Economic Systems

1. Economic Systems

2. Good:A tangible physical product that can be used to satisfy a desire or need (e.g., video game, TV, car, cell phone, etc.).Service:An intangible or non-material good that can be used to satisfy a desire or need. Usually involves the performance of a duty or work for another (e.g., hairdressing, lawyers, dry cleaning, childcare, etc.)Gross Domestic Product (GDP): Measures the value in dollars of all the goods and services produced in the country in one year

3. Economic Systems:The ways that societies make economic decisions about what to produce and how to distribute them

4. There are four types of economic systems in the world: Traditional Command Market Mixed

5. 1. TraditionalWho makes economic decisions?- Decisions are made based on what has been done in the past. People organize their economic choices following custom and tradition- These societies are based on subsistence farming or hunting and gathering - The needs of the group are largely met by their own activity, and members have little economic contact with outsiders

6. 1. TraditionalExamples?- Few completely traditional economies exist today- Remote areas where outside influences have little impact- Papua New Guinea, Inuit community?

7. 2. CommandWho makes economic decisions?- Decisions are made by a central authority, such as a dictator or the government.- The government decides the production and distribution of goods and services- Citizens are required to carry out these decisions; personal choices are few

8. 2. CommandExamples?North Korea - Can you name other countries in the world that have a command economy? - Former Soviet Union, Cuba, Iran, Saudi Arabia

9. 3. MarketWho makes economic decisions?- Decisions are made by all members of the society based on their own needs and desires through buying and selling in the marketplace- The government has very little involvement- Factors of production are largely owned by individuals and businesses- Businesses make decisions about what to produce based on what they think consumers want to buy

10. 3. Market - Those who are successful become wealthy and meet their economic needs- Those that do not have talents, abilities, and opportunities to be successful become poorExamples?USA- Can you think of other countries that have market economies? - Netherlands, Germany, UK

11. 4. Mixed Who makes economic decisions?- Decisions are made within a system that has aspects of both command economies and market economies- Governments, businesses, and individuals are all included in economic planning and decision making- Business’ actions based on market and what consumers want - Consumers make choices that influence the success of businesses

12. 4. Mixed - Government owns resources or business that are for the public good Examples?CanadaCan you think of other mixed economies? - Australia, Germany, United Kingdom

13. Economic Resources

14. Economic Resources The economic resources we have to provide goods and services include:1. Land2. Capital3. Labour4. Entrepreneurial Ability

15. Economic Resources 1. Land- Takes into account all the natural resources needed to produce goods (e.g., minerals, oil, energy, water, forested areas)2. Capital- The money that has to be invested in machinery, buildingstrucks, factories, etc.

16. Economic Resources 3. Labour- The human energy, efforts, and talents that go into producing something (e.g., wage-earning workers)4. Entrepreneurial Ability- Includes all of the resources (not natural) that allow decisions to be made (e.g., scientific knowledge)- Entrepreneurs (skills and education) seen as innovators developing new ways to produce new products

17. Case Study Read the two case studies below and then answer the questions (to be provided)North Korea – A Command Economy (p. 137)Singapore – A Market Economy (p. 141)