ECONOMIC SYSTEMS

ECONOMIC SYSTEMS Who makes the decisions within each economic system?

Brainstorm activity • On your notes page, list 2 things you already know or want to know about the four economic systems. • Traditional • Free Enterprise • Communism • Socialism

Economic questions • Every society has limited resources. • This means no society has enough goods and services to meet the needs of everyone. • Because of this, each society must answer three economic questions.

Economic questions • What should be produced? • How should it be produced? • Who should get it?

Economic systems • The way in which society answers the economic questions is known as its “economic system.” • Traditional • Free Enterprise • Communist • Socialist

Economic systemstraditional – main features • Economic Decisions – custom and tradition determine what should be produced, how it should be produced and for whom. • Production – based on custom and time-honored methods. New ideas are discouraged. Very little change or growth. • Private Property – no private property. Things are owned by the family or village. • Trade – goods and services are produced to meet the needs of the members of the family or tribe only. No trade with outsiders.

Economic systemstraditional - examples • Mostly found in rural, non-industrial areas • Bushmen of the Kalahari Desert of South Africa • Berber tribesmen of Algeria • Villages in South Asia

Economic systemsfree enterprise– main features • Private Property – people have a right to own private property and use this property as they see fit with limited interference from the government. • Free Enterprise – people are free to take part in any business, buy any product or sell any legal product. Businesses can lower prices, provide better quality, advertise, etc. to attract customers. • Profit Motive – the ability to make profits is what drives people to risk their money to start a new business. • Supply & Demand – determines prices. When demand is high, the price goes up. If the supply is high but demand is low, the price goes down.

Economic systemsfree enterprise - examples • Mostly found in countries with commercial agriculture and commercial industries. • United States • Great Britain • Canada • Japan • Singapore • Chile • France • Germany

Economic systemscommunism – main features • Role of Government – all major decisions on production, distribution and use of resources are made by the government. • Private Property – no private ownership. The nation or government owns all land, factories, farms and major resources. • Cooperation – all workers labor together and share equally. • Major Goal – to achieve a “classless” society – equality among all workers.

Economic systemscommunism - examples • At one time there were MANY communist countries, but they were unable to keep up with the goods created by free enterprise systems. • China – taking steps toward free enterprise. • North Korea • Vietnam • Cuba

Economic systemssocialism – main features • Role of Government – government uses its power to bring an end to poverty by taking control of the major resources of the nation and providing public services. • Economic Decisions – many decisions about production, distribution and the use of resources are made by the government. Other decisions are made privately. • Private Property – major industries are owned by the government. Other property is owned privately. • Major Goal – seeks a fairer distribution of income among society. People’s basic needs are met for free at a very low cost. (healthcare, transportation, housing, education)

Economic systemssocialism - examples • After World War II, most countries in Western Europe became Socialist, but many moved toward privatization in the 1980’s and 1990’s. • Sweden • Israel

Economic systemsmixed economies • In the real world, no economy TOTALLY follows one economic system. • Most countries have economies that blend features of each. • Countries can be classified on a spectrum ranging from free enterprise to communist based on how much control the government has. Socialism Communism Free Enterprise

Economic systemswho makes the decisions? • On your notes page, use what you’ve learned to fill in the “who makes the decisions” chart. • You make work with a partner. • Then draw a picture representation of each type of economic system. • Next class period we will look at specific countries and place them on a economic systems spectrum.

Economic SystemsCase study • You will be placed in groups of 4. • Assign the following duties: • Time Keeper – keeps time and keeps group on task • Librarian – reads information • Secretary – gather materials and keeps notes • Illustrator – draws spectrum and records countries • ALL GROUP MEMBERS – PARTICIPATE IN DISCUSSION

Economic systemscase study • Materials: • Country packet • 1 sheet of notebook paper • Pen/pencil • Butcher/construction paper • 1 or 2 markers

Economic systemscase study • Instructions: • Read each country’s economic information • Determine what type of economic system each country has and take notes over characteristics of each country • Draw an “Economic System Spectrum” on butcher/construction paper. (see example) • Review notes from each country and decide where each country should be placed on the spectrum • Be ready to support your group’s decisions

ECONOMIC SYSTEMS