • Draw a tree map on your page. Label the left branch, “pure market economy” and the right branch, “pure centrally planned economy”. Place each of the following nations under the branch you think accurately represents the current state of its economy. • United States, Mainland China, North Korea, Russia, Mexico

17. More Review… Writing Prompt: -Explain why a MIXED ECONOMY is the best way for countries to operate. Include the advantages that comes with being a mixed economy, rather, than a command or pure capitalistic economic system. -Create a CAMPAIGN BUTTON that illustrates the advantages of having a mixed economy. You need: • A Slogan • A Symbol

18. The U.S. Today There are 3 levels of government: a. Federal (National) b. State (50 Individual States) c. Local (thousands and thousands of cities/counties)

19. Stop, Drop, and Draw! • Draw tree map and label each branch with one of the three levels of government then draw a picture below to represent each one!!!

20. What Powers Does Our Gov’t Have? • Collect Taxes ($$$) -money, money, money • Provide Services -Medicare, Welfare, National Defense, etc… • Issue Regulations -laws for you and me to follow for society’s general welfare

21. By taxing, spending and regulating, a government is able to somewhat alter the answers to the 3 basic questions. • What: Production can be based on govt demand: schools, road • How: Government regulations can prevent the production of some goods and/or services • Who: By taxing, the govt redistribute these funds to help the old and the poor

22. “The Market” • NOT THE GROCERY STORE!!! • The term given to describe the exchange made between buyers and sellers

23. How Best to be Efficient??? Larger Market (more buyers and sellers) More Division of Labor More Opportunities to be Efficient

24. Question: • If individuals are motivated by the ‘invisible hand’ (profit), the evolution of the market economy came into being by implementing the following principles!!! • Division of labor • Specialization • Specialized capital • Efficiency • Allocation of resources • Profit

25. Evolution of the Market Economy • Division of Labor (people have specific tasks…think of the assembly line) • Leads to Specialization (really good at one or a few products) • Wants to become an expert in your good, so you develop specialized capital (good technology/tools) • Leads to efficiency • Allocate your resources (sell your goods) • Leads to PROFIT!!!