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Chapter 1.3 Economic Systems

Chapter 1.3 Economic Systems. Principles of Business. Chapter 1.3: Economic Systems. Goals Identify the three economic questions. Differentiate among the main types of economic systems. Describe the economic system of the United States. 3 Key Economic Questions.

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Chapter 1.3 Economic Systems

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  1. Chapter 1.3 Economic Systems Principles ofBusiness

  2. Chapter 1.3: Economic Systems • Goals • Identify the three economic questions. • Differentiate among the main types of economic systems. • Describe the economic system of the United States.

  3. 3 Key Economic Questions • What goods and services are to be produced? • How should the goods and services be produced? • What needs and wants will be satisfied with the goods and services produced?

  4. 1) What to Produce? • What goods and service are to be produced? • Every nation is different • We must learn how to best use our resources.

  5. 2) How to Produce? • How should the goods and services be produced? • What resources will be used? • Human? • Machinery/Technology?

  6. 3) What needs and wants to satisfy? • Needs/Wants are Unlimited • Which will be met? • Who’s needs and wants are most critical? • How will goods and services be distributed? • Goods and services shared equally? • If you contribute more should you get more?

  7. Types of Economic Systems • What is an Economic System? • The method a country uses to answer the three economic questions. • How much is the Government involved? • 3 Main Types: • Command • Market • Traditional

  8. Command Economy • Resources are owned and controlled by the government. • Economic questions answered by owners of the resources. • Government decides: • what and how goods will be produced • how they will be shared. • Personal economic choices are limited.

  9. Command Economy • Leaders use military force to carry out plans. • Freedom of the people is always limited in this system. • Examples: Saudi Arabia, Vietnam, Cuba, & North Korea

  10. Market Economy • Resources are owned and controlled by the people of the country. • Generally found in democratic forms of government. • No one tells consumers what to buy or businesses what to sell.

  11. Market Economy • Buyers and Sellers answer the 3 ?’s by what they buy and sell in the marketplace. • Marketplace: anywhere that goods and services exchange hands. • Examples: the supermarket, the internet, a flea market, etc.

  12. Market Economy • “What to produce?” • What are the people buying? • “How to produce?” • Resources are combined to produce the goods people want and buy. • “What needs and wants to satisfy?” • People buy what they want and can afford.

  13. Traditional Economy • Goods are produced the way they always have been produced. • Operate according to tradition or custom. • Children taught to use methods of their ancestors. • Goods produced by hand with simple tools • People or animals used for energy. • Change and growth occur slowly in this economy.

  14. Mixed Economy • Most nations of the world can be classified as a mixed economy. • Use both command and market ideas. • Russia & China • Command economies changing into mixed economies.

  15. What is the United States • We are a Market Economy • Our economic system also has other names. • Capitalism • Free (Private) Enterprise System • All 3 are essentially the same thing!

  16. What is Capitalism? • The private ownership of economic resources by individuals. • Owners are free to decide what they will produce with the resources.

  17. Our American Economic Principles • Capitalism is based on 4 important principles: • Private Property • Freedom of Choice • Profit • Competition

  18. 1) Private Property • You can own, use, or dispose of things of value. • As long as it doesn’t break the law. • Examples?

  19. 2) Freedom of Choice • You have the right to: • Buy where and what you please. • Organize with other workers (union). • Travel when and where you please. • Express your opinions. • Capitalism provides greater freedom of choice to the individual.

  20. 3) Profit • Sales – Expenses = Profit • The primary reason that businesses supply goods/services!

  21. 4) Competition • Rivalry among businesses to sell their goods and services to buyers. • Competition = Choices for Consumers • Businesses must: • Improve products • Offer better services • Keep prices reasonable • Produce new things.

  22. Chapter 1.3: Economic Systems • Goals • Identify the three economic questions. • Differentiate among the main types of economic systems. • Describe the economic system of the United States.

  23. Chapter 1.3: Economic Systems • Objective: Identify four principles of our market economy. • Assignment: Write in complete sentences. • What does a right to earn a profit influence a business owner to do? • Give three ways in which consumers benefit from competition among businesses?

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